Will cost-of-living anger cause a change of government at this federal election?

Russia's invasion of Ukraine in February 2022 was the beginning of a brutal war for those finding themselves in the middle of it. 

But for the rest of the globe, it sent out economic shockwaves just as the world was attempting to resume "business as usual" after two gruelling years of the COVID pandemic.

The war placed a further squeeze on critical commodities — food and energy — and led into an across-the-board lift in prices.

Inflation in Australia started to rise sharply in early 2022. From 3.5 per cent in December 2021 it climbed to 6 per cent by the June quarter of 2022. 

Former Reserve Bank assistant governor, and now Westpac chief economist Luci Ellis, says the inflationary surge which led to the cost-of-living shock felt by Australians over the last three years "was all about the pandemic".

"It was the combination of disrupted supply chains right around the world. Increased demand for the things that were being made in those supply chains," she said. 

"Everyone needed a new computer and a new desk.

But it was Russia's move that sent inflation climbing sharply.

And in Australia it had surged in the months leading up to the 2022 federal election campaign.

In the middle of the campaign, the Reserve Bank lifted the official interest rate to 0.35— it had been at a historic low of just 0.1 per cent since November 2020 — it was the first of 10 subsequent rate hikes from the central bank.

"These decisions reflect the fact it is now time to begin withdrawing some of the extraordinary monetary policy support that was put in place to help the Australian economy during the pandemic" the then RBA governor Philip Lowe said.

"On top of this, Russia's invasion of Ukraine has resulted in sharp increases in the prices of oil and gas, base metals and many agricultural commodities."

Voters 'didn't blame the government' at first

Economic management had always been one of the Coalition's sales pitches to voters.

Now it was having to defend rising inflation and falling real wages

"There are places and ways that government can make a difference here, including growing the economy without adding to these inflationary pressures, providing longer term cost-of-living relief, getting real wages moving again," Jim Chalmers said at the time.

"The Reserve Bank took a deliberate strategy to go not quite as high for a bit longer than some peer economies, and there was internal research done, which has been released under FOI, to say that one of the rationales for doing it that way was actually, if you had a much more aggressive path of interest rates, yes, you'd get inflation down a little bit sooner, but the unemployment price you'd pay for that really just wasn't worth it."

Managing director of polling firm Visibility, Tony Mitchelmore says voters at the time generally "didn't blame the government, and the government really didn't own the issue because of COVID, because of world forces".

According to Ipsos in 2019 cost of living had been rated as an issue of concern by 32 per cent of voters.

In 2022 that figure had risen to 52 per cent — the highest rating for the cost of living since Ipsos began monitoring issues of concern in 2010.

In 2025 the number is at 65 per cent.

Despite such a high number while the current election campaign is underway, Mr Mitchelmore said "while they're not really blaming the government, and there's not baseball bats out for them, there is some ownership of the economy, that's for sure".

"And it's almost a matter of hope, like, will these guys make a difference? Will they make a difference on cost of living? And that's where there isn't really a great deal of hope at the moment."

Mr Mitchelmore says the cost-of-living price shock has hit the swinging voters he speaks to in focus groups "personally in a big way".

"If you bring up the cost of living, the group really comes to life. People really feel like they're struggling," he said. 

"If anything it feels like it's got worse."

A feature of this particular price shock was how extensive it was: interest rates hit mortgages and rents — but almost all the staples also jumped: food, insurance and notably energy.

"The disruption to supply chains was pretty universal," Ms Ellis said. 

"Energy costs seep into almost everything that everyone does. Building costs have far reaching implications for many other categories of spending."

The households hit the hardest

While the price increases were across the board, the impact on some households was greater than others

"The group that's probably had the biggest increase in cost-of-living is working age households with mortgages," said Roger Wilkins, co-director of the HILDA survey.

"In particular we've seen the average mortgage go up by 30 per cent between 2021 and 2023, so that in 2023 on average people were paying about $35,000 a year on their mortgage, up from about $25,000 two years earlier."

The impact of the pandemic on some households made it particularly difficult. The single parents who CEO of Single Mothers Association Terese Edwards represents make up much of the lowest income groups documented in the HILDA survey.

During the pandemic, she says, it was "women who had to leave any sort of semblance of paid work because they were the one parent that had to home school, that had to look after their children".

"They were already harder hit because of that pandemic, and then when the economy started to recover, it was those families who were least likely to bounce back quickly.

Mr Wilkins agrees.

One group that hasn't been as badly affected is retirees, he says.

"About 80 per cent of retirees own their own home outright, so they essentially have very few housing costs, so they've dodged that cost of living increase," Mr Wilkins said.

"They obviously are still experiencing the pain of higher grocery prices and electricity prices and so forth, but also ... the age pension is indexed to inflation, so that's helped protect them and and we've also seen some increase in their incomes from things like increased interest on savings."

Voters left angry

The costs of housing — both mortgages and rent — have been the biggest shocks and left voters angriest.

The fallout was hardest on those renting at the bottom end of the market.

"For the lowest quartile of the rental market, rents jumped just under 18 per cent so it's hit families that were already, perhaps in those cheapest houses, perhaps the houses that weren't the best for their children," Ms Edwards said. 

"You know, they didn't have the the heating or the cooling, and [were] perhaps overcrowded and weren't healthy, so there was nowhere else to go."

The Albanese government has introduced a range of policies to try to ease the cost of living, including the re-engineering of last year's tax cuts and energy subsidies.

The Coalition criticised many of these measures, arguing government spending was keeping interest rates higher for longer.

Whatever their economic merits or flaws, this election will test whether such measures improve your political prospects

"They struggle to cut through in the first place.

"And then do they make a real [electoral] difference? I would say largely not."

Inflation has come down from its peak over 6 per cent to around 2.7 per cent. And last month interest rates also started to fall.

Ms Ellis says the Reserve Bank's forecast is for inflation of 2.5 per cent out to 2027.

That's right in the middle of its target range, so that should set the scene for more rate cuts to come, though the spectre of Trump tariffs has created more global economic uncertainty.

But fighting inflation has come at a political cost to the government.

"What they will want to do is make it about change and make it about Peter Dutton, and will he make a difference? 

"And that's where they've got hope, because there isn't a great amount of hope that change in government would necessarily change things"

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