Rising rent, grocery bills, and energy prices have Australians asking: what’s really happening to our cost of living in 2025? With policy changes and global pressures in play, households are adapting in creative—and sometimes tough—ways. Here’s an in-depth look at the numbers, the causes, and what you can do to stay financially resilient this year.
The Numbers: Where the Money’s Going in 2025
The Australian Bureau of Statistics (ABS) reports that the Consumer Price Index (CPI) rose by 3.2% year-on-year to March 2025. While that’s slower than the peaks of 2022-23, prices for essentials like housing, groceries, and insurance are still climbing faster than wages for many households.
- Rent: National median rent for a house is now $625/week, up 8% year-on-year. Sydney and Brisbane are seeing double-digit increases.
- Groceries: Food prices are up 4.3% overall. Fresh produce is particularly volatile, affected by climate and global shipping costs.
- Energy: Despite federal rebates, average household electricity bills rose 6% in the past year, driven by wholesale price pressures.
- Insurance: Home and contents premiums have jumped 11% on average, as extreme weather events and rebuild costs soar.
Australians are now spending a record 36% of household income on essential living expenses, according to the latest data from the Reserve Bank of Australia (RBA).
Why Costs Are Climbing: 2025’s Drivers
Several factors are combining to keep the pressure on Australian wallets:
- Housing Shortage: A chronic lack of rental properties, especially in major cities, continues to push rents higher. New incentives for build-to-rent projects announced in the 2025 Federal Budget may take years to ease the squeeze.
- Climate Events: Floods and heatwaves in early 2025 impacted supply chains, especially for fruit, vegetables, and dairy, driving up supermarket prices.
- Energy Transition: The accelerated closure of coal-fired power plants, while key for emissions targets, is contributing to wholesale price spikes until more renewables and storage come online.
- Global Pressures: The lingering effects of international conflicts and supply disruptions are still affecting costs of imports, from electronics to petrol.
Meanwhile, wages have grown by around 3.5%, not enough to keep pace for many lower and middle income households.
Policy Moves and Support in 2025
Governments at all levels are responding to cost of living stress with new and expanded measures:
- Energy Rebates: The federal government’s 2025 Energy Bill Relief Fund provides up to $350 in direct rebates for eligible households.
- Rent Assistance: Commonwealth Rent Assistance maximum rates increased by 10% in March 2025, the largest boost in over a decade.
- Cheaper Childcare: From July 2025, the Child Care Subsidy rises to 95% for families earning under $80,000, easing pressure for working parents.
- Public Transport: Several states, including Victoria and NSW, have frozen public transport fares for 2025 to help urban commuters.
Despite these moves, many experts say targeted help for renters and low-income families is still falling short of actual inflation in housing and essentials.
How Aussies Are Adapting: Budgeting and New Habits
With household budgets stretched, Australians are rethinking spending, saving, and even where they live:
- Switching Supermarkets: The rise of discount chains like Aldi and Costco is accelerating, with more shoppers trading down on brands and bulk-buying staples.
- Household Energy Upgrades: Demand for solar panels and heat pumps has surged, with state rebates making upgrades more affordable in 2025.
- Renting in the Regions: Regional migration continues as families seek cheaper housing, though price gaps are narrowing in many country areas.
- Side Hustles: Almost 1 in 5 Australians now earn extra cash through gig economy apps, freelancing, or online marketplaces, according to 2025 Finder research.
- Subscription Culling: Streaming, meal kits, and subscription boxes are on the chopping block as households review discretionary outgoings.
Financial counsellors report a spike in requests for help managing debts, negotiating with energy retailers, and accessing hardship support.
Looking Forward: What Could Change?
The RBA forecasts inflation will fall closer to its 2-3% target range by the end of 2025, which should eventually ease the rate of price rises. But housing and insurance are likely to remain pain points, and much depends on the pace of wage growth and the rollout of new supply in energy and housing.
For now, staying on top of your budget, seeking out rebates, and keeping an eye on government support remain essential strategies for Australian households navigating the cost of living crunch.
