Australian households who depend on government payments have faced the highest increases in living costs this year, new data shows.

Age pensioners and other recipients of government help faced 1.6 per cent higher living costs in the March quarter, according to the Australian Bureau of Statistics.

Their health costs spiked after thresholds for the Medicare Safety Net and Pharmaceutical Benefits Scheme (PBS) were reset on January 1, reducing the number of households that qualified for the schemes.

While headline and underlying inflation have fallen into the Reserve Bank’s target range and the central bank is widely tipped to cut interest rates later in May, many Australians are still struggling.

Other recipients of government help faced the highest cost increases on an annual basis, up 3.5 per cent in a move impacted by rising rent and tobacco prices.

“Rises in pharmaceutical products, medical and hospital services, electricity and fruit and vegetables have contributed to higher living costs for all household types this quarter,” ABS acting head of prices statistics Neel Tikaram said.

All household types faced higher living costs over the quarter, paying from 0.6 per cent to 1.6 per cent more in the first three months of 2025.

Self-funded retirees faced the smallest increases in living costs over the quarter, up 0.6 per cent and helped by lower holiday travel and accommodation prices.

Living costs for employee households rose 1.1 per cent over the quarter, impacted by a 1.5 per cent increase in mortgage charges and a 5.3 per cent spike in education costs.

‘The effect of the Reserve Bank of Australia’s cash rate cut in February 2025 will be seen in the June 2025 quarter due to the timing of the change in the cash rate,” Mr Tikaram said.

“The rise in mortgage interest charges was driven by higher mortgage debt levels and the continued rollover of expired fixed rate mortgages to higher variable rate mortgages.”

After other recipients of government payments, employee households had the next highest annual rise in living costs, up 3.4 per cent.

“Annual growth … in employee living costs has continued to slow this quarter and is down from the peak of 9.6 per cent in the June 2023 quarter,” Mr Tikaram said.

“Higher mortgage interest charges, insurance premiums, and food prices over the year contributed to rises in annual living costs across all household types.”

The Reserve Bank will meet on May 19 and deliver its interest rate decision the following day.

 

Adrian Black
(Australian Associated Press)