Renters feeling cost-of-living financial pressure alongside mortgage holders

The ANZ-Roy Morgan consumer confidence index shows the mood of households has continued to worsen and is now approaching levels of gloom not seen since the initial COVID-19 pandemic shock.

The index shows those paying off a home, who have seen the cost of their mortgage repayments soar in the past year, are the most downbeat, with an index score dropping to below 68 points.

But renters are also increasingly feeling dismayed. The index measuring their mood has fallen below 76 points for the first time after being in virtual freefall for much of the year as rents have surged.

Treasurer Jim Chalmers told a meeting of G20 finance ministers and central bank governors in India that inflation was moderating but "it will still be higher than we'd like for longer than we'd like".

Dr Chalmers said inflation was the "defining challenge" but urged his fellow policymakers "to think about what kind of economies we want to build as we emerge from the softness and the weakness in GDP growth over the course of the next 12 months or so".

"We need to be more ambitious than to just catch up and patch up and go back to the sorts of economies we had before COVID-19," he said, arguing the need to make economies more productive including through the transition to renewable energy and "get[ting] the human capital piece right".

ANZ senior economist Adelaide Timbrell said renters typically had smaller savings than those who owned or were paying off a home, and were feeling the pressure not only from growing rents but also rising living costs like power bills.

Ms Timbrell said such costs could be felt particularly acutely because renters are not able to draw on equity and refinance like home owners are able to do.

The Reserve Bank of Australia has been aggressively increasing interest rates in order to restrain household and business spending and reduce inflation. In the past 14 months it has hiked the official cash rate from 0.1 to 4.1 per cent.

Ms Timbrell said consumption has "fallen back sharply in 2023 because people have less cash after paying for essentials and have become more risk averse".

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But she said there was significant variation in the experiences and behaviour of households, with those paying off a home actually increasing their mortgage repayments in the first three months of the year to levels much higher than those experienced between 2014 and 2019.

By contrast, Ms Timbrell said, there was a group of households who were digging in to their savings.

The survey of 1478 households found that inflation expectations remain anchored at around 5.7 per cent, suggesting people do not expect price pressures to ease any time soon.

If living costs rise further, Canberra student Deb Hermanus said she would reconsider how she travels to work and university.

After two years of renting in student accommodation, Ms Hermanus moved to a sharehouse in Taylor this year to find cheaper rent.

In 2020, Ms Hermanus was paying a little more $300 per week for a studio apartment in student accommodation. This year, she would have been paying the same for a room in a six-share apartment on campus.

Despite paying less rent now, other cost of living pressures were emerging such as the rising price of groceries and petrol.

"I try and make sure I plan my day from the very start so that I'm not driving back and forth and just being very aware of what I'm doing every day," she said.

Ms Hermanus said she was worried about further increases to her living costs.

"Currently I drive a lot but I [would] have to look into taking the light rail and buses more often as well."

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