Australians have endured one of the sharpest cost of living surges in four decades. From the 2022 inflation peak to today, official government data tells a story of accumulated pain — and, slowly, partial recovery. Here is what the ABS, RBA, and Treasury data actually shows, without the political spin.
To understand Australia's cost of living in 2026, you have to start with the inflation shock that preceded it. The ABS Consumer Price Index hit a peak annual rate of 8.4% in the December 2022 quarter — the highest rate since 1983. That followed years of ultra-low inflation in the 1-2% range during the 2010s, meaning households, businesses, and government policy were all calibrated for a low-price environment that had abruptly ended.
By mid-2025, annual CPI had returned to the RBA's target band of 2-3%, sitting at approximately 2.7% (ABS June 2025 quarter). On the surface, that sounds like the problem is solved. It is not. Inflation returning to 2-3% does not mean prices fell — it means they stopped rising as fast. The cumulative price level increase from December 2021 to December 2025 is estimated at approximately 18-20%. A household that spent $1,000 per week in 2021 needs roughly $1,180-1,200 to buy the same goods in 2026.
The components driving inflation were not uniform. The ABS CPI disaggregates into eleven major groups. The biggest contributors to the 2022-24 surge were housing (new dwellings, rent, and utilities), food and non-alcoholic beverages, and insurance and financial services. These are not discretionary categories — they are the unavoidable costs of existing.
Housing costs represent the single largest component of Australian household expenditure, and they have not relented. The ABS Housing Cost Index, which tracks new dwelling construction costs, rents, and related expenses, rose significantly faster than headline CPI through 2022-24.
Rental markets across Australia entered a structural crisis well before the inflation surge, and the pandemic-era demand shift compounded it. National median asking rent reached approximately $620-640 per week in early 2026, according to ABS and Domain data — representing increases of 35-40% from pre-pandemic levels in many cities.
City-level medians (houses, early 2026):
Rental vacancy rate: SQM Research data shows national rental vacancy rates have remained below 1.5% — a historically tight market where tenants have little negotiating power. In Perth and Adelaide, vacancies dropped below 0.5% at various points in 2023-24, effectively meaning that for every available rental property, there were dozens of applicants.
For homeowners with variable rate mortgages, the RBA's rate hiking cycle was a cost of living shock in its own right. The RBA lifted the cash rate from a historic low of 0.10% in May 2022 to 4.35% by November 2023 — a 425 basis point increase delivered in 13 consecutive rises, the fastest tightening cycle since the early 1990s.
On an average outstanding mortgage of approximately $600,000 (Australia's average outstanding balance per ABS), that translates to roughly $1,500-1,700 per month in additional repayments compared to pre-hike levels. For households that stretched to buy at the peak of the property market in 2021-22, the combination of falling prices and rising repayments was severe.
The RBA began its rate-cutting cycle in February 2025, reducing the cash rate by 25 basis points to 4.10%. Further cuts have followed since then as inflation returned to target. While this provides relief for variable rate borrowers, fixed-rate mortgage holders who locked in at 2-3% rates during 2020-21 have been rolling off those terms at the higher prevailing rates, facing sharp payment increases even as the cash rate trends lower.
Food price inflation hit Australians at the checkout weekly and became one of the most politically charged cost of living issues. The ABS Food and Non-Alcoholic Beverages CPI group peaked at an annual increase of approximately 9.2% in the March 2023 quarter — meaning the weekly grocery bill for many households increased by close to 10% in a single year.
Categories that saw the sharpest increases:
Supermarket concentration: The ACCC's 2024-25 inquiry into supermarket pricing found that Woolworths and Coles — which together hold approximately 67% of the Australian grocery market — maintained or expanded profit margins during the inflationary period. The inquiry found evidence of pricing practices inconsistent with full cost pass-through, drawing significant political attention and a Senate inquiry in early 2025.
By early 2026, food CPI had moderated to approximately 2-3% annually. But the base effect means prices are not falling — they are simply rising more slowly from an already elevated level. The ABS Household Expenditure Survey data suggests average household food spending has increased from approximately $230/week pre-pandemic to over $280/week in 2024-25.
Electricity and gas prices were the most acute single cost shock of the post-pandemic period. The ABS Utilities CPI group — tracking electricity, gas, and other household fuels — recorded annual increases of over 14-18% at peak in 2022-23, driven by a perfect storm of global LNG price surges (post-Ukraine war), domestic market design failures, and ageing coal plant closures.
The Australian Energy Regulator (AER) default market offers (DMO) — which set a reference price for residential electricity — rose sharply. In South-East Queensland, the default offer increased approximately 23% in July 2023. In New South Wales and Victoria, increases of 19-22% were applied in the same period.
The federal government's energy bill relief program — $300 per eligible household credited in quarterly instalments across 2024-25 — provided temporary relief but did not address underlying price levels. State-based rebates added further assistance in some jurisdictions, particularly Queensland and Western Australia.
Gas prices followed a similar trajectory. The ABS records gas and other household fuels CPI rising over 30% cumulatively from 2021 to 2025. In Victoria, where household gas connections are most prevalent, residential gas bills increased from an average of approximately $900/year to over $1,300/year over the same period.
The central question of any cost of living analysis is whether income is keeping pace with prices. The answer for Australia is: partially, and unevenly, and only recently.
