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Australian households face a cost-of-living tipping point as the RBA raises the cash rate to 4.6%, driving housing stress, food insecurity and mental health concerns.
Australian households are confronting a cost-of-living crisis that experts warn may be a tipping point, after the Reserve Bank of Australia raised the cash rate to 4.6% this week, the highest level since 2011. The increase compounds housing stress, declining financial wellbeing, food insecurity and rising mental health concerns across the country.
Rate Rise Adds Pressure on Households
Justin Everitt, a grains farmer and vice-president of NSW Farmers, said his first thought on hearing the rate decision was that it was another kick in the guts. He was already feeling the pressure of the cost-of-living crisis, compounded by soaring fuel costs that make it harder to do his job.
Everitt produces wheat, canola, barley, beef and lamb on his farm in Brocklesby. He said the rate rise could not have come at a worse time, describing the situation as unsustainable as he pushes the boundaries of what he can do.
The financial strain is not limited to farming. More Australians are reporting housing stress, a decline in financial wellbeing and food insecurity, according to the Hilda survey.
Financial Wellbeing Declines Across Australia
Launched in 2001, the Hilda survey follows the lives of more than 17,000 Australians each year. It found a general worsening in people's perceptions of their financial future since 2020.
Average financial wellbeing worsened for 24.1% of females and 20.8% of males. The number of people who feel on top of everyday finances is down.
Housing stress surged, while food insecurity, described as a highly persistent inability to afford adequate food, increased from 13.7% in 2020 to 17.9% in 2024. The data was collected before this year and last year, but experts say the implications are concerning given additional and persistent increases in interest rates, and fuel and energy prices.
Mental Health Toll of Cost-of-Living Crisis
Dr Lay San Too and Dr Yamna Taouk, senior research fellows at the University of Melbourne's school of population and global health, are co-authors of the research. Taouk said that when people feel everything is becoming more expensive and working harder still is not enough to get ahead, it can create ongoing stress and a sense of loss of control.
Over time, persistent hardship can undermine a person's sense of control and security and may increase the risk of more enduring mental-health problems, including depression and anxiety, Taouk added. When households lose their financial buffers and cannot see a credible path back to security, the effects can accumulate psychologically.
The study captured hardship through people's actual experiences of not meeting essential expenses, including housing, in-home heating, meals and utility bills, which Taouk said are concrete signs that people are struggling. The tipping point comes after financial buffers including savings and offset accounts are exhausted.
Taouk noted that financial hardship was associated with poorer mental health before the crisis, but that association became significantly stronger during 2022-24. In other words, the same experience of hardship appears to have been more damaging to mental health in the cost-of-living crisis than it was previously.
Households Adapt as Stress Rises
Taylor, who rents in Sydney's Parramatta suburb with her husband, was squeezed out of her umpteenth rental three years ago. Although they have since secured a long-term lease that minimises the stress associated with the city's shocking rental market, she still struggles with the mental toll of how expensive life has become.
She said she feels hopeless about it, and it has affected her sleep the most, especially when her credit card payment is due. She worries about whether she will be able to pay it and what the month ahead looks like.
As a therapist, she is seeing the stress in her patients too: their sleep is compromised and many feel there is no reprieve from the pressures of everyday bills.
Taylor and her husband have drastically altered the way they live. They shop late at night to only buy discounted meat and ready meals. She said they know which shopping centres to go to on which days to get the best prices, and she does not think they have paid full price for anything in the last 12 months.
She socialises with friends on walks instead of evenings out. The couple have started asking family for supermarket gift cards for their birthday presents because they need groceries more than other items. She also takes her medication every second day, to stretch out time between having her prescriptions refilled.
Taylor had long ago given up hope of buying a house but had hoped to buy an apartment. Facing up to the reality that that is not going to happen, even though she is on a very good salary, has been a reckoning.
Other data showed a rise in financial stress, with one in four households having at least one cashflow problem in the past year, a figure that almost doubled for single parents. The percentage of Australians working at least two jobs has hit an all-time high.
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