Why Albanese is emphasising he's 'dead serious' about addressing cost of living

At the time, the government was still enjoying the warm afterglow of its election win and, helped along by a host of legacy issues that were weighing on the opposition from its term in office, was riding high in the polls.

A 2.4 percentage point jump in interest rates had taken some of the gloss off, but plentiful work and hefty savings were insulating many from the full impact of soaring prices.

Fast-forward 12 months, though, and the questions about living costs have become much more pressing, and the politics of the issue for the government significantly uglier.

After a year in which the prices of staples like bread, eggs, electricity, gas and rents have grown at or close to double-digit pace and repayments on a typical mortgage have jumped more than $300 a month, it is little surprise families are feeling the financial strain.

Aside from a short-lived spike during the Black Friday sales period, consumer spending on non-essentials like furniture, electronics, household appliances, theatre and cinema tickets and even clothes and footwear has plummeted.

Household consumption, one of the mainstays of the economy, flatlined in the three months to September last year and was up just 0.4 per cent from the same point in 2022.

Given that the population surged by more than 620,000 over that period and inflation rose 5.4 per cent, it is an extraordinarily weak result.

The figures are of a piece with the gloom many feel about their personal circumstances and prospects.

Consumers started the new year more pessimistic than they have been at any time since the depths of the last recession in the early 1990s.

The Westpac-Melbourne Institute consumer sentiment index, already at historically low levels, fell 1.3 per cent in January, dragged lower as a growing proportion expect their financial position to be even worse this year than last.

Unsurprisingly, interest in buying a new home or splashing out on new fridges, couches, curtains or other household goods is at virtually rock bottom.

Westpac senior economist Matthew Hassan says the measure of consumer confidence is currently among the lowest in the near-50 year history of the survey.

"The new year looks to have picked up where the old one left off: cost of living and high interest rates continuing to domination and sentiment bumping around deeply pessimistic levels," Mr Hassan says.

Worryingly for Labor, polls indicate these concerns are also souring the mood of voters toward the government.

Cost of living dominates voter priorities, according to polling undertaken by the Redbridge Group in December.

The issue was ranked highly across all segments of the electorate but resonated particularly strongly with those under significant financial stress, including renters, mortgage holders and those living in the outer suburbs, Redbridge found.

Significantly, just a third of voters thought the government was focused on the right priorities, and there are signs many of those struggling financially are beginning to turn against the government.

According to the Redbridge poll, Labor's primary vote has declined from 38 to 33 per cent since August, and director Simon Welsh told Sky the biggest fall was among those with trade and vocational qualifications, many of whom feel that on living costs the government has been largely absent.

Support for Labor among this group dropped from 36 to 30 per cent in four months, with many switching their choice directly to the Coalition. Mr Welsh warned this could spell trouble for the government.

"These folks live in very high numbers in those outer suburban areas where Labor has already been losing skin over multiple election cycles," he said.

"[But] this was the first time that what we're really seeing is that vote starting to coalesce a bit around the around the Liberal support."

The shift suggests the opposition is gaining traction with its accusation that the government has been distracted from tackling inflation and living cost pressures by the Voice referendum and other issues.

Sensing the government's increasing vulnerability, and facing an important byelection in Dunkley in Melbourne's outer south-east within the next few weeks, Mr Albanese has led from the front since the beginning of the year in trying to counter the perception.

The Prime Minister has been zig-zagging the country, following a schedule partially dictated by the need to provide reassurance to disaster-hit communities and to begin campaigning to retain Dunkley.

But the one constant in his blizzard of appearances on FM radio, morning television and at media doorstops has been his eagerness to spruik the government's focus on living costs.

The government's top priority, Mr Albanese told Triple M in Adelaide on Wednesday, was "continuing to address cost of living. That's got to be number one".

Appearing on Triple M Hobart on Thursday, he declared that, "we understand that cost-of-living pressures are the number-one priority and that's the priority of my government".

And on January 10 he assured Today show viewers his government was "dead serious" about addressing the living cost crisis. "We're doing ... everything within our power to reduce inflation."

The new year has offered up some positive developments to support his case, not least data showing inflation slowed to an annual rate of 4.3 per cent in November, its weakest pace since the beginning of 2022.

Mr Albanese seized on the result to declare that inflation was "heading in the right direction".

He has also taken the opportunity to shift some of the heat onto the supermarkets, using the appointment of former Labor minister Craig Emerson to review the Food and Grocery Code of Conduct as a talking point to have a whack at the major chains.

There has been mounting anger about how slow the big retailers, particularly Woolworths and Coles, have been to pass on cheaper wholesale meat, fruit and vegetable prices to their customers.

"We find it completely unacceptable," the Prime Minister thundered. "When supermarkets are getting goods cheaper, the prices should go down."

The Dunkley byelection could be an early test of whether hard-pressed households believe the government is taking the economy in the right direction.

If the Coalition manages to snatch back the traditional Liberal stronghold, it could embolden Opposition Leader Peter Dutton to redouble his attacks on Labor's credibility as economic managers.

Regardless of the result, the government will be looking to more favourable developments in the economy as the year advances.

Interest rates have peaked, according to the markets and many economists, and by year's end a monetary policy easing cycle may be underway.

Barring further shocks, inflation is also expected to continue slowing and in coming months wage gains will begin to outstrip the rise in living costs.

The government will be hoping that by the time voters get the ballot box at the next election, the pain and struggles many are currently experiencing will be little more than a distant memory.