Australia’s Cost of Living: What Shifted

We can say that most Australians stopped talking about inflation as a shock. It had already done its damage. Instead, people were dealing with its consequences, high prices that remained unchanged even when the headlines calmed down.

Life did not suddenly become cheaper. It just stopped getting worse at the same rate.

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Inflation Slowed, but the Higher Prices Stayed

Inflation clearly eased compared with 2022. That part is not in dispute. By late 2025, price growth was running below 4%, which on paper looks manageable. The problem is where those increases were coming from.

Month after month, the pressure sat in the same places: housing, insurance, services. These are not costs people can easily avoid or swap out. Even with inflation cooling, the weekly shop and monthly bills were still landing well above where they’d been only a few years earlier.

The rate of increase changed. The base didn’t.

Wages Improved, Unevenly and Briefly

Pay growth finally picked up through parts of 2024, and for a moment, it felt like something had shifted. In several sectors, pay rises of around 4% became more common, particularly where staff were hard to replace. Construction, professional services and parts of the public sector saw the clearest gains, and for workers there, this was the first time in years that wages looked like they might be catching up.

That window didn’t stay open for long. As new agreements rolled through, wage growth eased back again. By late 2024 and into 2025, the headline pace slipped below 4%. In lower-paid roles, especially in hospitality and retail, increases largely followed award adjustments. With inflation sitting in the mid-3% range, those rises left very little to spare.

A big part of the disconnect comes down to how wage growth translates into real life:

● Nominal pay versus real income. Even a 4% pay rise barely translated into real gains once inflation and broader living costs were factored in, leaving many households simply treading water.

● Short momentum, uneven impact. Wage growth above 4% was brief and uneven, lifting higher-skilled roles while workers near minimum rates saw little real change.

This is why wages sit at the centre of the cost-of-living story. They’re the main channel through which households try to offset rising prices. In 2024–2025, that channel worked just well enough to stabilise things, but not well enough to create a feeling of getting ahead.

How Households Adjusted Without Making Noise

What stood out over 2024 and 2025 wasn’t panic or dramatic cutbacks. It was quiet recalibration. People changed their behaviour without framing it as a sacrifice.
Common adjustments looked like this:

● reviewing subscriptions one by one instead of cancelling everything

● switching supermarkets or brands rather than reducing overall spending

● delaying upgrades with no clear replacement date

● becoming more selective with casual entertainment and small, recurring extras

Entertainment spending, in particular, started to draw more attention. Smaller, low-commitment items that once blended into monthly statements became easier to question casual digital access tiers, capped-use platforms or fixed limits often labelled internally with shorthand like pokies net 15. For many households, these expenses shifted into the mental category of “optional”, rather than automatic.
None of these moves transformed a budget on its own. Together, repeated month after month, they helped keep things balanced.

Jobs Helped Keep the Floor in Place

The labour market did cool, but it never really gave way. Through most of 2024 and 2025, unemployment sat in a narrow band around 4–4.3%. In December 2025, it was 4.1%. That’s clearly higher than the post-pandemic lows, but still well below levels that usually signal real stress.

Finding work became slower and more competitive, not scarce. Underemployment hovered roughly between 5.7% and just over 6%. Enough to leave some people wanting more hours, but nowhere near crisis territory. Youth unemployment followed a similar pattern. By late 2025, the trend rate was around 9.5–10%, down from the 12% plus levels seen earlier in the decade.
What also mattered was who stayed in the labour force. Participation remained high, sitting close to 66.7%, which suggested people weren’t dropping out en masse. Most households still had at least one income coming in, even if hours or pay growth weren’t ideal.

That stability worked through budgets in fairly practical ways. Regular pay, even when modest, kept cash flow predictable. It reduced the need for emergency cutbacks and allowed households to spread adjustments over time. Treasury data itself shows real disposable income improving across 2024–25, helped by the combination of wage growth, tax settings and government transfers.
There was also a behavioural element. When the risk of losing a job feels contained, families tend to trim around the edges rather than slash essentials. Subscriptions get reviewed, spending becomes more deliberate, and big commitments stay intact. Confidence didn’t surge, but it didn’t collapse either and that made the overall cost-of-living squeeze more manageable than the raw inflation numbers alone would suggest.

What It Feels Like for Most Households Now

At this point, it doesn’t feel like a recovery, but it no longer feels like a crisis either. The experience sits somewhere in between, shaped more by adjustment than by clear turning points.

For most Australians, everyday reality comes down to a few steady themes:

● prices no longer surge, but they haven’t meaningfully retreated

● pay packets have improved, though unevenly and without a clear sense of getting ahead

● job security feels relatively stable, even as confidence remains cautious

The cost-of-living story now is less about shocks and more about endurance. Small choices. Repeated compromises. Making the numbers work month to month, without expecting a sudden release of pressure.