Six months after 40 per cent of Australians expected their finances to improve, almost the same proportion now expect them to worsen, with some households cutting back on basics such as toothpaste, shampoo and haircuts, according to data cited by financial columnist Victoria Devine.
The shift reflects five interest rate rises by the Reserve Bank in 2026, persistent cost-of-living increases in housing, insurance and transport, and rising grocery and utility costs, Devine wrote in an opinion column for The Age and The Sydney Morning Herald.
A YouGov survey from March found 40 per cent of Australians expected their financial situation to improve this year, with young adults the most optimistic. By November, a Foodbank report showed a third of Australians now expect things to get worse heading into 2027, and that 3.6 million households are experiencing food insecurity, struggling to afford or access affordable and nutritious food. Half of those households fear their situation will deteriorate further.
Foodbank found some households are driving less, reducing energy use, skipping haircuts and cutting back on personal grooming products including shampoo, conditioner, soap and toothpaste.
An Essential poll cited in the column found four in 10 people say cost-of-living pressures are having a negative impact on their lives. One in three reported the stress was affecting their physical health, 36 per cent said they were struggling to sleep, and more than one in four said the toll was affecting their relationships. Six in 10 believed inequality was increasing.
Devine, a retired financial adviser and host of the podcast She's on the Money, said that if the current reality and sentiment persist, individual financial pessimism could become a collective experience, and the task would become convincing people that things can and will change for the better.
Analysis
Why This Matters
- Cost-of-living pressures are now forcing households to cut spending on basic hygiene products, a sign of deepening financial strain.
- The data show rising levels of stress, sleeplessness and relationship strain linked to financial worry.
- With interest rates still rising, the risk is that widespread pessimism becomes self-reinforcing, dampening economic activity further.
Background
Australia's central bank has raised interest rates five times in 2026, adding to cumulative increases from previous years. Inflation has been persistent, with housing, insurance and transport the main drivers. Real wage growth has lagged, leaving many households with less disposable income.
Key Perspectives
What to Watch
- The Reserve Bank's next rate decision and whether it signals a pause or further increases.
- Government policy responses, including potential cost-of-living relief in future budgets.
- Whether the trend of reduced discretionary spending broadens to more essential categories, indicating deeper economic distress.
Checked
12 claims in this story checked against 1 source: 11 supported.
Show each claim
- SupportedSome households say they are cutting back on toothpaste.The Age - Latest News: “with those households saying they were driving less, reducing energy use at home, not getting haircuts and cutting back on personal grooming products like shampoo and conditioner, soap and toothpaste.”
- SupportedA third of Australians expect their financial situation to get worse going into 2027.The Age - Latest News: “a third of us now say we are expecting their financial situation to get worse going into 2027.”
- Supported3.6 million households are experiencing food insecurity, defined as struggling to afford or access affordable and nutritious food.The Age - Latest News: “Their report found that 3.6 million households across the country are experiencing food insecurity – which is struggling to afford or access affordable and nutritious food”
- SupportedAlmost the same proportion who expected finances to improve six months earlier now expect them to worsen.The Age - Latest News: “It was only back in March that 40 per cent of Australians said they were expecting their financial situation to improve this year. Cut to today, and we see almost the same number of people now expect their situation to get worse over the coming 12 months.”
- SupportedThe shift reflects five RBA rate rises in 2026 and rising living costs, including housing, insurance, transport, groceries and utilities.The Age - Latest News: “In 2026 alone, the RBA has handed down five interest rate rises, and the cost of living has been persistently rising, with housing, insurance and transport being the main drivers”
- SupportedA March YouGov survey found 40 per cent of Australians expected their financial situation to improve that year.The Age - Latest News: “that polling I mentioned earlier, from YouGov, found that where 40 per cent of Australians said they were expecting their financial situation to improve”
- SupportedHalf of the households experiencing food insecurity fear their situation will get worse.The Age - Latest News: “and that among households, half fear things are likely to get even worse.”
- SupportedFoodbank reported that some households are driving less, using less energy, skipping haircuts and cutting back on personal grooming products.The Age - Latest News: “with those households saying they were driving less, reducing energy use at home, not getting haircuts and cutting back on personal grooming products like shampoo and conditioner, soap and toothpaste.”
- SupportedAn Essential poll found cost-of-living pressures were having a negative impact on four in 10 people’s lives.The Age - Latest News: “A recent Essential poll found the cost of living is having a negative impact on four in 10 people’s lives.”
- SupportedOne in three people said stress and worry were affecting their physical health.The Age - Latest News: “One in three said the stress and worry is impacting their physical health”
- SupportedThirty-six per cent said they were struggling to sleep.The Age - Latest News: “and 36 per cent said they’re struggling to sleep.”
- Partly supportedDevine said that if current reality and sentiment persist, financial pessimism could become collective and the task would be convincing people things can and will improve.The Age - Latest News: “There’s a real possibility that individual cases of financial pessimism become a collective experience ... If that sentiment, and this current reality, hangs around for too long, that’s when the real worry kicks in and the task becomes convincing people things can and will change for the better.”