The ABS Wage Price Index (WPI) — which tracks wage movements across the economy, controlling for changes in jobs held — showed annual growth of approximately 3.6% in the December 2024 quarter. That compares favourably to the headline CPI of around 2.4% in the same period, meaning real wages were (narrowly) positive in late 2024 for the first time since 2021.
But from 2022 through to late 2023, real wages were deeply negative. Inflation was running at 7-8% annually while the WPI peaked at around 3.9%. The cumulative real wage loss over that period is estimated at 4-5% — representing a significant and durable reduction in purchasing power that has not been fully recovered.
Average earnings in context: ABS data for November 2024 shows average weekly ordinary time earnings of $1,960 for full-time adults. Annualised, that is approximately $101,900. The national median (which is lower than the mean due to high earners skewing the average) is closer to $73,000-75,000. At the median income, housing costs alone absorb more than 30% of gross income in all capital cities except Darwin and Hobart — the conventional threshold for housing stress.
The Fair Work Commission has delivered above-average minimum wage increases since 2022 in explicit recognition of the cost of living crisis. Annual decisions:
The national minimum wage is approximately $24.10 per hour as of 2024-25 — equivalent to around $915 per week for full-time workers, or about $47,600 per year before tax. At the minimum wage, covering rent in any major Australian city requires well over 50% of gross income — a situation that is, by any measure, economically untenable for many households.
Cost of living impacts are not evenly distributed. The ABS Household Expenditure Survey and Treasury analysis identify several groups facing disproportionate pressure:
The Albanese government's response to the cost of living crisis centred on the following measures across its 2023-24 and 2024-25 budgets:
The total relief package: Treasury estimates the cumulative 2023-24 and 2024-25 cost of living packages total approximately $23.6 billion across both federal and state government measures. In the context of a $680 billion federal budget, that represents roughly 3.5% of annual spending — substantial in dollar terms, but not a structural shift in any of the underlying cost drivers.
One of the most significant and under-reported cost of living pressures in Australia is insurance. The ABS Insurance and Financial Services CPI group recorded annual increases of 14-16% at peak, and insurance premiums continue to rise faster than general inflation in 2025-26.
The Insurance Council of Australia attributes the increases to climate-related claims events (floods, cyclones, hailstorms), rising construction and repair costs, global reinsurance market pressures, and population growth in high-risk areas. The practical effect: many Australians are seeing home and contents insurance bills of $3,000-5,000+ per year in high-risk regions, and some are being priced out of the market entirely — living uninsured in properties that cannot realistically survive a major weather event without financial ruin.
By April 2026, the headline numbers on Australia's cost of living look better than they did in 2022-23. Inflation is back in the RBA target band. Wages are growing faster than prices. Interest rates are falling from their peak. But these improvements are measured against a higher base — prices that are permanently 18-20% above their 2021 levels and are not coming back down.
The structural issues — housing supply shortfall, rental vacancy near historic lows, concentrated grocery retail, climate-driven insurance premiums — are not amenable to the monetary and fiscal tools that addressed the inflation surge. They require sustained policy reform over years and decades, not budget cycles.
For Australians asking whether they are better or worse off in 2026 than they were in 2021: the answer, for most households, is worse. Real wages have not recovered their cumulative losses. Rents are 35-40% higher. Energy bills are up 30-35%. And the relief measures, while meaningful at the margin, have not reversed any of those structural changes.
Track live economic data — inflation, wages, housing costs, and more — on Tax Pit's real-time dashboard, sourced directly from ABS, RBA, and Treasury data feeds. For context on how government spending decisions drive these pressures, see our action plan tracker. For analysis of how Australians are responding to financial stress, see our article on alcohol consumption and economic hardship.
How much has the cost of living increased in Australia since 2022?
According to the ABS Consumer Price Index, cumulative inflation from December 2021 to December 2025 was approximately 18-20%. The peak annual rate was 8.4% in the December 2022 quarter — the highest since 1983. Prices have not fallen; they are simply rising more slowly from an elevated base.
What is the average rent in Australia in 2026?
National median asking rent reached approximately $620-640 per week in early 2026, per ABS and Domain data. Sydney median house rent is around $780/week; Melbourne around $600/week; Brisbane and Perth around $650-700/week. Rental vacancy remains near historic lows of under 1.5% nationally.
Are Australian wages keeping up with the cost of living?
After sustained negative real wage growth in 2022-23, wages began outpacing inflation in late 2024. The ABS Wage Price Index showed approximately 3.6% annual growth against ~2.4% CPI by late 2024. However, the cumulative real wage loss from the inflation surge has not been fully recovered.
How much more are Australians paying on their mortgage versus 2022?
The RBA lifted the cash rate from 0.10% to 4.35% across 13 consecutive rises from May 2022 to November 2023. On an average $600,000 variable rate mortgage, that equates to approximately $1,500-1,700 in additional monthly repayments. The RBA began cutting rates from February 2025.
What government cost of living relief is available in Australia?
The federal government's 2024-25 measures include $300 energy bill relief per eligible household, redesigned Stage 3 tax cuts (approx. $800-$1,500 per year depending on income), increased Commonwealth Rent Assistance, expanded bulk billing incentives, and a 20% reduction in HECS-HELP balances. Total across 2023-24 and 2024-25: approximately $23.6 billion.
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