Discovering the True Expenses of Living in Australia: An Extensive Manual.

The burden of rising inflation in Australia is no secret. Last year saw it peak at 7.8% and it currently remains high, with an average rate of 7% for the year ending March.

Recent data from the Australian Bureau of Statistics (ABS) reveals that the cost of food and non-alcoholic beverages has risen by 8% in the last year, while travel and accommodation has spiked by 25%. Medical services have also gone up by 6.7%, while electricity has had a drastic 15.5% increase, the largest annual surge since 2013.

In practical terms, these figures translate to higher prices in supermarkets, steadily rising petrol prices inching towards the $2-a-litre mark, and airfares exceeding pre-pandemic levels. Renters are also bearing the brunt of price hikes, paying over 20% more each week compared to last year. Furthermore, Bill shock is expected to hit many consumers over the winter period, with electricity prices predicted to surge again by approximately 20% owing to the energy regulator's new maximum retailer charges.

To put this in context, the Reserve Bank of Australia's aim is for an inflation rate target between 2 to 3%. Consequently, if you find living expenses are becoming increasingly more expensive, there is some truth behind this observation. Luckily, you can cut down on living costs and build financial resilience with the help of Forbes Advisor's guide to the Australian cost of living. This guide informs you of what you can expect to pay, how to budget better, and how to handle and mitigate winter bills.

Although no definitive measure of cost of living exists in Australia, the consumer price index (CPI) is one of the critical measures used. It is used to gauge average changes over time in the prices of goods and services that people require to maintain an adequate standard of living. The ABS calculates the CPI based on a fixed number and type of goods and services that an average Australian household is most likely to purchase. While the CPI supports an analysis of inflation in the economy, it is not exhaustive.

From March 2022 to March 2023, Australia's CPI increased by 7%, with significant hikes in housing, gas and electricity, medical services, education charges, financial services and insurance, and food.

The challenge of keeping up with increasing prices persists, especially where income is not keeping pace. A recent survey by the Australian Council of Trade Unions indicates that over 50% of Australians have cut back on essentials or dipped into their savings to survive. One out of four respondents resorted to skipping meals or picking up a side gig to make ends meet.

According to a report released by the Australian Council of Social Service (ACOSS), poverty continues to be a pressing issue in Australia, with one out of eight people living below the poverty line. The poverty line is defined as a household's disposable income being below one-half of the median level for Australians. Those who mainly rely on social security payments from the government are more likely to be in poverty, but 37% of those living below the poverty line come from wage-earning households.

Lacey Filipich, the director of the online training site Money School and author of the Money School book, claimed that the number of financially-strained Australians exceeded the three million who are living below the poverty line. According to Filipich, the poverty line is defined by the median wage, and as inflation-driven prices are growing faster than wages, more people are likely living in poverty.

Moreover, Filipich stated that even those above the poverty line defined by income can still struggle because of rising prices and interest rate hikes. ABS figures indicate that the average weekly earnings for a full-time worker in Australia is $1,807.70, and minimum wage earners earn $21.38 per hour or 2.60 a week.

The increasing unaffordability of housing is said to be one of the biggest causes of financial stress. With a low availability of rental properties, rents across Australia have risen considerably. The national median weekly asking rent for a dwelling is $568, with the highest median asking rent being 3 for houses in Sydney. According to a 2023 report by Anglicare Australia, workers on award wages like nurses, childcare and aged care workers, hospitality workers, and teachers may need to allocate more than 80% of their income to pay rent in capital cities.

Joel Gibson, a money-saving expert and author of Kill Bills and Easy Money, warns that in addition to interest rate hikes hurting borrowers, the ongoing power price hikes were starting to bite, and rising food costs had also significantly impacted households. Australian grocery bills have gone up by 10%, on average, in the past year, resulting in an average increase of $1,200 in the household budget.

Filipich emphasized that while Australia was not prohibitively expensive compared to other countries, the cost of living in cities like Sydney and Melbourne differed significantly from the rest of the country. The biggest factor preventing Australians from getting ahead financially is secure work with decent wages, as having enough to cover living expenses with some leftover funds to save and invest is what makes it possible to improve one's financial situation.

The security of work has declined due to advancements in technology and the shift towards casual and contract positions. Additionally, wages have failed to keep up with inflation, creating financial strain for individuals, particularly young people and students who may hold less-qualified and lower-paid roles. Furthermore, those under the age of 21 and apprentices and trainees may receive a lower minimum wage.

For international students in Australia, covering expenses can be particularly challenging as many have to balance work with studying. Although work restrictions were relaxed during the COVID pandemic, working hours for visa holders will be capped at 48 hours per fortnight from July 1, 2023, with an exception for those employed in aged care. Students must also consider expenses beyond tuition fees, such as purchasing books, IT equipment, and specialized tools. The cost of living also varies depending on the location of the university, with some regional campuses offering a more affordable option.

