Save You have reached your maximum number of saved items. Remove items from your saved list to add more. TOTOTO Rising gasoline prices and multiple interest rate hikes have dealt the biggest quarterly hit to household finances in more than two decades. The purchasing power of families with one mortgage and two cars fell by
Rising gasoline prices and multiple interest rate hikes have dealt the biggest quarterly hit to household finances in more than two decades.
The purchasing power of families with one mortgage and two cars fell by an average of $450 a month in the March quarter of this year, while non-essential funds available to a typical renting couple fell by $180 a month. Households that own their own home were the least affected, with a drop in non-essential funds of $140 a month.
A report tracking household finances by economic consultancy Polis Partners shows that the first three months of 2026 saw the steepest quarterly decline in household discretionary income since the series began in 2004.
During that period, the Reserve Bank raised interest rates twice and gasoline prices rose above $2.50 a liter following the US and Israeli attacks on Iran in late February.
That financial double whammy erased almost all of the recovery the average household made in their budgets during 2024 and 2025, leaving them “back where they were 15 years ago in real terms,” according to the study.
The Reserve Bank also increased interest rates in May, but the effects of that decision were not included in the study.
Polis Partners director Rob Tyson said this year has shown how quickly family budgets can deteriorate when multiple cost pressures hit at the same time.
“There has been a huge jump in what households have to devote to essentials and that leaves a lot less to spend on other things,” he said.
But the impact has been uneven.
“Housing circumstances, household composition and income determine a family’s degree of exposure,” Tyson said.
“A couple with a mortgage and two gas cars they rely on to take their kids and commute to work have been hit hard, while a self-funded retired couple who have paid off their house and drive an electric vehicle have been largely insulated from the impact.”
The lowest 20 percent of people have been disproportionately affected; For those households, essential costs exceed income by about $81 per week on average, meaning they must resort to savings or use credit to make ends meet.
Middle- and lower-middle-income households have seen a significant drop in the amount of discretionary funds available to spend.
But high-income households, especially those who own their homes outright, have been relatively insulated from cost-of-living pressures.
For the entire year through March 2026, the amount the average household had to spend on non-essential items fell by $782.
Tyson warns there may be more pain on the horizon for Australian households.
“Unfortunately, the pressure is not over,” he said.
“Pressure will continue into the June quarter as another interest rate rise has diminished any relief associated with the fuel excise duty halving. Continued uncertainty around fuel prices and future RBA decisions could see Australian household budgets deteriorate further throughout the year.”
Bowser prices peaked in early April before returning to more normal levels in May and June. However, fuel prices are rising again following the resumption of conflict in the Middle East.
the quarterly household report by Polis Partners draws on national income, spending and price data to track what Australian households have left for non-essential spending after essential living costs.
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Matt Wade is senior economics editor at The Sydney Morning Herald.Connect through X either email.From our partners
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