Car finance to blame for increasing pressure on household budgets
Australian families are feeling the financial pinch more than ever, with the cost of owning and running cars consuming household budgets more than ever.
Household transport costs have risen by 7.4 per cent in the first three months of this year, far outpacing the government’s inflation figure of 1.4 per cent over the same period, new data claims.
The latest report on the Transport Affordability Index from the Australian Automobile Association – the body representing state motoring groups such as the NRMA, RACV, and RACQ – claims the sharp increase in household transport costs is mainly due to interest rate rises, which affects all variable interest rate loans including car loans.
According to the report, the average Australian household now spends more than $400 each week, or 15.8 per cent of its income on car loans, insurance, fuel, and maintenance, among other costs – up from 15.1 per cent in the previous quarter.
However, for those living in Melbourne, Sydney, or Brisbane, the weekly costs amount to more than $500, with regional areas such as Alice Springs, Geelong, and Bunbury sit just below $400.
While increasing fuel prices have often been the cause of transport cost pressures for households, continual interest rate rises by the Reserve Bank of Australia – designed to reduce spending and slow inflation – are now to biggest cause of headaches for families.
The 7.4 per cent increase in household transport costs in the first quarter is more than five times the key metric for measuring inflation – the Consumer Price Index – which measured a mere 1.4 per cent rise between 1 January and 31 March 2023.
“The cumulative effect of continually rising transport costs is a heavy burden at a time when Australians are feeling cost of living pressures across the board,” AAA Managing Director Michael Bradley said in a media statement.
“Transport is a significant and unavoidable expense for households and is one of the key drivers of inflation. Governments at all levels must consider these cost pressures when formulating policy.”
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