A more expensive Australia

Has the cost-of-living in Australia always been in “crisis” mode?

Let’s find out. Let’s compare the cost-of-living in Australia today to the cost-of-living a generation ago? Are we better off?

No, we are not.

Part 1

Today, the cost-of-living is significantly higher, driven by factors such as inflation, rising housing costs and changes in lifestyle expectations.

Comparing the cost of living in Australia today with that of a generation ago involves looking at several key areas: housing, groceries, transportation and general income levels. Here’s how these – and others – have changed:

Housing

A generation ago housing was more affordable relative to income. Mortgages were smaller and the ratio of house prices to average incomes was much lower.

By 2025 the cost of housing has significantly increased, particularly in the major cities. In 1995, the average price of a house was around $55,000 while by 2025, this figure had escalated dramatically to around $985,900 for a median house price. This reflects a substantial increase even when adjusted for inflation.

Saving for a house deposit in Australia today is markedly more challenging than it was a generation ago due to the disproportionate increase in property prices compared to wage growth. In the 1980s and early 1990s, the average house price was roughly 3.3 times the average annual income. This meant that buying a home was within more people’s reach relative to their earnings. By 2024, this ratio had escalated to around 8 to 10 times the average income.

Rent has also seen a sharp rise. For instance, what might have been affordable in 1995 has become much more expensive in terms of monthly rent for similar properties in 2025, again especially in major cities.

Groceries and Everyday Items

The cost of groceries has gone up, though not at the same rate as housing. Basic grocery items that cost around $100+ for a family of four in the 1970s now cost significantly more, with the average family spending upwards of $640 (not including fast foods) a month in 2025. This reflects both inflation and changes in consumer expectations and dietary habits.

To compare the cost of groceries in Australia today with that from a generation ago we can look at several sources and trends:

Historical Price Comparison

1970s and 1980s: In these decades, a basic grocery item like a loaf of bread might have cost around $0.20 (adjusted for inflation, that’s about $1.40 in today’s money). A jar of coffee was around $1.00, which would be approximately $6.00 now when adjusted for inflation.

Today: By 2025, the price for a loaf of bread can range from $3 to $6 (that I know of), and a similar sized jar of coffee might cost around $10 or more, depending on brand and quality.

General Trends

Annual Increases: Recent data suggests that grocery prices have been on an upward trend. Between 2022 and 2025, there’s been a noted increase of around 11% in grocery costs annually.

Inflation: The Consumer Price Index (CPI) for food in Australia has shown increases over the years, with a 3.30% rise in September 2024 compared to the previous year. This indicates that grocery prices have been rising faster than general inflation rates in some periods.

Specific Items

Fruits and Vegetables: These have seen significant price increases due to factors like weather events, supply chain issues, and labor costs. For example, grapes and watermelon have experienced price hikes of over 300% since 2021.

Meat and Dairy: Some items like bacon, eggs, and milk are cheaper today than in 1973 when adjusted for inflation, but this varies with specific products and brands.

Factors Influencing Price

Globalisation: While globalisation has led to cheaper prices for some goods due to international sourcing, it also means that global events can affect local prices more dramatically.

Economic Policies and Inflation: Government policies, currency strength, and inflation rates play a significant role in how much groceries cost.

Supply Chain and Production Costs: Increased costs in energy, transportation, and labor have directly impacted grocery prices.

In summary, while some grocery items might be cheaper in real terms due to efficiencies in production and global trade, the overall cost of groceries in Australia has significantly increased over the last generation, both nominally and when adjusted for inflation. This reflects broader economic trends, changes in consumer habits, and specific economic pressures affecting food production and distribution.

Transportation

The cost of owning and operating a vehicle has increased. In 1991, a new vehicle cost around $10,000 which, when adjusted for inflation, is far less than the $40,000 average in 2024. Public transport costs have also risen, though they remain somewhat affordable compared to other living expenses.

Wages and inflation

Average salaries have grown, but not at the same pace as housing costs. In 1980, median income was around $13,500, and by 2024, it was approximately $67,600. However, the house price to income ratio has worsened, making home ownership less attainable for many.

Wages have increased, but when compared to inflation and the cost of living, particularly housing, the real growth in disposable income has been less significant, affecting the standard of living for many Australians. Wages simply haven’t kept pace with the rising cost of living, particularly in housing, healthcare, and education.

A Generation Ago: Wages were more aligned with the cost of living, and essentials like food and utilities consumed a smaller proportion of household income.

Healthcare

Today: Healthcare costs have risen due to advances in medical technology and an aging population. While Australia has a public healthcare system (Medicare), out-of-pocket expenses for private healthcare and medications have increased.

A Generation Ago: Healthcare was more affordable, and public healthcare covered a larger share of medical expenses.

Education

Today: The cost of education, particularly tertiary education, has increased significantly. Many students now graduate with substantial debt due to the Higher Education Contribution Scheme (HECS) or other loans.

