Rising costs of living and lagging wage growth are making even the bare essentials of life a challenge for many Australians. On average the cost of living index rose by 1.4% throughout 2018-19, part of a broader 1.7% decline in the standard of living since 2013. Sydney in particular has seen some of the highest levels of price increase, currently being ranked as one of the most expensive cities in the world and the costliest in the Southern Hemisphere.
As seen below, there’s a longstanding and significant disparity in disposable income between Sydney’s Western suburbs and the city’s North, East and South. Many of these less affluent areas are financially strained to the point where some could not raise $2000 in the event of an emergency. This is a serious issue as Australia’s rising costs have not been uniform, instead disproportionately affecting the most essential goods and services. Since 2000, mandatory cost of living expenses such as healthcare, education, insurance and childcare have significantly outgrown wage growth (currently at near record lows of 2.3%) which is putting many families on the brink of financial ruin. Through RDA’s partnership with Nielsen, we were able to analyse this issue through the lens of GeoCMV cost of living concerns and market data variables.
The Bare Essentials – Food, Water & Electricity
As the price of food and basic utilities continues to rise (groceries by as much as 62% since 2000), even providing the bare essentials has become a challenge for many families. The poverty line for a family in Australia is $776 per week of household income (an estimate of the income required to cover the cost of essentials after housing is paid for) and more than one in eight adults fail to pass this threshold. This vulnerable group rely heavily on the support of welfare or community assistance to simply cover the cost of necessities and are thus most strongly affected by any price increase. This is clear from the distinct correlation between lower SES postcodes which sought welfare/community assistance and concerns over the price of food, water and electricity across Sydney.
Top Postcodes Food: Cabramatta, Villawood, Claymore, Gorokan, Fairfield
Top Postcodes Water: Cabramatta, Bonnyrigg, Villawood, Chester Hill, Fairfield
Top Postcodes Electricity: Spencer, Gorokan, Blue Haven, Woy Woy, Umina Beach
Childcare & Young Families
Childcare is consistently placed as one of the most significant expenditures for growing families, with costs having increased as much as 34% since 2013. Sydney is the most expensive city in the country for childcare, with some suburbs charging up to $200 a day. This is primarily a result of increased female participation in the workforce driving up demand (while supply remains low) and its impact is mostly felt by financially strained young families. As shown below, the areas most concerned over this growing cost overlap heavily with suburbs with a disproportionate amount of young families. Now taking around 27% of household income, the high cost of childcare is forcing both parents into the workforce and leaves little money left for other key essentials.
Top Postcodes for Childcare Concerns: The Ponds, Parramatta, Claymore, Homebush, Granville
General Insurance & Health Insurance
Hospital and medical services costs have gone up by 195% since 2000, leading many consumers to forgo health insurance altogether. This has been exacerbated by the price of insurance itself rising by around 118% during the same period, with gap payments now at an average cost of $300. Younger and more healthy Australians in particular are opting to dump their private health insurance as the cost far outweighs the likely benefits.
As seen below, this means that there are considerably lower private health insurance cost concerns within Sydney’s youth-dominated and subsequently uninsured inner-city. Moreover, as a discretionary purchase, many of the less affluent areas of Sydney’s West can’t afford insurance coverage, leaving the middle class as those most concerned by the increase. On the other hand, general insurance concern (regarded as either car or home protection) is more closely aligned to socioeconomic status as coverage is seen as a necessity by most people. As a result, less affluent households concentrated in the Western suburbs are those most affected by the cost as a represents a higher proportion of their total income.
Top Postcodes General Insurance: Menangle Park, Leppington, Bonnyrigg, Cabramatta, Smithfeild
Top Postcodes Health Insurance: Blaxland, Glenbrook, Woodford, Wentworth Falls
The underlying driver behind these concerns is socioeconomic status as less affluent individuals are more susceptible to any increase in their cost of living. It’s important that businesses are aware of this vulnerability since these consumer groups may require special assistance or treatment when handling their business-to-consumer relations. If you have any queries about the geoCMV variables we used for this analysis contact the RDA Help Desk (firstname.lastname@example.org or +612 8923 6655).