Living costs have risen for all household types in the twelve months to the December 2025 quarter, new data from the Australian Bureau of Statistics (ABS) revealed.
Housing, food and non-alcoholic beverages and recreation and culture were the three main contributors to this overall surge. This comes as the confidence within the retail industry plummeted at the end of 2025.
ABS head of prices statistics Michelle Marquardt said rising annual living costs ranged from 2.3 per cent to 4.2 per cent in the December 2025 quarter, depending on the expenditure patterns of the different household types.
Households with government payments as their main source of income saw the largest annual rises in living costs due to rises in electricity costs over the year. These households saw a larger impact on their out-of-pocket electricity costs from state government electricity rebates in Queensland and Western Australia being used up compared to other household types.
Employee households’ living costs rose by 2.3 per cent, the smallest annual rise of all household types this quarter.
Employee households, whose main source of income is wages and salaries, benefitted the most from falling mortgage interest charges, which are a larger part of their spending than for other household types.
“Mortgage interest charges fell 6.4 per cent in the twelve months to the December 2025 quarter, as banks cut interest rates for both variable and new fixed rate home loans following the Reserve Bank of Australia’s decision to lower the cash rate target in February, May and August 2025,” Marquardt said.
Quarter-on-quarter, the lift in living costs slowed between September and December 2025 quarters.
Marquardt said that in the December 2025 quarter, lower electricity and health costs offset rises in other areas of living costs, as the timing of the Commonwealth Energy Bill Relief Fund (EBRF) extension payments and falls in pharmaceutical products and medical and hospital services lowered out of pocket costs for households.
All household types experienced falls in health costs during the quarter. The falls were due to a rise in the proportion of households reaching the Pharmaceutical Benefits Scheme (PBS) safety net threshold and the expansion of the Bulk billing incentive program, both of which reduced out-of-pocket expenses.
Households with government payments as their main source of income recorded the smallest rise in living costs this quarter. These households experienced the largest falls in health due to a higher proportion of households reaching the PBS safety net threshold, as well as medical and hospital services making up a larger part of their spending.
Employee households recorded a rise of 0.2 per cent per cent in living costs this quarter. Mortgage interest charges fell 2.8 per cent this quarter and largely offset rises in other areas of living costs.
In the clothing and footwear space in particular, living costs fell by 0.4 per cent quarter-on-quarter in all but employee households.