A Generation Ago: University education was more heavily subsidized, and fees were lower or non-existent.

Utilities and Essentials

Today: The cost of utilities (electricity, water, gas) has risen sharply due to infrastructure investments, privatisation, and environmental policies.

A Generation Ago: Utilities were more affordable, consuming a smaller portion of household budgets.

Lifestyle and Consumer Goods

Today: While technology and consumer goods (e.g., electronics, clothing) have become relatively cheaper due to globalisation and mass production, discretionary spending on services like dining out, entertainment, and travel has increased.

A Generation Ago: Discretionary spending was lower, and households focused more on essentials.

Childcare

Today: Childcare costs are a significant burden for families, with fees often consuming a large portion of household income.

A Generation Ago: Childcare was more affordable, and informal care arrangements (e.g., family support) were more common.

Overall Cost of Living

The general cost of living in Australia has risen considerably. According to various sources, Australia ranks as one of the more expensive countries in the world for living expenses, with Sydney and Melbourne being particularly noted for high costs. However, the affordability varies greatly by region, with cities like Hobart and Adelaide offering a lower cost of living.

While incomes have grown over the last generation, the cost of living, especially housing, has outpaced income growth, significantly impacting the affordability of a lifestyle similar to what was possible a generation ago. This shift has led to broader discussions on housing affordability, income inequality, and cost of living pressures in Australia.

Summary

Whilst it’s in our nature to blame sitting governments for all the woes in the world, in this instance it would be wrong to do so.

Overall, the cost of living in Australia has risen substantially over the past generation, particularly in housing, healthcare, education, and utilities. While wages have increased, they have not kept pace with these rising costs, leading to greater financial pressure on households. Additionally, changes in lifestyle expectations and consumption patterns have contributed to higher living expenses.

Part 2

What had contributed to making Australia a more expensive country?

We’ve seen that prices have risen significantly over the past generation due to a combination of economic, social, and policy-related factors… but why? Here are some key reasons:

Inflation

Inflation is the general increase in prices over time. Over the past few decades, the prices of goods and services in Australia have risen due to inflation, which erodes purchasing power. While inflation has been relatively moderate in recent years, its cumulative effect over a generation has led to higher costs for essentials like housing, food, and healthcare.

Housing Costs

Housing affordability has become a major issue in Australia. Property prices and rents have skyrocketed due to factors such as population growth, urbanisation, limited housing supply, and speculative investment. This has made housing one of the biggest contributors to the rising cost-of-living.

Wage Growth vs. Cost Increases

While wages have grown over the past generation, they have not always kept pace with the rising costs of essential goods and services. This has made it harder for many Australians to maintain their standard of living.

Globalisation and Supply Chains

Australia is part of a global economy, and disruptions in global supply chains (e.g., due to pandemics, geopolitical tensions, or natural disasters) can drive up the cost of imported goods. Additionally, global demand for resources like energy and food can increase prices domestically.

Energy and Utility Costs

The cost of energy (electricity, gas, and fuel) has risen significantly due to factors such as infrastructure investments and upgrades, and global energy market fluctuations. These costs are passed on to consumers.

Population Growth and Urbanisation

Australia’s population has grown significantly, particularly in major cities like Sydney and Melbourne. This has increased demand for housing, infrastructure, and services, driving up costs.

Policy and Taxation

Government policies, including taxation and regulation, can influence the cost of living. For example, the Goods and Services Tax (GST) introduced in 2000 has contributed to higher prices for many goods and services.

Lifestyle Changes

Changes in lifestyle expectations, such as increased consumption of technology, dining out, and entertainment, have also contributed to higher living costs. Australians today spend more on discretionary items than previous generations.

Climate Change and Environmental Factors

Climate change has impacted the cost of living through more frequent natural disasters, which can disrupt supply chains and increase insurance costs. Additionally, environmental regulations and sustainability initiatives can increase the cost of goods and services.

Interest Rates and Debt

Low interest rates in recent years have encouraged borrowing, leading to higher levels of household debt. While this has made it easier to finance large purchases like homes, it has also increased financial vulnerability for many families.

Global Economic Trends

Australia is significantly influenced by global economic trends, such as rising commodity prices, trade tensions, and currency fluctuations. These factors can impact the cost of imported goods and services.

Summary

The rising cost of living in Australia is the result of a complex interplay of economic, social, and policy factors.

Dear reader, we need your support

Independent sites such as The AIMN provide a platform for public interest journalists. From its humble beginning in January 2013, The AIMN has grown into one of the most trusted and popular independent media organisations.

One of the reasons we have succeeded has been due to the support we receive from our readers through their financial contributions.

With increasing costs to maintain The AIMN, we need this continued support.

Your donation – large or small – to help with the running costs of this site will be greatly appreciated.

You can donate through PayPal or credit card via the button below, or donate via bank transfer: BSB: 062500; A/c no: 10495969