Living Expenses Calculator
Do you match the household expenditure measure?
Preparing your home loan application can be a daunting task, especially when you’re trying to work out your living expenses on a weekly or monthly basis.
Use the living expenses calculator to find out how your spending compares to the average monthly cost of living in Australia.
Will it stop you from getting a mortgage?
How does the calculator work?
This calculator uses your family size, location and lifestyle to estimate your living expenses based on the Household Expenditure Measure (HEM).
This is the same method used by the Australian Bureau of Statistics (ABS) and by most Australian banks when assessing your borrowing power for a mortgage application.
The result should be used as a general guide only, as your living expenses can vary significantly depending on how you choose to spend your money.
If you are new to Australia then you can learn more about how to buy a home in our non-residents section.
What items are expensive in Australia?
The cost of living in Australia is significantly higher than most countries, including other developed countries.
In particular, you’ll find that the following items are much more expensive:
- Housing (rent and house prices)
However, Australians tend to have a much higher income so it’s still possible to enjoy a good lifestyle.
Which expenses are included?
The calculator takes all basic living expenses into account such as groceries, utilities, phone, public transport/car and entertainment.
The cost of renting or mortgage repayments is calculated separately so you can replace the figure with your own estimate after you decide where you would like to live.
Example of HEM living expenses measure
The cost of living can vary signficant depending on the make up of your household.
Below are some example results of the living expenses calculator which include the cost of monthly mortgage repayments based on average Australian house prices:
- Living cost in Australia for one person: $2,835 per month
- Average living expenses for a couple: $4,118 per month
- Average monthly living expenses for a family of 4: $5,378
Input your own details to find out how your living expenses really compare with the national average.
The most expensive cities in Australia
The most expensive cities in Australia are Sydney and Melbourne.
Perth and Canberra are also relatively expensive but it’s people living in the other capital cities such as Brisbane and Adelaide that have some of the lowest living expenses in Australia.
An exception to this is if you live in a very remote area such as a mining town.
You may find that your average cost of living is high due to the cost of bringing goods and services to your community.
Why do banks use the HEM?
Under the National Consumer Credit Protection Act 2009, Australian banks must make allowances for living costs when they run borrowing power or serviceability assessments for applicants.
This goes above any debts or liabilities they have.
The industry regulator, the Australian Prudential Regulation Authority (APRA), doesn’t provide specific dollar figures for banks to adhere to so for years they were using the Henderson Poverty Index or Henderson Poverty Line and added an allowance.
In 2012, the Commonwealth Bank (CBA) switched to the Househole Expenditure Measurement and other banks followed.
Banks don't just rely on the HEM
Most Australian banks certainly rely on the HEM as a guide but they also use their own measures, adding a buffer based on their own risk appetite.
Another way banks mitigate risk is by using an assessment rate or interest rate buffer.
By assessing your borrowing capacity at a higher rate, they can determine whether you’ll still be in a comfortable financial position should interest rates rise.
Banks don’t publish these rates and HEM buffers.
Luckily, mortgage broker can help you prepare your mortgage application so you can maximise your borrowing power with the right lender.