All household types saw quarterly living cost increases of 0.4% to 1% in the June quarter, according to the Australian Bureau of Statistics (ABS).
“Employee households had the smallest rise in living costs of all household types this quarter. The last time this happened was in the March 2022 quarter, before mortgage interest rates began rising,” said Michelle Marquardt (pictured), ABS head of prices statistics, in a media release.
“Households with government payments as their main source of income saw the largest rises in living costs this quarter.”
The Living Cost Indexes (LCIs) differ from the Consumer Price Index (CPI) because they include mortgage interest charges instead of the cost of building new dwellings.
Employee households, whose main income comes from wages and salaries, benefited most from falling mortgage interest charges, which make up a larger share of their spending than for other households.
“Mortgage interest charges fell 1.4% in the quarter for employee households, 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 2025,” Marquardt said.
The ABS had earlier released its June quarter CPI, showing headline inflation easing to 2.1% annually and trimmed mean inflation down to 2.7% – the lowest since 2021. The latest CPI data has already shaped market expectations for an RBA rate cut in August, with ANZ and CBA both forecasting a 25-basis-point reduction, followed by another cut in November.
The LCI update comes as ABS household spending data showed a 0.5% rise in June, with goods purchases lifting 1.3% while services slipped 0.5%. Analysts noted that easing price pressures and rate cuts have supported three consecutive quarterly gains in real household spending volumes.
Housing and Food and non-alcoholic beverages were the main contributors to the quarterly rise in living costs. Electricity costs also rose as households used up the Commonwealth Energy Bill Relief Fund (EBRF) and state government rebates from earlier quarters.
In Queensland, the continued drawdown of the $1,000 state rebate also lifted out-of-pocket electricity costs.
Food prices rose across all household types, driven by seasonal fruit and vegetable increases, including strawberries, blueberries, grapes, tomatoes, and cucumbers.
The annual rise in living costs slowed in the June quarter compared to March 2025, reflecting slower growth in mortgage interest charges and falling automotive fuel prices.
“Higher housing and food and non-alcoholic beverages prices over the year contributed to rises in annual living costs across all household types,” Marquardt said.
Households reliant on government payments saw the largest annual living cost rises due to electricity price pressures and the expiry of rebates, which had a proportionally larger impact on out-of-pocket costs for these households.
Employee households’ annual living costs rose 2.6%, down from 3.4% in March. The main driver was mortgage interest charges, which saw annual growth slow to 4.5%, down from 8.8% in the previous quarter.
The Pensioner and Beneficiary Living Cost Index (PBLCI), which tracks age pensioner and transfer recipient households, rose 2.9% in the 12 months to June, outpacing the 2.1% rise in CPI.
Age pensioner and government transfer recipient households experienced larger annual price rises for housing and food than those captured in the CPI.
“Government pensions are indexed on 20 September and 20 March by the greater of the rise in the PBLCI and CPI over a six-month period,” Marquardt said. “Over the six months between the December 2024 quarter and June 2025 quarter, the PBLCI rose 2.7% while the CPI rose 1.6%.”
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
