Why our obsession with interest rates and cost of living is a problem

Summary

Podcast Summary: The Morning Edition — "Why our obsession with interest rates and cost of living is a problem" (February 3, 2026)

---

Episode Overview

This episode features host Samantha Selinger-Morris interviewing senior economics reporter Matt Wade about Australia's collective focus on interest rates and the so-called "cost of living crisis." Wade challenges pervasive media narratives, using data and historical context to argue that, for most Australians, the economic situation is less dire than headlines suggest. The discussion explores why this obsession may crowd out other important economic conversations, with insights into who actually faces financial pressure, and the consequences for public policy.

---

Key Discussion Points & Insights

1. Is There Really a Cost of Living Crisis?

• Historical Data Challenges the "Crisis" Narrative

  • Matt Wade references the HILDA Survey, a 20-year longitudinal study, which suggests current financial stress levels are not unprecedented.
    • “While the level has risen a bit, it's not out of step with that whole 20 year period. And in fact it's a little lower than it was in the early 2000s.” (Matt Wade, 01:36)
  • The language of “crisis” is likely an “overstatement for the vast majority” of Australians. (01:16)

• Relative Household Wealth Growth

  • Recent years have seen extraordinary growth in household wealth, especially among homeowners.
    • “Overall Australian households are far more wealthy than they were even five years ago, let alone longer.” (Matt Wade, 02:27)
  • Real wage growth has kept pace with (or exceeded) inflation over much of the past decade.

2. Contextualizing Interest Rates

• Recency Bias Skews Public Perception

  • Current interest rates, while higher than the COVID era's extraordinary lows, are “certainly not high by historical standards.” (Matt Wade, 03:44)
    • For comparison: Interest rates peaked at 18% in the 1980s–90s, are currently near 5%, and were at today's levels even 20 years ago. (03:28–05:05)
  • The public became accustomed to near-zero rates during COVID, which was unusual.
    • “A lot of us kind of got used to that as sort of... It was great. You know, we've never experienced such low interest rates ever.” (Matt Wade, 05:38)
    • “Interest rates have gone back to a more normal level and that's where they are now. That was always going to happen.” (05:45)

• Not All Households Are Affected Equally

  • Newer mortgage holders face higher burdens, while those who purchased 10–20 years ago carry less financial risk. (Matt Wade, 04:06)
  • Not everyone is a mortgage holder; a broad perspective is valuable.

3. Who Is Under Financial Strain?

• Disproportionate Impact Acknowledged
  • Certain households, such as single-parent families and low-income individuals living alone, face higher financial stress.
    • “Single parent households with kids often have a high rate of financial stress. ...People who don't have a family who are on low incomes...they also are overrepresented.” (Matt Wade, 07:41)
  • Despite rising bills, data do not suggest widespread inability to pay, even for electricity:
    • “The most recent HILDA survey found it's lower than it was at several points over the past 20 years.” (Matt Wade, 08:23)

4. Wealth Inequality vs. Cost of Living

• Homeownership Drives Wealth Gains; Renters Left Behind
  • The benefits of wealth growth have been uneven, largely favoring property owners.
    • “If you do own property, you benefited disproportionately.” (Matt Wade, 09:05)
  • Calls for nuanced policy focus:
    • “Wealth inequality is a big deal and it's going to take good, thorough, thoughtful policy to address it. ...If politicians are constantly responding to complaints about the cost of living, it means there's a lot less political bandwidth to deal with these other economic challenges.” (Matt Wade, 09:18)

5. The Dangers of Fixating on Cost of Living

• Two Major Pitfalls Identified
  • 1. Poor Economic Policy:
    • Political pressure leads to inefficient policies, like blanket electricity subsidies for all households, many of whom don't need them.
      • “Not all of them needed it and therefore it's a bit of a waste of money. …That is like, if you like, an inefficient policy for the government to adopt.” (Matt Wade, 12:09)
  • 2. Neglect of Bigger Challenges:
    • Focus on cost of living diverts attention from critical topics such as productivity stagnation, the clean energy transition, and growing inequality (especially intergenerational).
      • “When some issue like cost of living is taking up all the political space, it's very hard for that process to get going in a meaningful way or to get the space that it needs for the community to be brought along.” (Matt Wade, 13:38)

