Living costs are growing at their fastest pace on record as broad-based price increases, particularly soaring rents and mortgages, eat increasingly deeply into household budgets.
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As homebuyers brace for the likelihood of a further interest rate hike next week, Australian Bureau of Statistics figures show households reliant on wages and salaries for income saw their cost of living jump 3.2 per cent in the December quarter to be up 9.3 per cent from a year earlier - the biggest such increase since records began in 1999.
While wage earners have been hit hardest because they are the most likely to have a mortgage, all households have seen their living costs soar, according to the ABS.
After employees, self-funded retirees have faced the steepest rise in living costs - up 2.2 per cent in the three months to December to reach an annual rate of 7.6 per cent. The least affected were age pensioners, though they still had a 1.7 per cent quarterly rise, pushing the annual increase to 7.3 per cent.
The figures highlight the extent of the financial squeeze being felt by households across the economy and will increase the pressure on the federal government to provide living cost relief in the May Budget.
Treasurer Jim Chalmers told the 7.30 Report the government was very concerned about the impact of high living costs and flagged that it was the government's job "to provide... relief where we can do it in a responsible and affordable way".
According to ABS analysis, rising interest rates accounted for the lion's share of the surge in living costs for income earners, while for self-funded retirees the main driver was rising recreation and culture costs. Among pensioners and other government benefit recipients the biggest impact was felt in rising prices for food and non-alcoholic drinks.
The release of the figures came as a Senate inquiry into the cost of living heard from charitable organisations including Foodbank Australia, the Brotherhood of St Laurence and the Salvation Army about growing demand for help.
In a submission to the inquiry, Foodbank said fresh fruit and vegetables were in "hot demand" at its hubs, member networks and breakfast club programs in schools.
The charity said its 2022 report found almost a quarter of households were struggling financially to access food more often, with high and rising living costs the main reason cited.
According to the report, more than half of households battling food insecurity had someone in paid work and almost 50 per cent had mortgages.
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In an appearance at the Senate committee hearing in Sydney, the Reserve Bank of Australia's Head of Economic Analysis, Marion Kohler, said inflation pressures were "quite broadly based".
But, in hopeful news for consumers, Ms Kohler said the worst of the inflation wave may have passed.
"We think the peak in inflation occurred at the end of 2022 and it will ease through the course of this year," the RBA official said, citing the resolution of supply chain problems, the stabilisation of global commodity prices and the effect of higher interest rates in slowing the economy.
One of the biggest concerns for policymakers is the looming financial cliff facing hundreds of thousands of borrowers due to come off low fixed-rate mortgages this year.
Ms Kohler estimates the number of mortgages involved will be "in the high 800,000s" and their value will be around $350 billion.
The central bank official admitted that recent interest rate rises were hurting: "Many people are understandably concerned about how they will manage in this period where the cost of living has increased significantly".
But she said the best the RBA could do to alleviate the situation was to bring inflation down to its 2 to 3 per cent target band.
The Reserve Bank Board will consider updated forecasts on inflation, growth, jobs and household spending at its meeting on February 7. Many economists think the strength of inflation late last year (it accelerated to 7.8 per cent in the December quarter) will convince it to hike the official cash rate to 3.35 per cent and may push it to 3.6 per cent in March.
![Soaring mortgages and rents have helped drive living costs to a record high. Picture Shutterstock Soaring mortgages and rents have helped drive living costs to a record high. Picture Shutterstock](/images/transform/v1/crop/frm/3BUUzmFAhrhLyX9rFCubPq5/282c45b6-bd49-4280-8f93-5751002bee7b.jpg/r0_243_5472_3332_w1200_h678_fmax.jpg)