Australia’s cost-of-living crisis hitting even the well-heeled
AS THE cost of living began rising in Australia in 2021, Amber Daines and her family decided to rent out their three-bedroom residence in Sydney and buy a cheaper house about an hour up the coast, with every intention of selling it at retirement age and investing the proceeds. The economy had other plans.
Surging inflation and 13 interest rate hikes later, mortgage payments for Daines, a 47-year-old self-employed publicist, and her husband David Ungar, a logistics manager, have nearly doubled – from around A$6,000 (S$5,273) a month to closer to A$10,000. When their tenant’s lease ends next year, they plan to sell the Sydney property on which they’d once staked their future.
Australia’s cost of living crisis has already swept through lower-income families. Now even people on household earnings of A$150,000 and above are feeling the pinch as they dip into savings and slash spending, data provided exclusively to Bloomberg News by financial comparison site Finder show.
Finder’s survey of 1,055 Australians found that 34 per cent of people with household incomes of at least A$150,000 are avoiding bars and pubs to make their money go further. One in four have dialed back vacations, while 40 per cent are spending less on non-essentials, including clothes and homewares. And half of this group say they’re worse off compared with this time last year.
Even gym memberships are on the budget chopping block – with 17 per cent of high-income households cutting back.
“It feels like there aren’t any more hours in the day to work, too,” Daines said. “The pressure has to come down somehow.”
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The crisis bleeding into Australia’s upper echelons comes despite the nation boasting a household net adjusted disposable income per capita that’s higher than the OECD average. Household net wealth sits at US$528,768 in Australia – more than US$200,000 above the organization’s average.
To be sure, lower income earners are still the hardest hit when it comes to putting food on the table and a roof overhead, and the rising cost of day-to-day essentials remains a bigger burden than incendiaries. “The real pain isn’t coming from choosing to spend money on luxuries but on having to spend on things that are essential,” said Greg Jericho, chief economist at Canberra-based think tank The Australia Institute.
But while the average Australian weekly wage is a comparatively high A$1,838, Aussies with a A$590,000 mortgage are now forking out some A$1,345 more per month than they were in April 2022, the Finder data show.
An August quarterly survey from the Australian National University shows that since April 2023, financial stress has been at a higher level than at any time since February 2020.
At its latest meeting, the Reserve Bank of Australia increased its cash rate to a 12-year high of 4.35 per cent. This has hit highly geared borrowers on variable rates particularly hard. Minister for Government Services Bill Shorten has said that people making once aspirational incomes are struggling to make ends meet.
Senior Reserve Bank of Australia officials met earlier this year with representatives from the National Debt Helpline, a not-for-profit service that offers free financial counselling to those in need. This year, the helpline has seen a new cohort of people picking up the phone for help: those who are fully employed, but have fallen into mortgage arrears.
“They’re still working, and their partner may be working as well. Their income has remained the same, but because of all the interest rate rises and the cost of living pressures, they’re just not able to keep up,” said Claire Tacon, assistant director of financial counselling at the Consumer Action Law Centre, the organisation operating the helpline in Victoria state.
One measure to alleviate pressure is the introduction of new tax cuts, which begin in July. They remove the A$120,000 to A$180,000 tax bracket, increase the top tax bracket to A$200,000 and reduce the marginal rate of tax for everyone earning between A$45,000 and A$200,000 to 30 per cent – a change that’s sparked debate about whether making even A$180,000 is enough to feel wealthy.
For many high-income families in Australia, where the nickname “the lucky country” has become part of the lexicon, this is new territory.
For Daines, it’s become an anxious time.
“There are young kids to raise and supporting older relatives possibly too,” she said. “Retirement seems like a pipe dream.” BLOOMBERG
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