6. Public Debate & Conclusion

• Healthy debate about these issues is necessary, even if controversial.
  • “It's good to have a bit of a debate about it because I do think that, yeah, the debate is good and healthy.” (Matt Wade, 14:29)

---

Notable Quotes & Memorable Moments

• On the overuse of ‘crisis’:
  • “Calling it a crisis is probably overstating it for the vast majority.” (Matt Wade, 01:12)
• On recency bias with rates:
  • “A lot of us kind of got used to that as sort of... It was great. You know, we've never experienced such low interest rates ever.” (Matt Wade, 05:38)
• On the need for policy focus shift:
  • “Wealth inequality is a big deal and it's going to take good, thorough, thoughtful policy to address it. We need to do it. But if politicians are constantly responding to complaints about the cost of living, it means there's a lot less political bandwidth to deal with these other economic challenges.” (Matt Wade, 09:18)
• On the dangers of blanket subsidies:
  • “Not all of them needed it and therefore it's a bit of a waste of money.” (Matt Wade, 12:09)
• On political debate:
  • “The debate is good and healthy.” (Matt Wade, 14:29)

---

Important Timestamps

• Cost of Living ‘Crisis’ Language Challenged: 01:01–02:09
• Historical Perspective on Interest Rates: 03:10–05:28
• Distribution of Financial Stress: 07:31–08:48
• Discussion on Wealth Inequality & Policy: 09:02–09:49
• Consequences of Cost-of-Living Obsession: 11:47–14:15

---

Tone and Style

The conversation is measured, evidence-backed, and thoughtful, with both host and guest focused on providing context and challenging prevailing media narratives. Wade is composed, occasionally contrarian but always data-driven, while Selinger-Morris plays devil’s advocate to drive the discussion deeper.

---

Summary Takeaway:
Australia's genuine cost-of-living issues are real for some, particularly vulnerable households, but the widespread sense of “crisis” is not fully supported by long-term data. The country’s focus on this single issue overshadows larger challenges like inequality and energy transition, risks poor policy choices, and limits the scope for necessary public debate.

Transcript

[A]

The Reserve bank lifted the cash rate for the first time in two years yesterday to 3.85%, exactly as mortgage holders have been fearing. But what if many of us are not actually in the cost of living crisis that we keep being told that we're in and that this new interest rate is comparatively good? I'm Samantha Salinger Morris and you're listening to the Morning edition from the Age and the Sydney Morning Herald. Today, senior economics reporter Matt Waid on how obsessing over the cost of living hides the real challenges of our age. Welcome, Matt.

[B]

Thanks for having me.

[A]

Okay, so I'm very excited to speak to you because you argue that for many of us the so called cost of living crisis and isn't really backed by evidence. So what do you mean by that? I mean all the headlines are saying that we are indeed experiencing one.

[B]

Yeah, well, I guess one of the things is there's no doubt that many households have come under cost of living pressure. You could even call it a cost of living crunch. But I think when you think across the whole of Australian society, all of our households, all the families calling it a crisis is probably overstating it for the vast majority. And we've got very good data that goes back 20 years where a group from Melbourne, Melbourne Institute at Melbourne University have asked households a whole lot of questions about their financial situation. It's called the Hilda Survey. It's a very famous long running survey in Australia, very valuable. And so they've asked these questions about financial stress since 2001 of a similar sample of 9,000 households. And it turns out that in the past few years, while the level has risen a bit, it's not out of step with that whole 20 year period. And in fact it's a little lower than it was in the early 2000s. So this language of crisis I think can be a little bit of an overstatement.

[A]

And you point out in your most recent column that one ANU economist says that households are typically well ahead of those a generation ago. So walk us through that a little bit.

[B]

You see, I guess there's always, these are always somewhat relative questions, but let's take wealth for example. I did a story just the other day about the incredible growth in household wealth over the past five years. Now that's average. Obviously it doesn't count for everyone, but overall Australian households are far more wealthy than they were even five years ago, let alone longer. The other thing to say is that while income growth has probably been a little bit more subdued over the past decade than many would hope for much of that period, we've kept up, if not had higher wage growth than inflation. That means real wage growth. So that's an indicator, again, that, you know, we might not be way ahead of where we were, say, 10, 15 years ago. We certainly haven't gone backwards.

[A]

And so you've also pointed out in your column that historically, I mean, if we go way back, that interest rates have been way, way higher. So how much higher are we talking about? And then why should that be comforting to us now?

