The Cost of Living Is Still Rising – Here Is How to Make Your Money Work Harder

Most Australians are feeling it. Groceries, energy bills, rent, mortgage repayments, insurance. Everyday costs have increased significantly, and the relief many were hoping for in the form of interest rate cuts has not arrived. Instead, the RBA has raised rates three times in 2026, and inflation remains above the target range.

The question is not whether things are difficult – they clearly are. The question is what you can do about it.

Where the Pressure Is Coming From

Several factors are driving the current environment, and understanding them helps explain why relief has been slow to arrive.

Inflation has re-accelerated after showing signs of easing in late 2025. Housing costs have risen 6.3% annually, rents nationally are up 5.5% year-on-year, and energy prices have increased sharply since the government’s Energy Bill Relief Fund ended on 31 December 2025, removing a buffer that had softened bills for two years.

Fuel prices have also risen significantly due to the conflict in the Middle East, which has affected global energy markets. These costs flow through to groceries, transport, and the prices of goods and services more broadly.

Wage growth has not fully kept pace. The Wage Price Index rose 3.4% in the year to December 2025 (below the rate of inflation in housing, food, and energy), leaving many households with less purchasing power in real terms than they had a year ago.

What the Government Has Put in Place

The 2026-27 Federal Budget included a number of measures designed to provide relief, though the Government itself has acknowledged they do not fully offset current cost pressures.

The personal income tax cut from 1 July 2026, reducing the rate on income between $18,201 and $45,000 from 16% to 15%, will save eligible workers up to $268 per year, or around five dollars a week. The new $1,000 instant work-related expense deduction, also from 2026-27, will provide an average saving of around $205 at tax time for eligible workers.

The Medicare levy low-income threshold has been increased, benefiting over one million low-income Australians. Targeted payments through Centrelink are also providing support for eligible recipients including pensioners and JobSeeker recipients.

These measures provide real, if modest, support. They are not a substitute for a broader financial plan.

What You Can Actually Do

When costs rise and income does not keep pace, the most effective response is a combination of reducing unnecessary spending, protecting the income you have, and making your savings and investments work harder. Some areas worth looking at:

Review your mortgage

With rates on hold, now is a good time to compare what you are paying against what is available to new borrowers. Lenders are actively competing for quality customers, and the difference between your current rate and the best available rate may be significant. Even a 0.25% reduction on a $600,000 loan saves around $1,500 per year.

Look at your energy costs

State government energy rebate programs are still available in most states, though eligibility criteria vary. Checking whether you qualify for any concessions and comparing energy providers is worth doing. For business owners, energy is also a deductible expense and should be included in your cost review.

Make the most of super contributions

Contributing more to superannuation on a before-tax basis reduces your taxable income today, which in turn reduces the income tax you pay. With the concessional cap increasing to $32,500 from 1 July, there is an opportunity to shelter more income from tax and build long-term wealth at the same time. This is particularly effective for those on marginal tax rates of 32.5% or above, where the 15% super tax rate generates a meaningful saving.

Review your insurance

Insurance premiums have increased across the board, and many people are either overinsured in some areas or have gaps they are not aware of. A review of your life, income protection, and general insurance can identify whether you are paying for coverage you do not need, and whether the coverage you do have is appropriate for your current circumstances.

Look at your overall budget

It sounds basic, but a clear picture of where your money is going is the foundation of everything else. Many people have subscriptions, services, and recurring costs they have forgotten about. A few hours reviewing bank statements can often identify meaningful savings that require no sacrifice.

A Note for Business Owners

Cost-of-living pressures affect businesses as well as households. Wages, materials, fuel, insurance, and financing costs are all higher than they were two years ago, and consumer spending on non-essential items is softer as households tighten their budgets.

The businesses navigating this environment best are the ones reviewing their pricing, their cost base, and their cash flow regularly, not once a year. If your margins have compressed without a formal review of your pricing, that is worth addressing. If your cash flow is tighter than it should be given your revenue, understanding where the pressure is coming from is the first step to addressing it.

Cost-of-living pressures are real, but they are manageable with the right approach. Whether you want to review your mortgage, optimise your tax position, or take a broader look at your financial position, Simmons Livingstone can help. Call 1800 618 800 or email admin@simmonslivingstone.com.au.