Cost-of-living crisis fuels financial stress and job losses in Australia

Cost-of-living crisis fuels financial stress and job losses in Australia

Data released last week shows that the cost-of-living crisis is having a devastating impact on financially-stressed working-class households in Australia, amid rising job losses and signs of recession.

Unemployed workers registering for social welfare outside Centrelink office in Sydney, Australia, 2020.

First of all, far from receding, inflation is resurging, further cutting real wages. The official Consumer Price Index rose from 3.6 percent in the March quarter to 3.8 percent in the June quarter, rebounding after falling from 7.8 percent in December 2022.

Costs for workers and their families rose even more sharply. Soaring rents, building construction costs, insurance premiums, fuel prices and increases in the cost of fruit and vegetable drove up price rises for essential items by an average of 4.5 percent.

Even that underestimates the shock to working-class households. The latest available Australian Bureau of Statistics (ABS) figures estimated that the living cost index for “employee households” rose by 6.5 percent over the past year, primarily fuelled by much higher home mortgage payments and education costs.

The ongoing cut in living standards is reflected in falling retail sales. They dropped by 3 percent per person in the June quarter. They are down 6.7 percent per person since the June quarter of 2022—the first months of the Albanese Labor government—according to the ABS.

Other data showed that most of this drop is occurring in essential spending, especially food, despite bargain hunting in mid-year sales. By contrast, expenditure on more up-market items, such as cosmetics, sports and recreational goods, grew by 6.3 percent year-on-year.

This is another indication of the widening social and class divide under the Labor government, accelerated by its $200 billion “Stage Three” income tax cuts, which are benefiting high-income households seven times more than low-income ones.

Other data indicated rising levels of mortgage stress, especially among new home buyers in low-income areas. The proportion of homes being resold within three years, mostly due to inability to make payments, jumped to 16 percent, the highest level in results that go back a decade.

There are growing numbers of car loan defaults, which are regarded as an advance warning of deeper financial problems. Westpac bank data showed 90-day-plus automotive loan arrears are now about twice the rate of two years ago.

Even if the Reserve Bank of Australia holds off on another interest rate rise this week, 13 consecutive interest rate rises since May 2022 are having the effect intended by the central bank. Backed by the Labor government, the bank is inducing an economic slump that is driving job cuts and putting downward pressure on workers’ wages.

In per person terms, the economy has been in recession since the start of 2024. Production grew by just 0.1 percent during the first three months of the year. That is far less than inflation and population growth.

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