Economists optimistic about costs, while pain continues for consumers

NSW housing minister Rose Jackson caused controversy with a radio interview in 2024. Picture: Jeremy Piper

ANALYSIS

Good news, the cost of living crisis is over! Sure, it may not feel like it, but a bunch of economic experts say so.

The July Finder RBA cash rate survey canvassed a group of economists and 44 per cent of them said they believed the toughest times had peaked and household budgets were bouncing back.

Of course if you ask those people who have no economics experience, other than spending 100 per cent of their time living in the current economy and paying costs, their opinions are quite different.

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A separate Finder survey of 1014 regular Aussies came back with 88 per cent believing ‘Cozzie Livs’ (yes, this crisis has been around long enough now to have its own nickname) was still in full swing.

Interestingly, 95 per cent of Baby Boomers thought the cost of living crisis was ongoing, making it the generation with the highest proportion feeling the pain.

Gen X was next with 92 per cent, while Gen Y (84 per cent) and Gen Z (83 per cent) were slightly more optimistic about the future.

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Finder head of consumer research Graham Cooke said that “despite talk of sunshine on the way, a lot of people still feel like they’re in the middle of the storm”.

“It’s a harsh reality that’s interestingly hitting older generations harder. Many are living on fixed incomes and relying on savings, so any increase to expenses or drop in interest can be a real body blow.”

Finder head of consumer research Graham Cooke.

Cooke advised households to focus on things they could control.

“When inflation hits and prices rise, returning to normal takes a long time. You can’t put the genie back in the bottle, but you can review your household spending.

“Whether it’s switching providers for your insurance, home loan, or internet, or simply cancelling unused subscriptions, every little bit helps.”

Perception gap

Experts seem to have a knack for being on a different page to a lot of average Australians.

It may be a bank executive suggesting packing your lunch from home could go some way to offsetting massive interest rate rises. Or RBA governor Michele Bullock opting not to lower rates for the approximate 33 per cent of the adult population paying off a mortgage, despite already having paid her own mortgage off within a decade, thanks to a heavily discounted interest rate for RBA employees only?

What about NSW Housing Minister Rose Jackson, who late last year said on radio that renters ought to be able to find a two-bedroom apartment in Sydney for “a couple of hundred bucks” a week.

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Sure, maybe if they first rented a time machine and went house hunting 25 years ago.

Cooke said there’s a “healthy divide” between economists, other public figures and the general public when it comes to economic opinions.

“Everyday Aussies are usually far more pessimistic than economists,” Cooke added. “We’ve seen this in past research.

RBA Governor Michele Bullock. Picture: David Gray.

“There is also a growing divide between the property-owning class and everyone else. We’ve seen 13 cash rate increases push up mortgage costs, which were passed on to renters in rent rises. Through this period, rental stress has increased more than mortgage stress.

“Now, interest rates are coming down and homeowners are saving an average of $300 per month, but those savings are not being passed on in lower rents.

Cooke did point out that expert conclusions are typically drawn from macroeconomic data, while consumers often speak from personal experience.

“Economists who suggested the cost-of-living crisis is over pointed to comparisons between today’s indicators and those of past downturns,” he said.

“But that doesn’t necessarily reflect the gut feeling many still have when the rent is due.

“It’s fair to say that many experts would make more than the median income and in many cases feel the pinch of inflation less, but I’d suggest the disconnect in sentiment is more to do with data than being out of touch.”

The Finder survey showed that South Australia was the most pessimistic about the cost of living (93 per cent), followed by Queensland (92 per cent) and NSW (86 per cent).

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