Cost of living stress comes from mortgages as well as groceries

The cost of living is not only about consumption. It is linked to housing costs.

The cost of living. How many times do we hear it? Sometimes you wonder if any politicians on either side actually shop, so really know how, or fill up their own cars every day and pay their bills. How many of them have a mortgage? It is rarely at front of mind for a lot of commentators, too.

In middle-income households it is the main topic of conversation. Most of the young families I know are cynical about the government actually doing anything about the cost of living. The cost of living is not only about consumption. It is linked to housing costs.

However, different levels of income affect consumption priorities and expectations and affect individual households’ cost of living differently. Families have a range of experiences.

A couple with a relatively high income, one adult dependant, no mortgage on the principal residence, have different priorities about living costs than a young single person living on a low income who has to pay rent, although the older couple in the big house can help younger ones to own a house.

Nevertheless, the big house costs almost $8000 a year in rates, more than $2000 in gas and electricity. Household expenses, especially food, combined with petrol, can cost about $500 a week, but price rises haven’t affected older couples’ consumption as much as that of young families.

A relatively high middle-income household with two full-time salaries and three school-age children is affected more by the rise in living costs. Their bills for rates, electricity, gas, internet, insurance and so on are $2000 a fortnight. They have cut back on medical insurance. They spend $600 a fortnight on groceries. To save money they shop across Coles, Aldi and Costco. They buy little processed food except for the odd cooked chicken and have cut back on red meat. They eat a lot of pasta. With teenagers they go through more than three litres of milk a day.

Cleaning, laundry and dish-washing products, the most expensive items, are basic. Even the dog can’t have his special dog food any more. Frozen chicken legs are cheaper. The couple has two cars. But the real kicker for this household is the mortgage. It drains a huge slice of income. That is typical in such households.

Although they are worried about energy costs, especially gas, their electricity bill has been reduced by solar. They are more nervous about interest rates. They want to see petrol prices come down but would like a permanent cut in the excise as they understand the flow-on effect to cheaper grocery prices through cheaper road transport and cheaper energy.

A mortgage drains a huge slice of income.

In a two-income low middle-income household with one child in childcare, the couple is very frugal. They, too, have a big mortgage but they are careful about their grocery shopping, which rarely tops about $150. Price gouging in supermarkets is not their main concern because they shop in three outlets and the markets, are keen cooks and prepare everything from scratch. Their biggest impost, other than mortgage repayments, is childcare although they get a subsidy. They each stay home one day a week so their little one doesn’t have to go to care more than three days a week. They have one car and he rides to work on his bike.

They decided to take on more hours because they never had any spare cash. They are considering abandoning health insurance since it is unnecessary for emergency.

They understand the flow-on effect of cheaper petrol prices. However, like most, their focus is on paying the mortgage. They are not interested in electricity subsidies, they just want cheaper electricity, although solar has brought down that cost. They say the cut in the petrol excise is an attractive policy but it should be permanent because of the cost to agriculture. If that were brought under control it would be beneficial to shoppers.

The poorest family is a single mother with one school-age child. She gets about $1000 a week working for the NDIS and tops it up with private cleaning jobs for cash. Her household expenses come to about $1200 a week. Rent alone is $500 a week and her food bills are expensive, $250. Lately she has begun to notice the difference between outlets so she has stopped shopping at only one to reduce her food bills. She is solely focused on the cost of living and would prefer cheaper electricity rather than subsidies. She is critical of the government and asks “Why, with so much gas, we can’t be as rich as Qatar” or, more realistically, Norway.

She echoes much of what I hear about the cost of living. Why is it that the government can make so much money from our resources but we are not seeing the individual benefit? The cost of living is not just shopping. Food and energy are intrinsic to family consumption and everything revolves around paying for housing. It is the No. 1 problem.

Across all household types the bottom line is the cost of housing. The mortgage is the primary consideration for the middle classes and rents for those on low incomes.

However, with consumption expensive, it is almost impossible for low-income earners to save anything. The upshot is fewer low and low-middle income people able to make the leap to home ownership.

Neither side of politics has promised much to change that. Housing and consumption are intertwined in normal households, so for individual families, middling or low, cynicism about government’s ability to affect policy on cost of living has only deepened.