Introduction

As Australia approaches its 2025 federal election, the cost of living crisis has emerged as a pivotal issue, deeply affecting the lives of millions of Australians. With rising costs for housing, education, and basic necessities, many are struggling to make ends meet. This article delves into the current state of the cost of living crisis, its impact on various sectors, and how it might influence the upcoming election.

The Current State of the Cost of Living Crisis

The cost of living in Australia has been under intense scrutiny due to persistent inflation, high interest rates, and increasing housing costs. Despite some easing in inflation rates, with headline inflation dropping to 2.8% in the September quarter of 2024, underlying inflation remains a concern at 3.5%[1]. The Reserve Bank of Australia (RBA) has maintained interest rates at 4.35%, indicating that inflation, while improving, is still above the target range[1].

Key Challenges

• Housing Affordability: Rental affordability is at record lows across most capital cities, with the cost of building new homes remaining elevated. This situation is exacerbated by the difficulty in increasing housing supply[1].
• Education Costs: The cost of education is rising significantly, with the total cost of a government education in Sydney projected to be $150,323 over 13 years for a child starting school in 2025—a 59% increase from 2024[2].
• Digital Divide: Many families struggle to afford essential digital tools for education, such as laptops and internet access, which is crucial for schoolwork[2].

Impact on Education

The cost of living crisis is profoundly affecting the education sector. A significant number of Australian children live in poverty, which can have long-term consequences on their academic achievement and wellbeing[2]. Key findings include:

• Affordability Concerns: 90% of parents supported by The Smith Family fear they cannot afford essential school items, including digital devices, uniforms, and school excursions[2].
• Digital Divide: Only 48% of families have reliable home internet for educational needs, and just 40% of students regularly access a laptop/computer for schoolwork[2].

Economic Outlook and Interest Rates

The economic outlook for 2025 suggests a potential recovery in GDP growth, driven by an increase in household consumption following improvements in real household disposable incomes[3]. However, inflation is expected to rise above 3% in the second half of 2025 due to the unwinding of cost-of-living measures like electricity rebates[3].

Interest Rate Projections

The RBA is expected to begin easing interest rates in early 2025, with the cash rate projected to reach around 3.5% by the end of the forecast period[3]. This easing could provide relief to households but may also depend on inflation trends.

The 2025 Federal Election

The cost of living crisis is set to be a central theme in the 2025 federal election, with both major parties likely to focus on measures to alleviate financial pressures on families.

Key Election Promises

• Labor's Promises: Labor has emphasized tackling the cost of living, with promises to subsidize childcare and reduce university fees and student debt[1].
• Potential Budget Measures: The March budget may include further targeted cost-of-living measures, such as extending electricity rebates to prevent a spike in inflation[1].

Conclusion

The cost of living crisis in Australia is a complex issue that affects not only household budgets but also broader economic stability and social equity. As the election approaches, policymakers will need to balance economic growth with measures to address these pressing concerns. The outcome of the election will likely be influenced by how effectively each party addresses these issues.