Australian households have endured their weakest decade of income growth since the 1950s, with employee living costs rising about 28 per cent between December 2021 and June 2026 while wages increased by about 15 per cent, according to new research that finds the cost-of-living squeeze is being driven increasingly by fixed expenses rather than inflation alone.
The sixteenth report in The Balance Sheet research series audits the household economy by following income through tax, housing, food, transport, energy, healthcare, education, insurance, debt and unpaid time.
Its central finding is that the crisis has become structural.
“The cost-of-living crisis is not primarily an inflation story,” the report says. “It is a fixed-cost story.”
Real household disposable income per person remains 3.6 per cent below its 2022 peak. Over the past decade, it grew by 6.6 per cent compared with an OECD average of 20.7 per cent, leaving Australia with the weakest income growth among comparable developed economies.
The report says the experience of households has also been more severe than the headline consumer price index suggests because the CPI excludes mortgage interest. The Australian Bureau of Statistics’ employee living cost index includes it.
At the peak of the first squeeze in 2023, employee living costs were rising at 9.7 per cent a year while annual CPI inflation was 6 per cent. Across the period from December 2021 to June 2026, consumer prices rose about 21.5 per cent, but employee households faced an increase of about 28 per cent.
“Australians are not imagining it,” the report says. “The statistics that say otherwise were measuring something else.”
Real household disposable income per person remains 3.6 per cent below its 2022 peak. Over the past decade, it grew by 6.6 per cent compared with an OECD average of 20.7 per cent, leaving Australia with the weakest income growth among comparable developed economies
The report was completed as households entered what it describes as a second squeeze before recovering from the first.
After reducing interest rates during 2025, the Reserve Bank raised the cash rate three times in early 2026, returning it to 4.35 per cent as inflation accelerated to 3.8 per cent. Mortgage interest charges rose 8.2 per cent in the June quarter, with part of the latest increase still to be reflected in household payments.
A Middle East oil shock pushed petrol to $2.08 a litre before the Commonwealth temporarily halved fuel excise. The measure expired on August 3, restoring about 16 cents a litre to prices as the report closed.
Measured electricity prices rose 22.4 per cent in the year to June, although the report stresses this was largely caused by the expiry of government rebates rather than an equivalent increase in underlying bills.
The paper’s signature calculation follows every $100 earned by a dual-income household on $150,000 with a $600,000 mortgage.
About $19.70 goes to income tax and the Medicare levy, while $29.10 is absorbed by the mortgage. Nearly half the household’s gross income is therefore committed before the first grocery is bought.
Food takes about $11, transport $7.20, recreation $8, health $4.20, insurance $3.50, education $3, energy $1.90 and communications $1.30. After other household expenses, roughly $3 remains as saving. Compulsory superannuation is paid by the employer on top of the wage and is not included in the $100 calculation.
The position is tighter for tenants. The national median rent reached a record $705 a week in the June quarter, absorbing 33.1 per cent of median household income. Rent consumes more than half the income of the lowest-earning quarter of renting households.
The report says national averages conceal this pressure because they include the 31 per cent of households that own their homes outright and face neither rent nor mortgage repayments.
Its comparison between 1990 and 2026 challenges the common focus on interest rates alone.
In 1990, when mortgage rates reached 17 per cent, the average new home loan was about $71,000 and repayments consumed roughly 30 per cent of household income. In 2026, the average new loan is about $735,000. Despite an interest rate about one-third as high, repayments absorb roughly 46 per cent of median income.
The average loan grew by about $75,000 in the past year alone, adding to the impact of the Reserve Bank’s rate increases.
Housing, the report finds, is now “the line that determines every other household choice”.
Food provides the clearest explanation for why households remain dissatisfied even when inflation slows. Annual food inflation has eased to 3.3 per cent, but prices are still about 25 per cent higher than in 2021.
Because groceries are purchased regularly, the report says, “food is where households take their weekly referendum on the price level and vote that the statistics are wrong”.
A typical household now spends about $178 a week on groceries and about $300 on all food, including takeaway and dining out. That amounts to roughly $15,600 a year, about $3,000 more than the equivalent basket cost in 2021.
At the most exposed end, Foodbank estimates 3.5 million households experienced food insecurity in 2025, including almost half of renting households.
Insurance emerges as one of the fastest-growing and least recognised expenses.
