The cost of living grinch needn’t steal your festive cheer

This year has been tricky for many households, wondering when interest rates might steady, when inflation will cool off and when the supply of homes, cars and energy will normalise. 

Hang tight everybody.

Yes, every new headline comes tinged with uncertainty and more than its share of pessimism. But here at Mozo we like to keep our heads above water and offer solutions to our readers. 

Now we can't quite solve the economy but we can try and make it easier for you by dissecting some of the news and demystifying the numbers.

So let’s make some sense of recent money news …

Rate hikes - start panicking! Yes, interest rates have been rising all year, with no end in sight. In November the Reserve Bank hiked the cash rate for a record seventh time in as many months. It's now 2.85%. 

The Treasurer Jim Chalmers has used the word 'difficult' to describe the situation for Australians, but of course, we're told that inflation is the priority problem to be dealt with - our difficulties can be handled another day apparently. 

The Reserve Bank of Australia has not held back as a result, and neither have many of the banks on their home loan interest rates. Those have also jumped over the past sixth months, with the big banks notably offering variable rates up around 5.6% on average (as per Mozo data). This has impacted many homeowners who until 2022 were only paying interest around the 2% mark. Fixed rate home loans have been even tougher to digest with average rates at 5.7% and up above 6% for longer terms. 

So what’s next? Some economists expect the "tightening" cycle to continue with one more rate hike to come in December, likely leaving us with a cash rate of 3.10% and higher home loan rates to boot. 

But don't despair folks! Take control. Review your home loan if you have one and switch where possible. There's always a better alternative out there, you just need to do your research.

Hey, the sky is falling because of something called inflation! 

The high cost of living that follows high inflation has also impacted the feeling around Aussie dinner tables. One way to measure this is with ‘consumer confidence’ grades. For example, the ANZ-Roy Morgan Consumer Confidence fell 1.2pts to 78.7 in early November and was said to be a stunning 30 points below the figure recorded exactly a year ago. 

But we need to put this into context and the way to do so is to ask, has confidence been down for a while, or does it just tick up and down? Well, by the same measure, consumer confidence dropped six straight weeks and according to Roy Morgan, is the longest series of declines since August 2020. It's also well below the average number all year, so on the face of things, yes, Aussie consumers aren't feeling confident.

But hang on a minute ... consumer confidence ticked back up in mid November, so you know, it might be time to just park the doom and gloom, put on a smile and get on with things. 

Seriously though, one index number can hardly represent every corner of the country accurately. So, as you weigh up your own feelings as a consumer, whether you're mad, sad or just feeling bad, take a breather. Have a look at the festive lights, share a drink with the family or maybe get a gift for a friend to help lift your own personal confidence index number. 

I’ve also read stories about how Aussies aren’t optimistic about the future. And yet, with all the sales occurring at the end of year, Black Friday or otherwise, a good portion of Aussies are confident enough to spend. Spending usually requires some bravado, you know?

Consider recent feedback from Aussies who say they are keen to shop for major household items. Indeed, Mozo research shows that 23% Australians say now is a ‘good time to buy’ major household items. Sure, a good number say it’s a ‘bad time to buy’ but it’s hard to argue with a discount, so the current shopping season can provide the retail therapy some might need. 

Saving money for a rainy day

Thankfully, amid all the climbing rates and swollen inflationary numbers, savings rates have begun to edge up, too. A number of banks have recognised the importance of giving savers a chance to stash some money with a good interest rate during these tough economic times.

Right now there are savings rates up about 3.5% and some that even exceed 4%, with specific conditions of course. As an example, Macquarie Bank's Savings Account intro rate and BOQ's Future Saver both offer above 4% (conditions apply again). Meanwhile, some term deposits are up at 4.5%, which represents a rather good rate when compared to earlier this year.  

Finally, it must be said that with all the heavy headlines, there are people trying to cut prices, improve costs and reduce the impact of financial stress. One basic way to tackle expenses is to take a more strategic approach to your weekly groceries. Some shops, aware of the troubles of many consumers, have discounted certain items ahead of the holidays, while local markets too offer secondhand items at lower cost. 

So there might be a silver lined ribbon around our Christmas season after all. We just need to look around, be aware of better options, and not settle for the doomsday storylines some like to spin.

If you’re on the hunt for a new savings account, perhaps check out our Savings comparison page to find one that suits you.