Actual living costs are growing much faster than the official inflation measure and households with wage earners are experiencing the biggest jump in expenses, according to the Australian Bureau of Statistics.
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The ABS has reported that its living cost index which, unlike the consumer price index, takes into account mortgage interest charges and gross insurance premiums, grew by between 6.3 and 9.6 per cent in the June quarter, depending on the type of household.
Wage earner households are suffering the biggest increase in living expenses by far, according to the ABS, up by 1.5 per cent in the three months to the end of June to reach an annual rate of 9.6 per cent, reflecting the impact of a near-10 per cent increase in mortgage interest charges.
The next hardest hit have been households dependent on government benefits (other than age pensioners) such as those receiving JobSeeker and disability payments, particularly because of fast-rising rents. Their costs grew 1.3 per cent last quarter, pushing annual growth to 7.3 per cent.
The least affected were self-funded retirees, whose costs were up 0.8 per cent in the June quarter to an annual rate of 6.3 per cent, mainly because they are least exposed to rising mortgages and rents.
The figures, released a day after the Reserve Bank of Australia decided to keep interest rates on hold for a second consecutive month, add to evidence that some households are being financially squeezed far more than others.
Reserve Bank of Australia governor Philip Lowe acknowledged on Tuesday that while overall consumption had slowed substantially because of higher living costs and interest rates, this disguised significant differences between households in how they were faring.
"Many households are experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income," he said.
Across all household types, housing and insurance charges made the biggest contribution to living costs, followed by furniture and household goods and food. The biggest drop in costs was in health, partly due to increased access to subsidised medicines under government changes to the Pharmaceutical Benefits Scheme.
These outcomes are particularly significant for those on government pensions, because pensions are indexed to the increase in the living cost index when it is higher than the CPI.
The ABS data coincided with the release of two separate reports showing wages pressure is building.
In its latest survey of employers, recruitment company Hays has found 95 per cent plan to grant pay rises this year as they struggle to attract and retain staff.
Almost 90 per cent of the 6903 organisations included in the study - including 28 per cent in the public sector - reported experiencing skills shortages, and 40 per cent said the impact of such shortages had intensified. Employers are also feeling pressure to hold on to workers, with 48 per cent admitting uncompetitive salaries were motivating staff to switch jobs.
![Living costs are outstripping inflation. Picture by Sitthixay Ditthavong Living costs are outstripping inflation. Picture by Sitthixay Ditthavong](/images/transform/v1/crop/frm/202296158/5a28145e-1451-4e37-b268-d4b4d0831a0d.jpg/r0_281_5500_3385_w1200_h678_fmax.jpg)
Hays Asia Pacific chief executive Matthew Dickason said there is a "significant surge in salaries" underway.
Reflecting this, two-thirds of employers surveyed planned to increase pay packets by more than three per cent, up from little more than a third last year.
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In a warning to employers, only 28 per cent of professionals included in the survey reported being satisfied with their income.
Meanwhile, a business index by employer organisation Ai Group found that although conditions overall continued to weaken, salaries are surging.
The report's wages indicator jumped 14 points in June, its biggest increase in a year.
Ai Group chief executive Innes Willox said it was "of particular concern [that] wages are rising at a record pace while industry faces the threat of contractionary conditions".
Mr Willox said planned changes to industrial relations laws "will add unnecessary pressure to our already struggling industrial sectors".
Wage growth is a key measure being watched closely by the Reserve Bank. It is concerned about the risk that the tight labour market will drive an unsustainable increase in pay.
Although rates are currently paused, Dr Lowe has flagged that more hikes may be needed to bring inflation down.