The recent decline in living costs across Australia presents a golden opportunity for Small and Medium Enterprises (SMEs).
With consumers having more disposable income, businesses can capitalize on increased demand and expand their operations. This shift in economic conditions can empower SMEs to make strategic investments, hire new talent, and innovate their offerings.
Living costs for Australian employee households recorded the smallest quarterly increase since late 2021, while other household types saw their lowest rises since 2020, according to new data from the Australian Bureau of Statistics (ABS). The September 2024 quarter saw costs for employee households rise by 0.6%, down sharply from the 1.3% increase in the prior quarter. Michelle Marquardt, ABS Head of Prices Statistics, explained that employee households faced larger cost increases than other groups due to higher mortgage interest charges. Despite the Reserve Bank of Australia holding its cash rate steady this quarter, mortgage interest costs continued to climb as fixed-rate mortgages rolled over to higher variable rates. However, this was offset by declines in electricity and automotive fuel prices, the ABS noted.
The introduction of the 2024-25 Commonwealth Energy Bill Relief Fund (EBRF) and state-level electricity rebates helped lower electricity bills for many households. Employee households, which previously did not qualify for these rebates, saw the largest benefit, with electricity costs dropping 20%. Meanwhile, households receiving government payments, already benefiting from past rebates, saw a smaller reduction of about 10%. “Most employee households didn’t qualify for previous electricity rebates, so the new rebates had a more substantial impact on their electricity bills,” Marquardt said. “The rebates have helped cushion the impact of rising interest charges for these households.”
Age pensioner and self-funded retiree households experienced the smallest increase in living costs, at just 0.3% this quarter, down from 1.2% previously. For self-funded retirees, holiday travel and accommodation prices saw notable increases, though this group also benefited from the new electricity rebates. Age pensioners benefited from falling healthcare costs, as many reached the Pharmaceutical Benefits Scheme (PBS) safety net threshold, reducing their out-of-pocket expenses.
Annual Trends in Living Costs
Over the past year, employee households recorded the highest annual cost increase, at 4.7%, driven by an 18.9% rise in mortgage interest charges. This marked a slowdown from the June 2023 quarter’s peak increase of 91.6%. In contrast, self-funded retiree households saw the smallest annual increase, at 2.8%. Other household types, including age pensioners and government transfer recipients, recorded annual increases in living costs between 3.5% and 4.4%, down slightly from the previous quarter. Increased insurance premiums, rental costs, and food prices contributed to these rises but were offset by declines in electricity and fuel costs. The data highlights the varied impacts of economic pressures across different household groups.
While rising mortgage interest costs continued to affect employee households, new government rebates and easing energy prices provided some relief, illustrating the ongoing balancing act faced by Australian households amid shifting economic conditions.
Ben Thompson, Chief Economist and CEO at Employment Hero said: “The latest Living Cost Index (LCI) data from the ABS paints a clear picture of financial strain on Australian households, with a quarterly increase of 0.6% for employee households and a year-on-year rise of 4.7%. It is interesting to look at this alongside Employment Hero’s Employment Report which reveals a 5.2% year-on-year wage growth.
“This shows consistent upward pressure on wages as businesses navigate a complex operating environment and efforts to keep pace with inflation and retain talent. Yet, with wage increases only slightly ahead of the rising cost of living, households are feeling the pinch.
“While the LCI and wage growth metrics capture different pressures, looking at the ABS data today highlights the ongoing tension businesses face in balancing competitive pay with escalating operational costs.”
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