Australia’s economy grew 2.1% in the year to June 2026, and unemployment sat at 4.7% in September. Yet many people say they feel poorer than they did five years ago.
The gap comes down to prices outrunning pay. Inflation has averaged about 4.4% a year over five years, while wage growth has averaged roughly 3.4%. An OECD report this year found Australia had some of the weakest real wage recoveries since the cost-of-living squeeze began.
The Reserve Bank lifted the cash rate to 4.6% in September, the highest in 15 years. A behavioural economist said people feel the economy at the petrol bowser, on the mortgage statement and at the checkout rather than in GDP figures.
Household data points the same way. Discretionary spending rose 1.4% in the June quarter, but nearly half of that was vehicle purchases, and travel spending was weak. Savings rates remain relatively high, a sign of caution.
Analysts are watching inflation, the RBA’s November decision and Middle East oil supply, which could push fuel prices and inflation higher again.
What it means for your money
If your pay hasn’t kept up with costs, you’re not imagining it. Review your budget for essentials, check whether your home loan rate is competitive, and keep a buffer in case rates rise again in November.
Source: Money Magazine