One in three experts say this isn’t a cost-of-living crisis

More than a third of Australian economic experts say the country is not in a cost-of-living crisis. But Finder’s own figures show household financial pressure remains at extreme levels.

Australians staring at another expensive supermarket shop, electricity bill or mortgage repayment may be surprised to learn that more than one in three economic experts don’t believe Australia is in a cost-of-living crisis.

Finder’s latest RBA Cash Rate Survey found 35 per cent of its expert panel answered “no” when asked whether Australia was still experiencing a cost-of-living crisis.

But here’s a question: how well off are the experts making that call? And are they living in the same financial world as most Australians?

Finder’s own figures suggest there’s good reason to ask. Its Cost of Living Pressure Gauge, which measures financial stress experienced by Australian households, remains firmly in the “extreme” range at 81 per cent.

And looking ahead, three in five experts expect cost-of-living pressures to get worse over the next six months.

It comes down to one word: crisis

Much of the disagreement comes down to how you define “crisis”.

Stephen Miller from GSFM believes the description goes too far.

“‘Crisis’ is overblown,” Miller said. “It has cost-of-living challenges brought on by long-term neglect by governments – state and federal; Labor and Coalition – of productivity enhancement and an ignorance of regulatory burdens on businesses and ultimately consumers.”

Veteran economist Saul Eslake, from Corinna Economic Advisory, also argued the word exaggerates the circumstances facing most Australian households, although he acknowledged some people were doing it particularly tough.

“While I absolutely recognise that some households – including in particular those on low wages, and those with big mortgages – are ‘doing it tough’, I think the word ‘crisis’ exaggerates the circumstances confronting a majority of Australian households,” Eslake said.

“Maybe that’s because I’m old enough to remember the double-digit inflation, unemployment and interest rates of the late 1970s and 1980s.”

Jeffrey Sheen from Macquarie University also pointed to improving real wages and moderating inflation, despite acknowledging prices remained too high for many lower-income households.

“The level of prices of goods and services seem too high to many lower income households. However, real wages are gradually trending upwards, and hopefully this will continue,” Sheen said.

“Inflation of these prices is actually modest, even if still above the RBA’s target range of 2-3%. So Australia does not have a crisis in the cost of living.”

There was plenty of disagreement.

Shane Oliver from AMP pointed to a simple gap between what Australians earn and what they now have to pay.

“Since 2021 prices are up around 25% and wages are only up about 19%, so real wages have fallen,” Oliver said.

University of Sydney economist Stella Huangfu said slowing inflation did not mean household affordability had recovered.

“While inflation has slowed a bit, the cost of living remains a significant challenge because prices are still much higher than before the inflation surge,” Huangfu said.

“Many households continue to face pressure from elevated housing costs, higher mortgage repayments and increased prices for essential goods and services. Inflation is easing, but affordability has not yet fully recovered.”

What households are telling us

Finder money and home loans expert Richard Whitten said millions of Australians remained under serious pressure despite some economic indicators improving.

“Macroeconomic indicators might be cooling on paper, but millions of people are still confronted with very high housing costs and expensive everyday bills,” Whitten said.

“House prices are finally starting to fall, but everything else has only become more expensive. For borrowers with big mortgages and Australians on low incomes, the cost of living is a massive challenge.

“Our latest research shows that 43% of Australians have less than $1,000 in savings.”

Mala Raghavan from the University of Tasmania was firmly in the “yes” camp.

“Australia is still experiencing a cost-of-living crisis, with housing and services inflation remaining persistently high,” Raghavan said.

“As these categories constitute a significant proportion of household spending, continued price pressures are reducing affordability, weakening real household incomes, and constraining living standards.”

Scott Kuru from Freedom Property Investors was even more direct.

“Don’t take my word for it. Ask people at the supermarket checkout, the petrol station or the ones queuing up at rental inspections,” Kuru said.

“They’re the ones that will tell you it ain’t all unicorns and rainbows.”

I agree wholeheartedly with that view, even this morning speaking with a table of over 50s in the local cafe in Melbourne it was a unanimously similar opinion.

Experts aren’t expecting much relief

Whatever they call the current situation, the experts aren’t particularly confident about what comes next.

Of the 29 experts who responded to Finder’s questions about the next six months, 72 per cent had a negative outlook for the cost of living. Employment wasn’t far behind, with 59 per cent negative, while 45 per cent were negative about household debt.

Not a single expert expressed a positive outlook for either the cost of living or employment.

Housing affordability was the outlier. Some 38 per cent were positive about its prospects compared with 21 per cent who were negative, with falling property prices potentially providing some relief for buyers.

Graham Cooke from Aussie Insights, who created Finder’s Cost of Living Pressure Gauge, acknowledged the argument ultimately depends on where you draw the line.

“Whether it’s a crisis depends on your definition,” Cooke said.

“Inflation is cooling and housing is becoming more affordable, so the extremes have certainly eased. However, with groceries and fuel still expensive, households are still facing significant cost-of-living pressures.”

All eyes on the RBA

The findings come ahead of tomorrow’s Reserve Bank cash rate decision.

Of the 38 experts surveyed by Finder, 35 – or 92 per cent – expect the RBA to leave the cash rate unchanged at 4.35 per cent.

That may be welcome news for mortgage holders, but a rate hold won’t make the past few years of price rises disappear.

Inflation slowing simply means prices are rising at a slower rate. It doesn’t put supermarket prices, insurance premiums, power bills or a family’s weekly expenses back where they were before the surge.

Economists can argue over whether Australia still qualifies as being in a “crisis”.

For Australians counting what’s left after the bills are paid, the label might be the least important part of the argument.

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