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Graph proves some Aussies shouldn't whine too hard about cost-of-living

The cost-of-living crisis has hit some harder than others and the pain being dished out is far from over.

Families are getting slammed by their mortgages. Anyone who bought a house in 2020 enjoyed a couple of years where their house price went up while they paid interest rates that were roughly zero.

But then the Reserve Bank of Australia (RBA) decided the good times had rolled too long. The central bank fetched a long-forgotten trick from the back of the cupboard: the rate hike.

They dusted it off and put it to work, piling on the pain. Official interest rates rose from basically zero to 4 per cent, while mortgage rates rose from around 2 per cent to over 5 per cent.

That added $1000 a month to mortgage repayments on the average new home loan in New South Wales.

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Who has a spare $1000 a month? Not everybody, that’s for sure. There’s been a world of hurt for families as they take on more shifts at work and cut expenses so they’re not spending more than they make each month.

The ones most in the crosshairs are the young families.

Those with new home loans and little kids. They’re experiencing a cost-of-living rise of more than double inflation recently: 6 per cent.

But they don’t have a lot of equity in their homes, nor do they have offset accounts stuffed with extra home loan repayments.

The whinging, however, comes from a wider cross-section than just young homebuyers.

And if we look at the data we find that some of those people don’t have quite so much to complain about.

The Australian Bureau of Statistics published cost-of-living indexes for a range of groups in society so we can see how the general rate of inflation affects different families differently.

What it shows is that the cost of living for “employee households” has been rising extremely sharply recently. But that comes after a very long period where life got a little cruisy.

The next chart shows the cost of living index, where all different households re set equal back in 1998, so we can easily compare changes since.

Cost of living index graph.
Cost of living index graph. (Jason Murphy)

It shows life has got steadily tougher for pensioner and beneficiary households.

But employee households who already had mortgages were playing on easy mode for most of the period between 2010 and 2020.

From basically the 1990s to now, mortgage rates have been falling for most of the time.

And especially from 2010 to 2020, as the next chart shows.

Graph showing standard variable owner occupier rates.
Graph showing standard variable owner occupier rates. (Jason Murphy)

The big question is whether our current moment is a bit like 1970 and rates are going to surge further upwards from here.

If so, the pain being dished out to young mortgage holders is far from over.