Australia's economic misery looks set to stay

Sticky inflation and rising rates push misery index back to post-pandemic highs, with no relief expected before 2028.

Economic misery in Australia is back near its post-pandemic highs and is expected to stay well above recent historical averages until at least the end of 2028, new analysis from CEDA shows.

CEDA's analysis of the misery index, which combines inflation, unemployment and interest rates, finds that all the improvement recorded since 2023 has now been reversed.

The drivers of misery have also shifted. Through the 2010s, unemployment was the biggest contributor, averaging 5.5 per cent across the decade. Today, higher prices and interest rates are behind the spike, while the labour market has been a source of strength.

Key findings include:

• Headline inflation rose 4 per cent over the year to August, after briefly returning to the Reserve Bank’s 2 to 3 per cent target band in 2025.
• Interest rates are now at a 15-year high, following four rate increases this year from the RBA.
• Consumer confidence surveys show sentiment is at levels rivalling the depths of the pandemic.
• High economic misery was previously driven by elevated unemployment – in this cycle, misery is instead being driven by persistent inflation and higher interest rates. 
• Australia’s labour market has been a source of strength. Unemployment averaged around 4 per cent from 2022 to June 2026, below New Zealand (4.4 per cent) and Canada (6 per cent), and around 177,000 jobs have been added this year.

CEDA Head of Economics, Liam Dillon, said the index confirmed what many Australians were already feeling.

"Households have been squeezed from two sides this year, with prices and mortgage repayments both rising. A resilient jobs market has been the main thing holding many families together," Mr Dillon said.

"But misery is not felt equally. High inflation hurts all Australians, but hits people on lower and fixed incomes the hardest. Increasing interest rates to tame inflation is a bitter medicine, hurting those with mortgages and adding pressure on the labour market. 

"Productivity growth is the only lever that can bring down all three drivers of misery at once. It lets businesses pay higher wages without raising prices, which keeps inflation and interest rates in check and supports jobs.

"The 2025 economic reform roundtable showed there is an appetite for change. What is needed now is sustained action to turn that appetite into stronger productivity growth. Getting that right is key to making us a country with far less to feel miserable about."

Liam Dillon is available for further comment and interviews.

Media contact: 
Lisa Harmer
Director of Communications and Advocacy
Mobile: 0436 379 688 | Email: lisa.harmer@ceda.com.au