If it feels like everyday life is getting more expensive, the latest data confirms it — and for many households, the pressure is still building.

New figures from the Australian Bureau of Statistics (ABS) show living costs increased for all household types in the year to the December 2025 quarter, rising between 2.3% and 4.2%. While the increases may appear moderate on paper, the impact on real household budgets — particularly for essentials — has been significant.

Living costs determine the real pressure households feel

Unlike inflation, which measures general price movements across the economy, the ABS Living Cost Indexes track the out-of-pocket expenses households actually pay. This provides a clearer picture of day-to-day financial pressure.

The latest data shows cost increases were largely driven by housing, food, electricity, and everyday essentials — the expenses families cannot easily reduce or avoid.

Who has been hit the hardest?

Households relying primarily on government payments — including pensioners and beneficiaries — experienced the largest rise in living costs, between 4.1% and 4.2% over the year.

A major contributor was electricity prices, which surged after state-based rebates in Queensland and Western Australia were exhausted.

By contrast, employee households recorded the smallest increase, with costs rising 2.3%. This group benefited from earlier mortgage interest rate reductions, which make up a larger portion of their spending compared with other household types.

However, that relief may be temporary.

Interest rate rises could add new pressure

After cutting interest rates three times last year, the Reserve Bank of Australia (RBA) has now lifted the cash rate to 3.85% — its first increase in more than two years.

Higher interest rates typically flow through to mortgage repayments and rental costs, raising concerns that housing expenses could once again climb for both homeowners and renters.

What’s driving higher living costs?

Several key categories were responsible for pushing household costs higher over the past year:

Housing
Housing remained the biggest contributor, with electricity prices jumping 21.5% as rebates were wound back. Rents increased 3.9%, while new dwelling costs rose 3%.

Food and groceries
Food prices rose 3.5%, reflecting higher grocery and dining costs. Meat and seafood increased 4.4%, with beef up 10.8% and lamb and goat rising 13.4%. Fruit and vegetable prices climbed 4%, partly due to extreme rainfall in Queensland.

Recreation and travel
Recreation and culture costs also increased, driven by higher travel prices. Holiday travel and accommodation rose 5.8%, with domestic travel up 9.6% and international travel and accommodation jumping 24.4%.

Some relief — but not for everyone

Compared with the September 2025 quarter, living cost increases slowed slightly. Lower electricity and health expenses helped offset rises in other areas, supported by government energy relief payments and reduced medical costs for some households.

But many experts warn the broader cost-of-living crisis is far from over.

Financial hardship is rising

Food relief charity OzHarvest reports growing demand, warning that rising living costs and interest rates are pushing more households into financial distress.

Meanwhile, the Australian Council of Social Service (ACOSS) says low-income households are bearing the brunt of rising costs, with some forced to skip meals, delay medical care, or go without basic necessities.

Their data shows people receiving JobSeeker are significantly more likely to experience food insecurity and lack access to essentials such as internet, phones, and household appliances.

The bottom line

The latest ABS data confirms what many Australians are already feeling — the cost of living remains high, and essential expenses continue to rise.

While cost increases have slowed slightly, rising interest rates and ongoing pressure on housing, food, and energy mean many households are still facing financial strain.

In this environment, careful budgeting, debt management, and proactive financial planning are more important than ever — particularly for households already feeling the squeeze.