The Insurance and Financial services group recorded the strongest rise across all LCIs this quarter. This was due to increases in Mortgage interest charges and Insurance. Mortgage interest charges rose as banks passed on the Reserve Bank of Australia’s (RBA’s) cash rate rises to home loan interest rates. Insurance premiums rose across house, house contents and motor vehicle insurance.
Food and non-alcoholic beverages rose across all LCIs. Higher prices for Meals out and takeaway foods contributed to the rise due to higher input costs. Fruit and vegetables also rose due to cooler weather which reduced supply of tomatoes and cucumbers.
Housing was another main contributor for the household types where Rents make up a higher proportion of expenditure. Rental prices continued to rise this quarter reflecting strong demand amid low vacancy rates.
Employee LCI recorded the strongest rise across the five household types (+1.5%)
Employee households, whose primary source of income is wages and salaries, rose due to a rise in Mortgage interest charges. Mortgage interest charges make up a higher proportion of expenditure for Employee households. Mortgage interest charges rose by 9.8% in the June 2023 quarter, with banks passing on the RBA’s cash rate rises to home loan interest rates.
Self-funded retiree LCI recorded one of the smallest quarterly rises (+0.8%)
Self-funded retirees, whose principal source of income is superannuation or property income, recorded one of the smallest rises across the household types. The smaller rise for Self-funded retiree households is due to having the smallest proportion of expenditure for mortgage interest charges and rents, which drove the rise for the other household types. These households also have the highest proportion of expenditure for domestic holiday travel and accommodation, which fell due to discounting in airfares and accommodation prices falling.
Pensioner and Beneficiary LCI (PBLCI) rose 1.1%
The PBLCI measures living costs for Age pensioner and Other government transfer recipient households. These households source their principal income from government pensions.
Other government transfer recipient households rose 1.3%, the second largest quarterly rise across the household types. Rents make up a larger proportion of expenditure for Other government transfer recipient households than for the other household types. Rental prices continued to rise this quarter.
Age pensioner households recorded a smaller rise of 0.8%. Health makes up a larger proportion of expenditure for these households. The cost of pharmaceutical products fell due to an increase in the proportion of consumers who qualify for subsidies under the Pharmaceutical Benefits Scheme (PBS). The fall in Health costs offset some of the rises for these households.
Government pensions are indexed by the rise in the PBLCI when it is higher than the CPI over the six-month indexation period. Over the six months between the December 2022 quarter and the June 2023 quarter, the PBLCI rose 3.2% whilst the CPI rose 2.2%.