SYDNEY, May 4 (Xinhua) -- With inflation surpassing 5 percent and wage growth continuing to stagnate, Aussies have begun to feel the pressure of rising living costs.
This pressure was confirmed by the Australian Bureau of Statistics last week. The country's Consumer Price Index increased by 2.1 percent in the first three months of this year, and 5.1 percent over the last 12 months, the increase of which has been predominantly in the housing, fuel and food sectors.
For example, in the first three months of this year, the cost of new dwellings has surged by 5.7 percent and fuel by 11 percent. The cost of food has risen by 2.8 percent, with vegetables up 6.6 percent and fruit 4.9 percent.
"Our food, home repairs, mortgage, everything keeps going up. I don't know how we will keep making room in our budget," Kate, who is 28 and did not wish to give her surname, told Xinhua on Monday.
Kate said she and her partner have been tightening their budget over the past six months, as they recently purchased an apartment in western Sydney.
Brendan Rynne, chief economist of financial advisory firm KPMG, said rising inflation has been a conflation of internal and external pressures.
"We know that during the first quarter of this year, we had even greater pressure on oil prices ... and goods prices increased due to supply chain challenges following COVID, which aren't going to abate," Rynne said.
Meanwhile, with the annual wage growth dropping below 3 percent, Aussies are further losing their purchasing power. They have become less willing to go on holidays, switch jobs or have children.
"We've had low wage growth for quite some time. And whilst that has been manageable, we've also had price inflation. This is really demonstrating the problems with a low wage economy," Paul Henman, professor at the School of Social Sciences of the University of Queensland, told Xinhua.
Rynne said that the Reserve Bank of Australia (RBA) would be forced to raise interest rates in May or June despite the slow wage growth.
"The argument by many economists is that the Reserve Bank is behind the curve with regard to managing inflation in Australia, and that we need to move interest rates up fairly rapidly in order to start to manage the inflation risk that's occurring at the moment," he said.
While that could help calm the demand side, the supply side is far more uncertain, Rynne said. "The drivers to inflation are not uniform."
By the end of this year, the cash rate may rise to 1 percent from its current 0.1 percent, Rynne predicted, adding that banks and lenders in Australia have already begun to increase mortgage rates to prepare for the RBA's upcoming move.
Kate said her mortgage rate rose from 2.29 percent to 4.04 percent last week, meaning she and her partner will now spend 600 Australian dollars (about 420 U.S. dollars) more to service the same home loan.
"We are also getting married early next year, so the money we were putting aside for the wedding has also reduced ... all in all it is impacting our savings and how we spend our money," Kate said.
However, to Henman, the pressure of rising living costs would not be the same for all Aussies.
"This will actually impact most heavily on those lower- and middle-income earners who don't have the same level of discretionary capacity, who may not have actually developed savings," he said.
For poorer households like single-parent homes, parents might cut back on meals and sanitary items to afford school supplies, he noted. "People will be scraping around the edges to really survive," he said.
Henman further said that the government could begin to address this issue by increasing unemployment payments in the short term and promoting higher wage growth in the long run, and that it should also invest more in social housing.
"We have as a society, a very strong private housing sector, which has been allowing our social housing sector to decline. If we can improve the capacity of our social housing to provide more housing options, that would help those at the very bottom," he said.
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