Bad news for Aussies as financial pain tipped to linger for years

It’s the news no Australian wants to hear: the cost-of-living pain is here to stay for years more.

Analysis from the Committee for Economic Development of Australia (CEDA) released earlier this week found the country’s “misery index” is back near its post-pandemic highs, and little relief is expected before the end of 2028.

The index combines inflation, unemployment, and interest rates to capture household financial strain using data from 2007 through June 2026.

CEDA found all improvement recorded since 2023 has now been wiped out, as high prices and steep borrowing costs continue to bite.

A major driver of the gloomy outlook is stubborn inflation, which isn’t expected to return to the middle of the Reserve Bank’s target band (2 to 3 per cent) until March 2028.

Things went from bad to worse on Thursday, when ABS data showed almost 40,000 Australians fell out of work in September, tipping unemployment up to 4.7 per cent.

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It’s another blow for households already dealing with persistent inflation and interest rates sitting at a 15-year high.

Yet for borrowers, that grim news offers a silver lining: the softening jobs market may give the Reserve Bank enough breathing room to stave off a fifth rate hike before Christmas.

Before Thursday’s job figures, CEDA head of economics Liam Dillon said a resilient labour market had been propping up Australia’s fragile economy.

“Households have been squeezed from two sides this year, with prices and mortgage repayments both rising,” he said.

“A resilient jobs market has been the main thing holding many families together.”

The labour market has held up well in recent years, sitting at historic lows.

Unemployment averaged about 4 per cent between early 2022 and mid-2026, compared with 4.4 per cent in New Zealand and 6 per cent in Canada across the same period.

Australia added about 177,000 jobs since the start of this year alone.

The makeup of Australia’s economic pain also differs from what households experienced before the pandemic. 

During the 2010s, economic pain was primarily driven by unemployment. Today, high living and borrowing costs are responsible for the surge, CEDA said.

Dillon argues stronger productivity is the only long-term way to bring inflation, interest rates, and unemployment down in tandem.

“Productivity growth is the only lever that can bring down all three drivers of misery at once,” Dillon said. 

He said it means businesses can pay higher wages without raising prices, which keeps inflation and interest rates in check while supporting jobs.

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“Getting that right is key to making us a country with far less to feel miserable about.”

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