Cost of living pressures dominate political debate.
However, the evidence of household budgets examined in this report shows
that the pressures are less to do with the politically sensitive prices of petrol, energy or fresh fruit and more to do with changes in our spending habits and expectations and outsourcing to the services industry.
In spite of cost of living pressures, price inflation in Australia and living costs appear to be relatively benign and have been for the past two decades. With incomes rising more sharply than living costs Australian families have a higher standard of living. The average family is ahead by $224 per week and this growth in average incomes has been spread across all ends of the income
and socio-economic spectrum. Households are spending more money on discretionary expenditure and we find that even low income and pensioner
households spend one in three dollars on discretionary items.
The proportion of household expenditure on the basic essentials of life remain virtually unchanged since 1984 at around 38 per cent of household budgets, approaching 50 per cent for lower income households.
The stability of expenses or living costs over-time uncovered in this report are consistently demonstrated in spite of some items experiencing strong price inflation such as health, tobacco and education. Other items compensate with much lower or negative price inflation, such as audio visual and computing equipment and clothing and footwear.
Indexes developed specifically for measuring the living costs for different household types show that almost without exception, regardless of the type or socio-economic position of households, incomes have grown well beyond living costs.