[B]

Again, it's quite a complex story here because we can look back on the days where many of our, probably our older listeners had, were borrowing money, when interest rates rose to like 18% in the late 1980s, early 1990s. So that's way off where they are now, right? Where your typical home borrower has probably a mortgage rate around 5%, you know, give or take 50 basis points or half a percentage point or two. So we're away from those days, of course, but what's changed since then is that mortgages have got bigger, especially the mortgage payments or the mortgage amounts of those who recently purchased the house. So there's certainly differences there. So it's hard to make comparisons over time. But it's fair to say that where the level of interest rates now are certainly not high by historical standards, and they are, you know, compared to those days, 20, 30 years ago, quite low. I'd also add there that often we focus a lot on, if you like, people who have recently borrowed money to buy a house or whatever. Now, that's a really important group and we need to be very concerned about that group. But, but again, we're looking at the whole of the population here. And so there's people who maybe borrowed money 10, 15, 20 years ago, they're paid off a lot of their loan, and so they're not carrying such big mortgage burdens as, say, someone who bought a house in the past few years. They're all part of the Australian community, all part of the, if you like, the household story. And we've got to sort of take that into account when we start talking about crisis.

[A]

And also, do you think it's relevant, I'm thinking something that our colleague, economics correspondent Shane Wright, mentioned on this podcast just last week, which is that only two years ago, mortgage interest rates were 4.35% and that it was 20 years ago under John Howard, when interest rates at the time were at a record low, and that was at 3.85%, which is, you know, what the Reserve Bank Announced.

[B]

Well, that's absolutely right. And look, I think we all often suffer from recency bias. It's a sort of a word that gets bandied around often by academics and economists and so forth. And the point is, during COVID we had this extraordinary experience where interest rates went down to virtually zero. They were just a little bit above zero. And a lot of us kind of got used to that as sort of. It was great. You know, we've never experienced such low interest rates ever. But, you know, what's happened is interest rates had gone back to a more normal level and that's where they are now. That was always going to happen. It was kind of inevitable. It's certainly unfortunate and a problem that we've got this uptick in inflation that the Reserve bank is currently grappling with. But all the figures are fairly within the bounds of our historical experience. There's nothing unusual going on now that we haven't perhaps seen in the past. After the break, household wealth inequality is a big deal and it's going to take good, thorough, thoughtful policy to address it. We need to do it. But if politicians are constantly responding to complaints about the cost of living, it means there's a lot less political bandwidth to deal with these other economic challenges. I didn't expect this. TikTok has more short dramas than I could ever finish. Each episode leaves you wanting the next. Download TikTok now and try it.

[A]

Okay. But I do want to play devil's advocate for just a moment in particular about the cost of petrol, groceries, you know, our bills. Our colleague Shane Wright noted just last week that electricity prices grew by 20 across 2025. So surely that would cause enormous strain on some households.

[B]

Right, you're right. This is a really big problem for certain types of households. I referred before to the HILDA survey, which gives us this amazing picture of not just, you know, average across the board sort of problems or issues that household face, but the type of household. And it turns out that the kind of households you might expect, single parent households with kids often have a high rate of financial stress. It's interesting, often people who live alone or people who don't have a family who are on low incomes, obviously they also are overrepresented in sort of, I guess, the financial stress data. But the other point I'd sort of make is that we even have data on the share of people who had trouble paying electricity bills, those who had had to either put it off or delay or whatever, and it's lower now or the most recent HILDA survey found it's lower then than it was at several points over the past 20 years. So even on that example of electricity that is so often raised, and it is true, electricity prices have really surged for a variety of reasons. But this story that suddenly somehow all these people can't pay their electricity bills is, is not borne out by the figures.

[A]

Okay, that's interesting. And you mentioned that the average household in Australia has enjoyed a big increase in wealth. But I'm just curious, like, does this only apply to homeowners? What about renters who have been facing massive increases in payments?

[B]

Well, this is one of the problems with wealth. I mean, wealth is an area in Australia where if you do own property, you benefited disproportionately. So one of my points about, I guess raising the question about the cost of living crisis is we do have all these other big economic challenges and wealth inequality is one of them. But it's like this so called crisis for cost of living. It crowds out discussion of all these other issues. You're right. Household wealth inequality is a big deal and it's going to take good, thorough, thoughtful policy to address it. We need to do it. But if politicians are constantly responding to complaints about the cost of living, it means there's a lot less political bandwidth to deal with these other economic challenges.

