Cost of living crisis in Australia: how to make ends meet

Australia’s cost of living crisis is still very much in play, and households across the country are feeling the pinch as the relentless price increases hit everything from food to household bills. Even though Australian inflation has eased from its sky-high 2022 peak, it’s still stubbornly sitting at 3.8%. The Reserve Bank of Australia (RBA) has decided to keep the cash rate unchanged at 4.35% for now, acknowledging that while inflation has decreased, it remains well above the desired 2-3% target. So, the cost of living pressures on average households is still looming. But how do we make ends meet in these tough times? Let’s find out the causes, solutions, and tips to help you navigate this ever-changing economic climate.

Why has the Australian cost of living increased so much?

Fuel Prices

Ah, petrol; the never-ending pain at the pump. Remember when filling up your tank didn’t feel like a complex maths equation? Those were the days. According to the ACCC, global tensions have kept fuel prices elevated, and with the typical fluctuation in the price cycles, the cost of fuel can change dramatically within just a week. This volatility, combined with ongoing geopolitical factors, continues to contribute to the rising cost of living on everyday essentials. With no relief in sight, it’s time to get savvy. Use fuel apps like PetrolSpy to track down the best prices in your area—because every cent counts when you’re trying to ease the strain on household budgets.

Grocery Bills

The cost of groceries has jumped by 3.3% over the past year, and it’s not just because of global supply chain issues or natural disasters. Price gouging has also been in the media recently, with some retailers allegedly upping prices more than necessary. It’s no wonder that Aussie households are experiencing financial stress. But here’s a little tip: meal planning. It’s a game-changer for managing food costs, and we’ve got a Meal Planning on a Budget Guide that can help you stretch your dollars further while keeping your family healthy. Have you seen the latest CHOICE report on which supermarket is the cheapest? ALDI takes the crown, with prices now confirmed to be around 25% lower than Coles and Woolworths.

Check out Tammy Barton’s thoughts on price gouging.

Will there be another interest rate rise?

Whatever your financial situation may be, it is important to prepare for any price hikes or for another interest rate rise. Traditionally, interest rates are increased to combat inflation. In fact, that is the key purpose of increasing interest rates, but it isn’t always that simple. Interest rates were low during the pandemic to encourage business activity, which means they will be brought back to their pre-pandemic rate at the very least. It is important to ensure that your debt is manageable when this does become the case, or if they increase to higher than pre-pandemic rates. Historically, Australia has witnessed major changes in prices and interest rates after economic crises. The global recession in the 1980s saw mortgage rates reach over 17% because of wild inflation rates from the global oil crisis.

Housing Costs

Renting these days? It’s like musical chairs with too many players and not enough chairs!  Housing remains one of the most significant points of financial strain, with the cost of living rising due to a 5.5% increase in housing expenses over the past year. The national median weekly rent has climbed to $620, marking a 6.1% increase over the past year. Many renters are now opting for rental properties with more bedrooms to share costs, which has driven up rental prices for three-bedroom apartments by 7.2% year-on-year. This trend underscores the financial resilience of Australian households who are increasingly finding ways to adapt in the face of this rental crisis.

Will there be another interest rate rise?

The RBA remains cautious about making any decision on future rate increases given the economic uncertainties. But let’s be honest; none of us have a crystal ball to predict what’s coming next. It’s smart to get ahead of the game. Start by building up your financial cushion, whether that means boosting your savings, tightening up your budget, or even paying down some debt. The goal? Be ready for whatever curveball the RBA might throw our way.

So how can I make ends meet?

It’s time to get up close and personal with your budget. A well-organised budget is like a map; it shows you where your money’s going and where the magic can happen. Here’s some quick tips to help in this cost of living crunch:

1. Create a realistic budget: Jot down all your income, benefits, side hustles; and split your expenses into fixed (rent, utilities) and variable (groceries, entertainment). Track your spending for a month, and you’ll quickly spot where to tighten the belt.
2. Trim the fat: Time to cut those non-essential expenses. Cancel those subscriptions you forgot you had, swap pricey nights out for dinner parties at home, and embrace free fun like board game nights or local events.
3. Shop smart: Grocery bills can swallow your budget, so get strategic:
   • Plan your meals: A weekly meal plan saves money and keeps you from those expensive last-minute takeaways.
   • Buy in bulk: Stock up on non-perishables when they’re on sale, and go for in-season produce at your local green grocer for the best deals.
   • Choose store brands: They’re often just as good as the big names but much gentler on the wallet.
4. Boost your income: If your budget’s still tight, think about bringing in extra cash. Pick up a side hustle, declutter or sell stuff online. Every little bit helps when you’re stretching those dollars.

Take control of your finances today

The cost of living crisis in Australia isn’t showing signs of easing up anytime soon. But by getting proactive with budgeting, meal planning, and even finding the cheapest fuel, you can take back control and eliminate financial stress.

Ready to take the first step? Download our free Personal Budget Template. If you’re feeling a bit lost in the numbers, don’t worry, MyBudget is here to guide you through every step, ensuring your bills are paid on time and you can reach your financial goals. Reach out to us on 1300 300 922 or enquire online today.

Cheryl is part of the My Budget Corporate Finance team and takes care of the company’s finances with the same care that MyBudget extends to their clients budgets. She speaks from the heart about relevant financial topics, reflecting on her own personal journey through single parenting, budgeting, financial resilience and beating cancer.