Key takeaways
Australians earning an average $90,000 a year full-time salary at the start of the cost of living crisis now need to earn $107,730 to have kept up with inflation.
Homeowners with a mortgage would need to earn even more – $120,294 per year – to have kept up with the rising cost of living and rising interest rates.
Since the onset of the cost of living crisis, inflation has surged by 19.7%, while wage growth has lagged at just 12.2% — this means the average Australian has lost 7.5% of their purchasing power.
If you’re feeling the pinch of the cost of living crisis, you’re not alone.
New analysis reveals that the average Australian now needs to earn $107,730 a year just to maintain the same standard of living they had a few years ago.
This is a significant jump from the $90,000 salary that was once considered sufficient for many full-time workers.
But what does this really mean for Aussies trying to keep up with the relentless rise in living costs?
The wage gap is widening
The analysis, conducted by Money.com.au, highlights a significant gap between wage growth and inflation.
Australians earning an average full-time salary of $90,000 in mid-2021 would need an income boost of $17,730 just to keep pace with the rising cost of living.
However, current figures from the Australian Bureau of Statistics (ABS) show that the average salary now sits at $100,016—well short of what’s needed.
This shortfall means the average Aussie has lost 7.5% of their purchasing power over the past few years.
Inflation has surged by 19.7% since mid-2021, while wage growth has only managed a modest increase of 12.2%.
This disparity has left many Australians feeling the squeeze, particularly those with mortgages.
The impact on Australian households
The impact of these rising costs is not just theoretical.
The number of Australians working multiple jobs has surged from 818,700 in June 2021 to 974,000, highlighting how many are struggling to make ends meet.
This is equivalent to 6.7% of our employed population.
For homeowners, the burden is particularly heavy.
With average home loan rates jumping from 2.84% to 6.03% since mid-2021, those with an average loan of $555,600 are now paying an extra $1,047 per month, or $12,564 more per year.
These figures paint a grim picture for mortgage holders who are not just grappling with the cost of living crisis itself but also with the Reserve Bank’s solution—higher interest rates.
The reality of a $100,000 salary
What was once considered a high-income salary of $100,000 is now viewed as merely mediocre, especially in today’s economic climate.
Many Australians are finding that their primary income is no longer sufficient to cover basic living expenses, forcing them to work extra hours or find additional sources of income just to get by.
Where do we go from here?
While there has been some relief through higher interest rates on savings, energy rebates, and recent tax cuts, the reality is that many Australians are still feeling the squeeze.
Wage growth has started to catch up, but for many, the damage was already done during the early stages of the crisis when inflation was rampant.
The road to recovery may be slow, but understanding the challenges and planning accordingly can help.
Whether it’s by reassessing your budget, exploring additional income streams, or seeking professional financial advice, there are steps you can take to navigate these tough times.
In the meantime, we can only hope that the Reserve Bank will consider easing the pressure on homeowners by cutting interest rates sooner rather than later.
For now, it seems the best we can do is buckle down and weather the storm as best we can.
