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Uncovering Australia’s Real Cost of Living

20 October 2011 at 12:09 pm
Staff Reporter
In Australia’s two-speed economy, cost of living pressures for some poorer households have far outpaced CPI figures and are exposing more people to the risk of falling into poverty, new economic data has revealed.

Staff Reporter | 20 October 2011 at 12:09 pm


Uncovering Australia’s Real Cost of Living
20 October 2011 at 12:09 pm

In Australia’s two-speed economy, cost of living pressures for some poorer households have far outpaced CPI figures and are exposing more people to the risk of falling into poverty, new economic data has revealed.

The Relative Price Index (RPI) Report says that cost-of-living pressures on some Australian households – including skyrocketing prices for food, health care, education, housing and transport – have far outpaced CPI figures over the last six years, potentially stripping household savings and exposing more people to the risk of falling into poverty and disadvantage.

The Relative Price Index uses economic and population including the Consumer Price Index (CPI) and the Household Expenditure Survey (HES) to track cost of living movements across different income groups.

The report, prepared by the St Vincent de Paul Society with assistance from the Victorian Council of Social Service, shows that non-discretionary spending takes up almost all of the income of people in low-income households, leaving them with no opportunity to save, invest or create an asset base with which to survive lean economic times.

The RPI Report says that many households are being left with less of a financial buffer to help them deal with future price shocks.

The report also reveals the extent of cost-pressure inequality in the community – households that are able to spend money on things like household entertainment, vacations and computers are enjoying lower prices compared to five years ago.

Gavin Dufty, Policy and Research Manager at St Vincent de Paul and author of the RPI report, says the CPI alone is not sufficient an an indicator of cost of living changes.

Dufty says while the CPI is an important tool to measure average price changes in metropolitan Australia, the RPI Report shows that cost of living for some lower and middle income households is as much as 30 per cent higher than the CPI indicates, leaving many people exposed to serious financial risk.

Victorian Council of Social Service (VCOSS) CEO Cath Smith says the report reveals to hidden cost of Australia’s two-speed economy.

Smith says while those who are relatively well off are able to make choices about their spending and saving, the report tells a very different story for those with no money to spare.

The RPI Report has been released as part of Anti-Poverty Week – and makes a series of recommendations ‘to ameliorate these cost pressures’ (see below).

Greens spokesperson for Social Inclusion, Senator Penny Wright says Anti-Poverty week is a time for all Australians to think about why so many people in Australia are now affected by poverty and severe hardship.

Wright says a person living on Newstart with rent assistance, and renting the cheapest accommodation on the fringes of Melbourne or Sydney would be left with $16.50 a day to live on. Food, transport, bills and looking for work – all on $16.50 a day.


  1. Government to review and adjust where appropriate the adequacy of household income – in particular the current level and indexing of Government benefit payments must be reformed to ensure ongoing adequacy of payments;
  2. State and local governments must ensure that the concessions and rebates they offer to various groups are appropriately targeted and offer meaningful assistance;
  3. Government and essential services must offer alternative payment arrangements (e.g. fortnightly payments, etc.) to assist vulnerable households mitigate the impact of price increases and price shock. More payment options will provide households with the tools to budget effectively;
  4. Governments should review current taxation and concession arrangements, with the view to develop a cost of living strategy;
  5. The Commonwealth should develop a more appropriate tool to measure cost of living as per Australian Council of Social Service (ACOSS) Submission to 2010 CPI Review.

The full report is available on the VCOSS website:

*Flickr image (thumbnail and slideshow): AttributionNoncommercialShare Alike Some rights reserved by Kolya

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