[A]

And so, Matt, with this interest rate rise to 3.85%, Australians with mortgages of $600,000, they're going to be paying about $100 more a month. Right. And that's going to be stressful for a lot of people, even though we now understand from our discussion that contextually it's been a lot higher before. So what do you say to that?

[B]

First of all, no one wants to see interest rate increase. But I'd also make that point that we look at the household financial stress data and the reality is that most Australian borrowers, home borrowers, are not in financial stress. In fact, one of the striking features of the last five years, if we go back to Covid, where we've had this incredible ups and downs of economic fortunes with, you know, the disruptions of COVID super low interest rates, then we had that surge of inflation that pushed interest rates higher. They've come down a bit over the past year and now they're going up again. The thing is, through all that kind of volatility, rates of mortgage distress, you know, the share of households who couldn't pay their mortgage if they were a home borrower has remained very low at historic lows. And that's a really good sign it means that the Australian economy and Australian households and Australian families have done an amazing job of being flexible and responding to the challenges of the past five years. And I think you have to say the Reserve bank cops a lot of flak because they're, you know, everyone thinks they're about to lift interest rates, but we are well served by fine economic institutions in our country and that's something we can be very thankful for.

[A]

Which brings us, Matt, to the real pointy end of your argument, which is that there are actually two really big problems with our obsession with the cost of living that actually can hurt us in the long run. So what are they?

[B]

Yeah, well, my, my point is, as I say, I think that our obsession with cost of living has a couple of unhelpful consequences. The first one is that it leads government or encourages governments to adopt poor economic policies. You know, when they know their voters are sort of whingeing about or complaining about cost of living all the time, even if they might have high incomes, mind you, it's very hard for them to resist doing something about it or at least being appearing to do something significant about it. And a very good example of this was in the last federal budget. The federal government basically handed out electricity subsidies to every household. Now, it was a popular policy. I'm sure people liked that. But the fact of the matter is that not all of them needed it and therefore it's a bit of a waste of money. So that is like, if you like, an inefficient policy for the government to adopt. And I think that's partly a result of the political pressure that builds when people have such strong feelings about cost of living. The second one, it's a bigger point, I guess, and that is Australia has a range of massive economic challenges. You can sort of reel them off. You know, we've got fairly low productivity and obviously the incredible challenge of the clean energy transition, and that is a massive and long term economic challenge that we've got. And you know, many would argue perhaps one of our biggest challenges. There was a problem I mentioned before about growing inequality. I think that is going to become a bigger challenge for Australia as time goes on, especially intergenerational equity and a whole lot of cluster of issues around that. And again, the problem is politicians are very quick to talk about these challenges for cost of living, but we need to debate these other ones. You know, if we're going to have a successful energy transition, for instance, that's going to take a lot of public education, a lot of discussion with different community groups helping people understand what's going on and why we're doing all this stuff to transition to a low emission economy. And my point is that when some issue like cost of living is taking up all the political space, it's very hard for that process to get going in a meaningful way or to get the space that it needs for the community to be brought along and understand what's going on.

[A]

Well, I absolutely love to get your perspective and I'm not sure if you are one of those journos who likes to read the comments on their pieces, but I'm expecting that you're going to cop a lot of them with this one. It's a good thing. You're resilient, Matt Wade.

[B]

I'll be okay. I mean, it's good to have a bit of a debate about it because I do think that, yeah, the debate is good and healthy.

[A]

It is. Well, thank you so much, Matt, for your time.

[B]

You're welcome.

[A]

In other news today, some of the nation's most historic defence properties, including Victoria Barracks in Sydney, Melbourne and Brisbane, are poised to be sold in the hope of funneling billions back to defence. Exposure to harmful UV and smoking were the leading causes of preventable cancers among Australians, according to a new major global analysis. And residents of a Melbourne street, Prince Andrew Avenue, have called for Andrew Mattbatten Windsor's name to be removed following the former prince's connection to sex offender Jeffrey Epstein. Today's episode was produced by Josh Towers. Our executive producer is Tammy Mills, and our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. If you like our show, follow the MORNING Edition and leave a review for us on Apple or Spotify. Thanks for listening.