Cost of Living pressures falling fast

Despite the political rhetoric about how all us Aussies are doing it tough with cost of living pressures, the reality is rather different.

The Cost of Living Indexes released this morning by the ABS are designed to answer the question “By how much would after tax money incomes need to change to allow households to purchase the same quantity of consumer goods and services that they purchased in the base period?” They consider this question for a variety of household types (given the different expenditure patterns of households). Considering the fall in the third quarter inflation numbers we saw last week (see here for details), it will come as no surprise to see the COL indexes also down sharply.

q/q y/y
  Q2 Q3 Q2 Q3
Pensioner & beneficiary 0.4 0.2 3.1 2.1
Employee 0.4 0.4 2.3 1.9
Age Pensioner 0.4 0.1 3.1 1.9
Other Govt Transfer Recipient 0.4 0.3 3.1 2.3
Self-funded retiree 0.5 0.5 3.2 2.5
Headline CPI  0.5 0.5 3.0 2.3

Main drivers vary depending on household type, but a commonality is a decline (of about 1.5% q/q) in the cost of communications and (of about 1% q/q) in clothing. Health costs also fell with the main benefit being felt by the pensioner and beneficiary sectors (declines of between 1.5% and 2.0% q/q). Rises generally came from food (about 1.1% up q/q) and alcohol & tobacco (up about 1% q/q).

The bulk of households fall within the “employee” type where cost of living has been rising well below the rate of headline inflation for the past 2 quarters.

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