'Completely reversed': Why more Australian households are feeling miserable

In Brief Inflation, high interest rates and rising unemployment are keeping pressure on households. Economic misery is expected to remain above historical averages until at least 2028. Australians are feeling increasingly miserable about the economy, with financial pressures unlikely to ease anytime soon, according to new analysis. New research from the Committee for Economic Development of Australia (CEDA) found economic "misery" has returned to post-pandemic highs, wiping out improvements made since 2023 and leaving the country on track for several more years of elevated financial strain. The think tank expects misery levels to remain well above recent historical averages through to at least the end of 2028, as households continue to grapple with inflation, high interest rates and a gradually weakening labour market. Fresh data released on Thursday added to those concerns, showing Australia's unemployment rate climbed to 4.7 per cent in September — its highest level since October 2021. News that makes sense Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox. CEDA's misery index combines inflation, unemployment and interest rates to provide a broad measure of the economic pressures facing households. "When those things go up, there's more of a financial pinch for households and there's a little bit more pressure on the pocketbook," CEDA head of economics Liam Dillon told SBS News. Progress 'completely reversed' CEDA says higher prices and borrowing costs have been the main contributors to the recent rise in economic misery. "What we found is that since 2023, the misery index had been coming down as inflation was trending lower and the Reserve Bank was able to lower interest rates accordingly," Dillon said. "Since then though, inflation's been a little bit more persistent than we had hoped. That's led the Reserve Bank to increase interest rates to 15-year highs." "The combination of those things means that the progress on lowering that economic misery has now been completely reversed and we're back at 2023 levels." Steadily rising unemployment, high inflation and rate hikes have led to a three-year high of "misery" levels in Australia. Source: SBS News After briefly returning to the Reserve Bank's two to three per cent target range in 2025, annual inflation rose to four per cent over the year to August. The Reserve Bank has raised interest rates four times this year, taking the official cash rate to its highest level in 15 years, with some economists expecting another increase before the end of 2026. The report also points to broader signs of economic pessimism, with consumer confidence remaining at levels comparable to those seen during the pandemic. Unemployment exceeding forecasts While inflation and interest rates have driven the latest increase in the misery index, the labour market has helped cushion the impact on many households. But that source of support is beginning to weaken. In the decade before the pandemic, unemployment was the largest contributor to Australia's economic misery, averaging 5.5 per cent of the population and peaking at 6.3 per cent in late 2014. Since the pandemic, unemployment has remained comparatively low, averaging around four per cent. But fresh figures released by the Australian Bureau of Statistics on Thursday suggest labour market conditions are continuing to soften. Australia's unemployment rate has risen above market expectations to 4.7 per cent in September. Source: SBS News The Australian Bureau of Statistics said on Thursday Australia's unemployment rate for Australia in September was 4.7 per cent — the highest it's been since October 2021. The August rate was initially flagged as 4.6 but revised up to 4.7. Employment fell by 39,300 people over the month, while the number of unemployed Australians increased by 8,900. The result also exceeded the Reserve Bank's forecast for unemployment to reach 4.5 per cent by the December quarter. Despite the deterioration, Dillon said the jobs market remained a relative source of strength for the economy. "What we've seen is that even though unemployment has been rising, the labour market is still showing signs of resilience and that's really helping to support households," he said. About 177,000 jobs have been added since the start of the year, according to CEDA. Dillon said that had helped insulate households from some of the effects of higher inflation and interest rates, while household savings remain above the decade average in the years before the pandemic. The remedy to misery The report argues reducing economic misery remains difficult because efforts to bring down inflation can often come at the expense of employment and economic activity. To return inflation to the Reserve Bank's target range, it has largely relied on higher interest rates, increasing pressure on households already facing elevated living costs. Minutes from the Reserve Bank's September meeting, released this week, showed staff were increasingly concerned weak productivity growth may mean unemployment needs to be higher than previously thought to keep inflation stable. Dillon said stronger productivity growth offered the best long-term solution because it could ease pressure across all three parts of the misery index. "What we suggest and what we argue through this is that really the only way to get at all three drivers of misery is to boost productivity growth," he said. "That's a challenge and a long-term one at that, but really this index shows why that's so important." CEDA expects misery levels to remain above recent historical averages through to the end of 2028 based on current trends. — With additional reporting by the Australian Associated Press. For the latest from SBS News, download our app and subscribe to our newsletter .