For some Australian households, the latest increase in borrowing costs is arriving after years of financial strain rather than as an isolated setback.
The Reserve Bank increased the cash rate to 4.6% this week, its highest level since 2011. At the same time, households and businesses are dealing with higher fuel costs and the broader effects of the cost-of-living crisis.
Justin Everitt, a southern New South Wales grains farmer and vice-president of NSW Farmers, said the combination had intensified pressure on his household and farm. He described working longer and harder as “unsustainable” and said he found it difficult to “see the light at the end of the tunnel”.
Pressure is reaching essentials
Recent survey findings point to a wider deterioration in financial security. The Household, Income and Labour Dynamics in Australia survey, known as Hilda, follows more than 17,000 Australians each year and has been running since 2001.
Hilda reported increases in housing stress, declining financial wellbeing and food insecurity. Food insecurity was described in the source as a highly persistent inability to afford adequate food, rising from 13.7% in 2020 to 17.9% in 2024.
The survey also found that fewer people felt “on top of everyday finances”, while perceptions of the financial future generally worsened from 2020 onwards. Average financial wellbeing worsened for 24.1% of females and 20.8% of males, although the fact sheet does not specify the comparison period for those percentages.
Importantly, the Hilda data was collected before this year’s sequence of rate rises and fuel-price increases. That means it cannot show the full effect of the latest changes.
The mental load of financial hardship
Research from the University of Melbourne examined hardship through people’s reported experiences of being unable to meet essential expenses, including housing, meals, in-home heating and utility bills.
Dr Yamna Taouk, a co-author of the study, said persistent hardship can weaken a person’s sense of control and security and may increase the risk of enduring mental-health problems, including depression and anxiety. The study found that financial hardship was associated with poorer mental health before the cost-of-living crisis, and that the association became significantly stronger during 2022–24.
Taouk described this as an interpretation of the study rather than a simple claim that financial hardship causes the same outcome for everyone. Dr Lay San Too, another co-author, said the researchers had not yet included Hilda data from this year or last year, but considered the implications concerning given further increases in interest rates and fuel and energy prices.
Other indicators show similar strain. A General Social Survey found that one in four households reported at least one cashflow problem in the previous year. The figure almost doubled among single-parent households. A Lowy Institute poll also found that, for the first time, more people were pessimistic than optimistic about Australia’s economic performance, while Scanlon Institute insights linked increasing emotional distress with financial difficulty.
What the strain looks like at home
The effects are often visible in small, repeated decisions rather than one dramatic event.
Taylor, whose name has been changed, rents in Parramatta with her husband after being forced out of a rental property three years ago. Although they later secured a long-term lease, she said the cost of living continued to affect her mental wellbeing and sleep. The couple shop late at night for discounted meat and ready meals, choose walks instead of evenings out and ask family for supermarket gift cards as birthday presents.
Taylor also said she takes her medication every second day to extend the time between prescription refills. She described giving up hope of buying a home, despite earning what she called a “very good salary”, as a “reckoning”.
Lauren Bennett, a single mother with a full-time government job, said her salary was enough for her family to get by, but that they had given up much of their former standard of living. After buying a modest apartment in Sydney’s inner west in 2021 through the single-parent loan scheme, she said rate rises following her initial two-year fixed-rate period reduced her savings and left her feeling “numb”.
Bennett cancelled her gym membership and streaming services, rarely buys meals or coffee, often uses public transport and reduced her own medical appointments to prioritise her eight-year-old child’s specialist fees. She said there was little more left to cut.
Future plans are being postponed
Financial pressure can also influence decisions that once felt separate from household budgeting.
Erin Richardson, 31, has delayed starting a family with her partner, despite saying she has felt mentally ready for more than five years. Concerns about borrowing capacity, mortgage repayments, childcare, maternity leave and grocery costs made the prospect feel daunting and scary. Richardson bought a home in Newcastle after living with family.
For farmers, the pressure can also affect the movement of food through the economy. Everitt said petrol is needed for every part of farming, from harvest machinery to distribution, and that freight disruptions can prevent food from reaching markets. If crops cannot be harvested at the right time, he said, there may be no wheat for bread or barley for beer.
Everitt believes the cost-of-living tipping point has already arrived. His description is stark: “the onslaught of the punches after you’ve been knocked out”.
A crisis of depleted buffers
The source describes a tipping point as occurring after financial buffers such as savings and offset accounts have been exhausted. The experiences reported by renters, homeowners, single parents, farmers and people considering parenthood suggest how that depletion can narrow choices over time.
The available research does not yet capture the full effect of the latest rate and fuel-price increases. But it does show a pattern of worsening financial confidence, more food insecurity and a stronger association between hardship and poorer mental health during 2022–24.
For households already making repeated compromises, another increase may not feel like one more expense. It may feel like the loss of the last remaining room to adjust.
AI tools were used to assist with the preparation of this article.
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