Australian households are still feeling the cost‑of‑living pinch, but new ABS figures show the pressure is easing fastest for those with mortgages.
The latest Australian Bureau of Statistics (ABS) data show living costs rose for all household types in the 12 months to December 2025, with increases that “ranged from 2.3% to 4.2%… depending on the expenditure patterns of the different household types,” said Michelle Marquardt (pictured), ABS head of prices statistics.
Housing, food, and non‑alcoholic beverages, and recreation and culture were the main drivers of annual increases. However, the impact varied sharply across income groups.
Households relying on government payments as their main income source recorded the largest annual rise in living costs, largely due to higher electricity bills once state rebates were used up. These households “saw a larger impact on their out-of-pocket electricity costs from state government electricity rebates in Queensland and Western Australia being used up compared to other household types.”
By contrast, employee households saw the smallest annual rise, at 2.3%. ABS notes these households “benefitted the most from falling mortgage interest charges, which are a larger part of their spending than for other household types.”
“Mortgage interest charges fell 6.4% in the 12 months to the December 2025 quarter, as banks cut interest rates for both variable and new fixed rate home loans following the Reserve Bank of Australia’s decision to lower the cash rate target in February, May, and August 2025,” Marquardt said in a media release.
The figures land just as RBA has reversed course with a February rate hike in response to hotter‑than‑expected inflation, signalling mortgage relief may prove short‑lived.
On a quarterly basis, living cost growth has slowed across all household types.
“This quarter, lower electricity and health costs offset rises in other areas of living costs,” Marquardt said, pointing to the timing of the Commonwealth Energy Bill Relief Fund extension payments and falls in pharmaceutical products and medical and hospital services.
All household types saw health costs fall, helped by more people reaching the Pharmaceutical Benefits Scheme safety net and the expansion of bulk‑billing incentives. Employee households recorded just a 0.2% rise in living costs for the quarter, with a further 2.8% fall in mortgage interest charges largely offsetting other increases.
For brokers, the data underline a split picture: employed borrowers have a little more breathing room in their budgets, while vulnerable, government‑payment clients remain exposed to energy and other essentials.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
