Australia’s cost of living in 2025
Many Australian households continue to feel financial pressure in early 2025 despite slowing inflation. The latest data from the Australian Bureau of Statistics (ABS) shows that overall inflation eased to 3.4 percent in January 2025 which is the lowest level since mid 2022. However essential categories including rent and insurance remain elevated.
Households with mortgages have experienced mixed effects as interest rates stabilised while food and fuel costs showed signs of improvement.
Food prices: small but meaningful relief
ABS food inflation slowed to 2.1 percent annually driven by improved supply conditions and lower shipping costs. Some categories recorded noticeable declines including:
- Fresh vegetables: down 4 percent
- Dairy products: down 3 percent
- Bread and cereals: down 2 percent
However meat and takeaway meals remain higher than 2023 levels due to labour and transport costs.
Rent remains the biggest pressure
According to ABS housing data national rents increased by 8.3 percent over the past year with major cities experiencing the strongest growth.
Rental increases by location:
- Sydney: up 9.5 percent
- Brisbane: up 8.7 percent
- Perth: up 10.2 percent
Low vacancy rates and population growth are the primary drivers.
Fuel prices show improvement
Average unleaded petrol prices fell to AUD 1.72 per litre in January 2025 compared to highs above AUD 2 per litre in late 2024. Lower global oil prices and increased supply helped reduce costs for transport and logistics companies which contributed to lower grocery prices.
Electricity and insurance remain elevated
Electricity bills rose by 6 percent on average in 2024 and remain high due to wholesale market adjustments and network costs. Insurance premiums increased sharply especially for home and car policies driven by claims from severe weather events and higher repair costs.
Mortgage households
Households with variable rate mortgages experienced some relief as lenders reduced rates slightly following lower funding costs. Monthly repayments dropped by AUD 120 to AUD 240 for loans between AUD 500,000 and AUD 700,000 depending on lender adjustments.
Rental households
Renters continue to face the highest cost increases with limited signs of improvement in the short term. Government housing supply measures may take time to influence market conditions.
Household spending trends
ABS spending data shows that households are adjusting by:
- Buying more supermarket home brands
- Reducing dining out
- Delaying major purchases
- Increasing savings account usage
Where households feel the most pressure
Based on consumer surveys the highest stress categories are:
- Rent or mortgage repayments
- Insurance premiums
- Electricity bills
- Groceries
Government support measures
Federal and state governments continue to provide targeted support through:
- Energy bill rebates
- Rent assistance increases
- First home buyer programs
New measures may be introduced later in 2025 depending on inflation progress.
Are cost pressures easing?
While inflation is slowing the overall cost of living remains high especially for essential expenses. Households without mortgage relief or rental concessions are still experiencing significant financial strain.
Bottom line
Australia’s cost of living in 2025 shows mixed results. Food and fuel costs are easing which provides some relief however rent insurance and electricity remain elevated. The overall financial pressure depends on housing type location and household income.
Consumers should review household budgets carefully and consider switching to lower cost providers where possible.
This article is general information only and does not constitute financial, investment, legal, or tax advice. It does not consider your objectives, financial situation, or needs. You may wish to seek personalised advice from a licensed professional before making financial decisions.