Your MoneyAnalysis

Main cost-of-living price rises have cost some households €8,000 a year since 2021

Tax cuts and once-off measures in recent budgets, and wage increases for some, have offset a portion of these costs

The average annual cost of domestic gas and electricity has fallen from about €4,000 to €3,200 but in 2021 that figure was about €2,000. Photograph: Yui Mok/PA Wire
Conor Pope's picture
Conor Pope
Fri Sept 20 2024 - 14:36

It is unsurprising that help with everyday costs is now the top priority among voters, with everything from home loans and rent to groceries and energy significantly more expensive than three years ago despite a recent levelling of the price spikes.

Inflation is now at a three-year low of 1.7 per cent – which is obviously good news – but any attempt to dress that up as proof the cost-of-living crisis is over or a sign people are no longer feeling the financial pain of two years of hikes discounts the reality of living in Ireland today, as even a cursory look at the costs people face suggests.

The single biggest cost faced by most people is keeping a roof over their heads, and while interest rates are falling, two or three ECB cuts have not soothed the pain of 10 successive hikes before then.

When it comes to home-loan costs, tracker-mortgage holders are the canaries in the coal mine, and while recent rate cuts – amounting to 0.85 per cent – have seen costs fall, a typical home loan for this cohort remains about €400 more each month than in 2022.

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People on variable rates and coming off fixed rates are also in a much harsher financial environment and paying substantially more than before the cost-of-living crisis, while those looking to borrow money face interest rates that are at least 1.5 per cent higher than they would have been in 2021.

The story is no better for renters, with recent Residential Tenancies Board figures suggesting average rents have increased 8.1 per cent for new tenancies and 5.9 per cent for existing ones over the last year.

Such hikes leave many renters well over €200 poorer each month than they were three years ago, with some others substantially worse off than that.

[ Irish Times poll: Cost of living tops public concerns for budget ]

The next big expense for most is food, and while the annual rate at which grocery prices are climbing has steadied at less than 3 per cent, almost everything on our supermarket shelves costs more than three years ago.

The current rate of grocery inflation of 2.8 per cent is far below the 17 per cent recorded at the height of the crisis, but prices have not fallen, they’re just not climbing as fast as they were. If a household spent €200 a week on groceries in 2021 they might be spending €230 now, which equates to an annual increase of €1,560.

The average annual cost of domestic gas and electricity has fallen from about €4,000 to €3,200 but in 2021 that figure was about €2,000, so households are €1,200 poorer, with prices unlikely to fall much further in the months ahead.

The news is arguably worse for those with health insurance, with a series of hikes rolled by the three main providers leaving most households with cover paying about €500 more each year and no sign of the inflationary pressures easing on that front

When these handful of increases are totted up, some households are about €8,000 a year poorer than they were – and that is an after-tax figure – but, of course, there are myriad other increases people have endured.

Tax cuts and once off measures rolled out in recent budgets, as well as wage increases for some, have offset a portion of those costs but there’s much ground to be made up if people are to find their way back to the spending power they once had.