The ABS CPI structure plus the April 2026 data, in plain English.
Cost of living is the conversation that will not go away, and for good reason. After several years of fast price rises, households are still adjusting. This guide uses the ABS Consumer Price Index structure to break down where the typical Australian household's money actually goes, what is rising fastest right now, and where you have any practical room to push back. It is general information, not financial advice.
The ABS measures inflation using a basket of goods and services grouped into 11 categories. Each group is weighted by how much the average household spends on it, so Housing carries by far the largest weight, followed by Food and non-alcoholic beverages, Transport, and Recreation and culture. The weights are updated by the ABS to reflect actual spending patterns over time. The structure is set out on the ABS Consumer Price Index, Australia page.
On the year to April 2026 the headline CPI rose 4.2%, easing from 4.6% in the year to March. But the easing is uneven across categories, and the biggest contributors to inflation are the same ones that take up the largest share of most households' budgets. The table below shows how each group moved.
| CPI group | Year to March 2026 | Year to April 2026 |
|---|---|---|
| Food & non-alcoholic beverages | 3.1% | 2.8% |
| Alcohol & tobacco | 4.4% | 4.3% |
| Clothing & footwear | 7.1% | 5.9% |
| Housing | 6.5% | 6.3% |
| Furnishings, household equipment & services | 1.4% | 1.2% |
| Health | 3.0% | 4.0% |
| Transport | 8.9% | 6.6% |
| Communications | 1.4% | 1.5% |
| Recreation & culture | 2.8% | 2.5% |
| Education | 4.8% | 4.8% |
| Insurance & financial services | 2.8% | 3.0% |
It is worth being clear that the CPI and the cost of living are related but not identical. The CPI measures price change for a fixed basket. Cost of living additionally considers what households are actually spending and how that spending shifts over time. The ABS publishes a separate set of Selected Living Cost Indexes (SLCIs) for employee, age pensioner and self-funded retiree households, which is why two news stories about "cost of living" can quote slightly different numbers.
An average inflation rate is just that, an average. Lower-income households spend a much larger share of their income on essentials like food, energy and housing, so when those categories spike they feel inflation more sharply than the headline number suggests. Renters experience housing differently from owner-occupiers with a mortgage, and someone whose loan rate has just rolled off a fixed period can have a very different year from one halfway through a fixed term. The ABS SLCIs are designed to capture some of this variation between household types.
The same April 2026 CPI release that put headline inflation at 4.2% sits alongside the March quarter Wage Price Index, which rose 3.3% over the year. Wages still grew more slowly than prices, which means real wages were still falling, although the gap was narrower than earlier in the year. Households whose pay rose by less than the CPI lost some buying power; those whose pay rose by more than 4.2% gained a little ground.
The categories that dominate the CPI are also the hardest to change quickly. You cannot move house at will or refinance a mortgage overnight. But there is usually more flex in the discretionary categories: recreation, takeaway food, streaming and software subscriptions, the difference between driving and public transport, the difference between a brand-name and a generic at the supermarket. None of these are revolutionary, but they show up where most of the data does: in the categories with smaller absolute weights but real flexibility from week to week. The most useful first step is usually a month of tracking your actual spending, so you can see which CPI groups your own household leans on, rather than assuming.
Two indicators will largely shape household budgets through the rest of 2026. The first is the next monthly CPI release from the ABS, which will show whether April's improvement extends or stalls. The second is wage growth in the next quarterly Wage Price Index. If inflation continues to ease and wage growth holds, real wages would begin to recover, which is when the squeeze starts to feel more like genuine relief than a slower decline.
Within the Housing group, the major contributors are rent, new dwelling construction, utilities and property rates. Renters and recent buyers tend to feel rent and new dwelling costs first, while owner-occupiers further into a mortgage often feel utilities and rates more sharply, alongside any interest-rate moves on their loan. The headline Housing figure averages all of this out, which is why two households with very different living arrangements can report wildly different experiences of the same Housing inflation number.
Transport recorded the biggest moderation in the April 2026 data, easing from a 8.9% annual rise to 6.6%. Within transport, automotive fuel typically dominates short-term swings, while vehicle prices, vehicle maintenance, and public transport fares move more slowly. The ABS excluded automotive fuel from the trimmed mean in both March and April, a reminder that headline transport prices can move sharply without the underlying trend changing as much.
Surveys and budget data suggest a recognisable set of household responses when the cost of living rises faster than incomes: switching to home-brand groceries, dropping or rotating streaming subscriptions, deferring discretionary purchases, consolidating insurance policies and shopping rates, and being more willing to ask for a better deal on energy. None of those individually move the needle, but together they can free up several percentage points of disposable income, which is exactly the band where the CPI/WPI gap currently sits.
Disclaimer: This article is general information, not financial advice. Figures are drawn from the ABS Consumer Price Index, Australia release for April 2026 and the ABS Wage Price Index. Your own circumstances will differ.