Is the cost of living really out of control?

Abbott and Rudd FactChecker
Abbott and Rudd FactChecker 

The claim

Anyone would think our cost of living was spiraling out of control.

Prime Minister Kevin Rudd used the phrase "cost of living" an extraordinary 14 times in his press conference Monday. Mr Rudd's claim was universal, as he said Australian families were "all struggling from cost of living pressures".

On Tuesday, Opposition Leader Tony Abbott said "cost of living" four times. He spoke of "cost of living pressures", which would mean that not only was the cost of living "going up and up and up" (his words), but that it was going up faster than household income. 

Supporting evidence

Mr Rudd mentioned childcare, Mr Abbott spoke about electricity and gas. Electricity prices have climbed 17 per cent in the past year; gas prices have increased by 15 per cent. The government credits the carbon price with 10 and 9 per cent of those increases.

The cost of childcare climbed 7 per cent.

Does it stack up?
You would feel squeezed if that was all you noticed, but the consumer price index also notes that the price of food climbed an unusually low 1.1 per cent in the past year, while the price of petrol actually fell 3 per cent.

Taken together, it doesn't point to a squeeze: the total consumer price index climbed 2.4 per cent, and the typical wage earner's pay packet climbed 3.1 per cent. (The pay packet for Newstart recipients climbed 2.4 per cent.)

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But not all households are the same. The ABS calculates a number of different living cost indexes, and it says the costs facing aged pensioners climbed 2.6 per cent, the costs facing households dependent on benefits climbed 2.5 per cent, those facing self-funded retirees climbed 2.2 per cent, and those facing employees (so called 'working Australians') climbed just 1.4 per cent.

Lower mortgage repayment costs are to credit for the exceptionally low cost increases facing households headed by working Australians, and they've just fallen again. In the past year the standard variable mortgage rate has slid from 6.85 per cent to 5.95 per cent.

Australians wanting to complain about longer-term trends will get no support from an AMP National Centre for Economic Modelling study released last May. It finds the average family is ahead by $224 per week compared to 1984: low-income households are $93 per week better off, and high-income households are $429 per week better off.

About 40 per cent of household spending is discretionary - on so called 'luxuries' - and this is up from 38 per cent two decades ago.

AMP financial services managing director Craig Meller acknowledges that this isn't how Australians feel. But he says "today it is not uncommon to expect to eat at good restaurants, buy the latest technology and enjoy holidays which don't involve camping or staying with relatives."

"Maybe it is not the cost of living that's soaring out of control, but rather our aspirational selves telling us we need more," he says.

If so, politicians are likely to keep telling us they feel our pain.

Finding
Mr Rudd's claim is clearly false. He said Australian families were "all struggling from cost of living pressures".

Mr Abbott's claim was more guarded, but referred to "pressure" in a way that implied it was getting harder to fund cost of living pressures that are "going up and up and up". Even with the carbon tax, prices are increasing slowly.

On balance, taking both claims together, Politifact rates them false.

Fairfax is partnering with the Pulitzer-prize winning service PolitiFact during the election campaign. Its Australian arm, politifact.com.au, uses the same rigorous methodology as its US parent to rate the accuracy of claims by elected officials and other influential people in the Australian political debate.