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Living costs increased across all household types in the March 2025 quarter, according to the latest Selected Living Costs Indexes (LCIs) from the Australian Bureau of Statistics (ABS), reversing some of the smaller rises and falls seen in the December 2024 quarter.
Households reliant on government support – age pensioners, other government transfer recipients, and pensioner and beneficiary groups – recorded their largest quarterly increases in living costs since March 2023.
Employee and self-funded retiree households also experienced their highest rises since June 2024.
Living costs for employee households, whose main income source is wages and salaries, rose by 1.1 per cent in the March quarter, up from a 0.4 per cent increase in the previous quarter.
This rise was largely driven by mortgage interest charges, which make up a significant portion of expenditure for this group.
Mortgage interest charges increased 1.5 per cent over the quarter, a slight easing from 1.7 per cent in December 2024.
The continued rollover of fixed-rate mortgages into higher variable rates and increased mortgage debt levels contributed to the cost rise.
However, the Reserve Bank of Australia’s (RBA) February 2025 cash rate cut is expected to flow through in the June 2025 quarter, softening future impacts, according to the ABS.
The share of fixed-rate home loans for owner-occupiers continued to decline during the March 2025 quarter, while the proportion of variable-rate loans increased, further reflecting the ongoing transition away from low fixed-rate deals secured during the pandemic period.
Over the 12 months to March 2025, all five LCIs rose between 2.4 and 3.5 per cent. This compares to annual increases of between 2.5 and 4.0 per cent in the December 2024 quarter.
Households relying on government payments experienced higher annual rises in living costs than in the previous quarter, while employee and self-funded retiree households saw more moderate increases.
Mortgage interest charges were the most significant contributor to the annual increase in living costs for employee households, rising 8.8 per cent over the year.
Although still elevated, mortgage interest cost inflation has eased substantially from a peak of 91.6 per cent in the June 2023 quarter.
The ABS said this easing has been attributed to the Reserve Bank’s decision to hold the cash rate steady from December 2023 to January 2025, alongside a slowdown in the pace at which borrowers are transitioning from fixed to higher variable rate loans.
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