The Australian Government Department of Education has reported that international students' median annual expenses were around $28,378, including rent, food, and study expenses. Despite these expenses, savings can be found in monthly bills by switching to cheaper providers. Many individuals are reluctant to switch and tend to stay with more expensive providers out of fear of making a bad decision or the unknown. This fear often leads to the worst decision, which is putting off any decision altogether. Shopping around and comparing prices can save households hundreds or even thousands of dollars and is not as tiresome as people may think. By automating good money habits, individuals can build a better chance of financial success and alleviate financial stress, which can have significant impacts on a person's ability to make decisions.

Create a plan for addressing specific financial concerns that includes both preventative measures and responsive solutions. By doing so, you can alleviate stress and free up valuable brain space, knowing that you are prepared for any challenges that may arise.

When it comes to grocery shopping, don't be fooled by discounts alone. Instead, compare unit prices per volume to find the best value. Buying in bulk and opting for frozen, tinned, or "ugly" produce can also save you money without sacrificing nutritional value. Consider compromising on brand names for pantry staples or searching for deals online or through catalogues.

Meal planning is crucial for avoiding unnecessary food waste and overspending. Create a list of needed items for specific meals or snacks and stick to it when shopping. This can help reduce food waste and ultimately curb unnecessary spending.

Switching providers for utilities, such as energy and telecommunications, can often be done within minutes using comparison sites like energymadeeasy.gov.au or whistleout.com.au. Don't overlook the benefits of reducing consumption as well, by ensuring maximum efficiency through proper seals, closing doors and windows during heating or cooling, and only running full loads in appliances.

Consider switching from gas to electric appliances, as gas prices have seen higher increases compared to electricity in recent years. A report by the Climate Council found that this switch could save Australians around $2,000 per year.

By implementing these cost-saving strategies and being prepared for unforeseen financial challenges, you can take control of your finances and find greater peace of mind.

Upgrade to energy-efficient appliances: When it's time to replace your fridge or washing machine, opt for models with high energy and water efficiency ratings. If possible, also consider improving your ceiling insulation and draught-proofing and switch to LED lights. Investing in solar power or a heat pump system can also help reduce costs. Government rebates and loan schemes for purchasing appliances are available in different states, and residents of Victoria who use the compare.energy.vic.gov.au website can apply for a Power Saving Bonus payment of $250.

Reduce your reliance on cars: Choosing public transport, walking or cycling can save you money on fuel costs and tolls, while also reducing maintenance, insurance and registration expenses. If you depend on a private vehicle, use mobile apps to find the cheapest fuel in your area and avoid overpaying by up to 50c per litre.

Explore ways to lower mortgage costs: Call your bank once a year to ask for a rate reduction, which can save you thousands of dollars over time. Refinancing with a different lender could also help you secure a better rate. If you are experiencing mortgage stress, consider extending your loan term, accessing a payment holiday, or switching to interest-only payments.

Get creative with housing: In a tight rental market, consider co-generational living, house sharing, or moving farther away from the city to save on rent.

Maximize your savings: Put your savings into a high-interest savings account or a term deposit for a set period to earn attractive interest rates that exceed those of a normal savings account.

To build a nest egg or get ahead financially, follow these strategies to manage your bills effectively. Developing these habits during tough times can help you in the long run.

Utilize Your Offset Facility to Your Advantage: Maximizing your ability to reduce interest is easy if you have a 100% offset account home loan. Simply keep all your funds in the offset account and direct your employer to deposit your salary directly into that account. If you need a separate "savings" account, look for loans that offer multiple offset accounts.

Consider Salary Sacrifice to Super: Making voluntary contributions on top of your employer's payments is a great way to increase your retirement funds. The Moneysmart website by the Australian Government advises that you can save on tax by arranging with your employer to make extra super payments from your pre-tax income through salary sacrificing or salary packaging.

Investing Wisely: While property investment may be an attractive way to gain wealth, it is not always financially feasible. A more common and affordable way for Australians to build wealth is to regularly invest in shares/ETFs, especially on the ASX. Be aware of the risks and invest only what you can afford to lose. Once you have an automated saving process in place, consider keeping a cash buffer for emergencies and investing the rest to make it work harder for you.

Determining Your Investing Style: There is no one-size-fits-all rule when it comes to investing. Take the time to figure out which type of investing (bonds, shares, index funds and/or property) suits you best. Remember that different priorities, values, and situations call for different investment strategies. Start small and build your way up as confidence grows and issues are ironed out.

Why is the Cost of Living so High in Australia? Experts point to the combination of high inflation, stagnating wages, and insecure work as reasons why many Australians struggle to pay for basic needs. Increasing interest rates and property market supply and demand issues have also led to ballooning housing costs.

Living Costs in Australia vs. New Zealand: Generally, everyday costs are similar, but earning potential may be higher in Australia. New Zealand's CPI has increased by 6.7% in the past 12 months, with median weekly earnings for salaried workers at $1,189. Meanwhile, Australia's CPI rose by 7% in the same time period, with average weekly earnings of $1,807.70 for full-time employees.

How much does it Cost to Live in Australia? Major expenses when living in Australia include housing, food, utilities, petrol, healthcare, and education fees. The cost of living varies depending on where you live, with major cities such as Sydney, Melbourne, Perth, and Brisbane being the most expensive.