Counting the cost of everyday living
With the cost of living constantly on the rise, business information analysts at IBISWorld highlight just where those price spikes are hitting hard – and why.
IBISWorld estimates that the average person's weekly expenditure on day-to-day living has risen by 10.4 per cent over the past decade, from $1,253.80 to $1,384.30. However, some aspects of the Aussie lifestyle have been bleeding the bank account more than others.
Commenting on the increases, IBISWorld general manager Ms Karen Dobie said: "We're all well aware of spiralling housing and utility prices – our weekly spend on electricity has skyrocketed by 58.3 per cent in just 10 years. There has also been a 48.5 per cent rise in average rents, a 44.3 per cent jump in the cost of mortgage repayments and increases of more than 35.0 per cent in our gas and water bills. However, what's more surprising is the incredible 94.4 per cent rise in per capita spending on primary and secondary education."
"Growth in the cost of rent is a simple issue of supply and demand, with the rising cost of purchasing property making renting a more attractive option for many – especially young professionals seeking inner-city properties," Ms Dobie said.
While lower interest rates should have improved housing affordability, Ms Dobie said Australian house price to income ratios remain high, and she anticipates a modest increase in house prices over the next 12 months.
"Although the Reserve Bank's interest rate cuts haven't had a huge impact on the housing market so far, lower rates should prevent the market from falling. The June monetary policy announcement indicated that there may be further cuts in the near future, which should spur demand," Ms Dobie added.
Utilities on the rise
"The significant spike in utility prices is due to dramatic growth in demand on the back of population growth and increased business activity, as well as higher transmission and distribution costs and the higher costs of coal and natural gas flowing through to retail prices," Ms Dobie said.
"Water price rises are also attributable to a combination of drought conditions and infrastructure upgrades that had to be funded through government grants and revenue rises."
Overall, Ms Dobie said the introduction of the carbon tax had only had a modest effect on price increases, with fossil-fuel electricity generation the hardest hit. The Australian Industry Group estimates energy costs have climbed by 14.5 per cent since the tax was introduced in 2012.
IBISWorld reports that private school enrolments – which are significantly more expensive than government school enrolments – account for nearly 35.0 per cent of Australia's total student population, up from 32.0 per cent 10 years ago. Growth in government school enrolments has been much slower, pushing up the average price of education.
"An increasing emphasis on education spending from parents, government initiatives such as the Building Education Revolution and rising wage costs and tuition fees have all had an impact on the amount we shell out for primary and secondary education each week – now averaging $25.80 per person, compared with just $13.30 in 2002-03," Ms Dobie said.
Money for medicine
Over the past decade, our medical and health-related expenses have risen by 29.1 per cent to $83.90 per person per week as the ageing population puts further stress on the health system, driving up prices for aged-care services and specialist treatments not covered by Medicare.
Shopping up a storm?
Retail spending is the only area in the IBISWorld survey where average weekly spending has declined in the past 10 years. Our outlay on clothing and footwear has fallen to $49.20 per person from $50.00 in 2002-03 as a result of price drops driven by aggressive discounting in an increasingly competitive market.
"Growth in the Australian dollar has boosted competition from overseas retailers, lowering the cost of imports for retailers and producers. While the recent fall in the dollar is likely to persist, the prevalent downwards trends in the clothing and footwear retailing sectors are expected to continue," Ms Dobie said.
As for electronic goods, Ms Dobie said prices had plummeted over the past five years due to a fall in production costs, especially for televisions, and because more products are being sourced from China, where economies of scale have driven per unit costs down.