The median home insurance premium rose 28 per cent in a year to $1,894 in the Actuaries Institute’s latest national assessment, while quoted premiums in capital cities continued rising during 2025-26.
About 1.61 million households, or 15 per cent, now spend more than four weeks of gross income on home insurance. That proportion was 10 per cent two years earlier.
Costs are substantially higher in northern Australia, where annual home premiums can approach $5,000. Some households are responding by raising excesses, reducing coverage or abandoning insurance.
Once home, motor vehicle and private health insurance are combined, a fully insured family may spend between $9,500 and $11,500 a year.
The report describes insurance as climate and disaster risk arriving in household budgets through annual renewal notices.
It also finds some of the fastest-rising costs are in heavily subsidised services.
Childcare prices rose 7.6 per cent in the year the activity test was abolished, while secondary education increased by 6.6 per cent and medical services by 5 per cent.
The report says this reflects a recurring pattern in which additional public subsidies are followed by higher private fees, reducing some of the intended household benefit.
Healthcare illustrates both sides of the equation. The expansion of bulk-billing incentives lifted the share of GP visits bulk billed to 81.4 per cent, while the Pharmaceutical Benefits Scheme co-payment fell to $25.
However, the average gap paid by patients who were not bulk billed rose 13.5 per cent to about $49. Australians collectively paid $44 billion out of pocket for healthcare in 2023-24, equivalent to $1,635 per person.
Private health insurance premiums rose 4.41 per cent in April, pushing a typical family policy towards $5,600 a year. Dental and specialist services remain among the largest gaps in the universal system, with 2.3 million Australians estimated to delay or avoid care because of cost.
The debt chapter finds households are maintaining repayments, but often by cutting spending elsewhere.
Australian household debt equals about 177 per cent of disposable income, the fourth-highest burden in the world. Survey-based mortgage stress has reached a two-year high, yet mortgage arrears of 90 days or more remain below 1 per cent.
The report describes this as “resilience purchased by cancelling everything else”.
Beyond housing, Australians carry $21.8 billion in credit card balances accruing interest at rates of about 21 per cent. Buy now, pay later services are used by 41 per cent of adults, while the average car loan is about $34,000.
More than one-third of Australians report using credit for basic household expenses.
The research also treats time as part of the cost of living.
A record 978,000 Australians now hold more than one job. Women who perform unpaid work spend an average of four hours and 53 minutes a day doing it, compared with three hours and 52 minutes for men.
Australians completed 12.3 billion hours of unpaid care in a single quarter, valued at $461 billion at replacement cost. About 36 per cent of women and 30 per cent of men report feeling always or often rushed.
Working from home provides some relief, with the report estimating workers who avoid regular commuting can save about $5,300 and 3.4 hours a week.
But for many households, additional income has been absorbed by the cost of housing.
“Two incomes now buy, in work-years, roughly the house one income bought in 1990,” the report says. “The second income was the household’s productivity miracle. It has been spent.”
The burden differs sharply according to housing tenure, income and life stage.
About two-thirds of retirees renting privately live in poverty, compared with retirees who own their homes outright, who are among the country’s most financially insulated households.
Around 60 per cent of JobSeeker recipients live below the poverty line, as do about one-third of single-parent families. Young adults face the combined pressure of student debt, record rents and longer periods required to save a home deposit, while new migrants are much more likely to rent.
Regional households often benefit from cheaper housing but face higher transport costs and, in northern Australia, much higher insurance premiums.
“Australia does not have one cost of living,” the report says. “It has several, and the front-door key still decides which one you get.”
The report concludes that Australia’s apparent contradiction is genuine. It is one of the world’s wealthiest countries, but its households have experienced weak income growth and some of the developed world’s highest entry costs for housing, childcare and essential services.
Household wealth continues to rise, largely through housing and superannuation, while everyday cash flow is increasingly consumed by expenses that cannot easily be reduced or cancelled.
The crisis, it argues, would not disappear even if inflation returned to the Reserve Bank’s target range because housing, insurance, healthcare, childcare and other fixed costs have been rising faster than household incomes during periods of both high and low inflation.
Restoring the feeling of prosperity therefore depends less on bringing prices back to previous levels, which is unlikely, and more on ensuring incomes grow faster than committed expenses.
“Australia’s households are rich in stocks and squeezed in flows,” the report concludes. “The cost-of-living debate is two people quoting different halves of that sentence.”
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