There is no inflation rate. There's yours.
Australia's official inflation figure is one national average — and it leaves out the biggest bill many households have: mortgage interest. Put that bill back, and the number changes completely. Here's the official rate versus the real one, and how to find yours.
What’s your real inflation rate?
The official number is one national average. Yours depends on who you are and how you house yourself — and the year-on-year figure hides the bill that’s really squeezing you.
Your year-on-year rate looks low right now (2.1%) because mortgage interest fell as the RBA cut — but that only unwinds a sliver of the 2021–23 surge, when your costs ran well above the headline. Measured since the pandemic, working (wage or salary) have been hit harder than the official figure, not less.
And the bill the CPI never counted: a typical mortgage’s interest is now ~2.9× its 2021 cost (rates ~2.1% → ~6.1%). ABS mortgage-interest charges peaked at +91.6% in the year to June 2023 — the largest rise on record.
Each bar is the ABS Living Cost Index rise for working (wage or salary)that year. The recent small numbers don’t undo the big ones — they compound on top.
Just the last 12 months (2.1%)▾
Your biggest single bill — mortgage interest — fell 6.3% this year. That drop outweighs the rises in food, energy and insurance, pulling your overall rate below the 4.6% headline. (The official CPI never counted your mortgage either way.)
Cumulative figures compound the ABS Living Cost Index (and CPI) year-ended changes, 2020→March 2026. The year-on-year view is anchored to the ABS index for employee households (2.6%), adjusted for your housing. Illustrative, built on ABS series — general information only, not financial advice.
Rebuild the inflation number with the bills you actually pay
The official CPI leaves mortgage interest out entirely, and is slow to see rents. So we put them back — using the ABS’s ownalternative method (the “outlays” approach behind its Living Cost Indexes): everyday costs rise at the official rate, but your actual mortgage interest and actual rentgo in at what they really cost. Here’s the gap.
Interest only, at a typical variable rate: ~2.1% at the 2021 low → ~6.1% now. The CPI counts none of it.
Method: the ABS’s “outlays” approach (its Living Cost Indexes). Everyday costs rise at the official CPI (~25% since 2020); mortgage interest uses a typical variable rate (~2.1%→~6.1%); market rents from CoreLogic. For context, the ABS’s own Living Cost Index for working households is +29% over the same window. Illustrative, built on ABS/CoreLogic data — general information only, not financial advice.
The official number leaves out your mortgage
Australia’s headline inflation rate (the ABS CPI) measures the price of a fixed basket of goods and services. For housing, it counts the cost of building a new home — bricks, timber, labour — but deliberately excludes mortgage interest and the price of land.
That’s not a conspiracy — it’s by design (since a 1997 review, to stop interest rates and the inflation number chasing each other in circles). But it means when the RBA hiked and repayments exploded, the headline barely moved.
The ABS knows this, which is why it also publishes the Living Cost Indexes — which doinclude mortgage interest, and are the honest cost-of-living gauge. The Real Cost Index (under “Your inflation”) is built on them.
ABS Selected Living Cost Indexes. The mortgage household looks best this year (rates fell) — but is the hardest hit since 2020, above the official CPI’s +25%. One snapshot can’t tell you that.
The official number leaves out your mortgage
Australia’s headline inflation rate (the ABS CPI) measures the price of a fixed basket of goods and services. For housing, it counts the cost of building a new home — bricks, timber, labour — but deliberately excludes mortgage interest and the price of land.
That’s not a conspiracy — it’s by design (since a 1997 review, to stop interest rates and the inflation number chasing each other in circles). But it means when the RBA hiked and repayments exploded, the headline barely moved.
The ABS knows this, which is why it also publishes the Living Cost Indexes — which doinclude mortgage interest, and are the honest cost-of-living gauge. The Real Cost Index (under “Your inflation”) is built on them.
ABS Selected Living Cost Indexes. The mortgage household looks best this year (rates fell) — but is the hardest hit since 2020, above the official CPI’s +25%. One snapshot can’t tell you that.
Prices are only one of three forces squeezing you
The honest measure of “going backwards” is real income — and Australians are about 1% worse off than before the pandemic, the weakest stretch of real income growth since the 1960s. Higher interest and tax alone cut household income by ~5 points— and wages still aren’t keeping up (+3.3% vs +4.6%prices). Here’s how the three forces hit you.
Essentials you can’t avoid are rising 5.5% — faster than the 4.6% headline. (Find your personal rate in the calculator above.)
On $90,000, frozen tax brackets quietly lift your average rate +2.6 pts over a decade — about $2,357/yrmore in today’s dollars. Australia doesn’t index brackets, and it hits lower earners hardest.
A $500k loan’s interest is ~$30,500/yr — 2.9× the 2021 cost, and 33.9% of your income. Nationally, mortgage payments are near a 15-year high at ~10% of disposable income.
Tax uses verified ATO 2025-26 brackets (bracket-creep projected over 10 years at ~3% inflation, frozen thresholds; legislated 2026/27 rate cuts return some of it). Mortgage assumes a ~6.1% variable rate vs ~2.1% in 2021. Real-income and burden figures are RBA. Illustrative — general information only, not financial or tax advice.
The four charts that explain it
tap any chart to dig in ↗The bill the CPI ignores
Mortgage interest charges spiked +91.6% in 2023, then turned negative as the RBA cut. The CPI never counted it — your budget did.
Source: ABS Selected Living Cost Indexes
Who's hit hardest just flipped
Mortgage-holding employees went from the worst-hit household to the least; age pensioners are now the hardest hit.
Source: ABS Selected Living Cost Indexes
Essentials cost more than the headline
The ~61% of your budget you can't avoid is rising faster than the things you can — and faster than the official number.
Source: ABS CPI, non-discretionary vs discretionary
What's actually rising
Electricity leads — but it's almost all the unwind of government energy rebates (underlying ~3.1%). The averages hide these extremes.
Source: ABS CPI, year to April 2026
There isn’t one. There’s a range — from 2.6% to 5.2% — and yours is in it.
The honest answer isn’t “the government is lying.” It’s that one national average can’t describe a renter, a mortgage-holder and a pensioner at once. Find yours, then get the one number that matters each week.
Since 2020, prices are up +25% officially — and up to +29%for a working household with a mortgage. A low year-on-year figure doesn’t undo that; it compounds on top of it.
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Figures are ABS, rounded and illustrative. General information only — not financial advice.The Real Cost Index is illustrative — it personalises the ABS’s own published Living Cost Indexes and is not an official statistic.