Canberra has the highest standard of living in Australia, says a new report that shows cost of living pressures have less to do with the ''politically sensitive'' prices of petrol, energy or fruit and more to do with changing spending habits on services such as childcare.
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Canberra was the second most expensive city, behind Sydney, among state and territory capital cities because of similar housing costs, said the report by financial services group AMP and the National Centre for Economic and Social Modelling at the University of Canberra.
But higher wages, on average, in Canberra placed it No. 1 in the country for standard of living, said the ''Prices These Days!'' report, which examined how the cost of living has changed since 1984.
Despite sharp rises in electricity, mortgages, rents and petrol, the centre's principal research fellow Ben Phillips said the average household in Australia was $224 a week better off than in the mid-1980s, and even low-income households were ahead by $93 a week.
High-income households are in front by $429 a week.
''The key take-home message is that across Australia incomes have risen a lot more strongly than what prices have,'' Mr Phillips said.
''We found that incomes grew by about 20 per cent more than living costs did. We've also found, interestingly, that it is not just households at the higher end of the income distribution which are better off, it's right across the board.''
He said the standard of living in Canberra was more than 20 per cent higher than in Sydney, though Canberra was only ''about $400 cheaper a year'' on costs than the harbour city.
''The main drivers of cost difference between the capital cities is housing,'' he said.
Darwin and Perth were second and third, respectively, on standard of living, while Brisbane was in front of Melbourne, Sydney and Adelaide. Hobart had the lowest standard of living.
AMP Financial Services managing director Craig Meller said Australians were paying more on mortgages and rent than they did 20 years ago but discretionary spending has risen to about 40 per cent of household budgets, up from 38 per cent in 1984.
The report said key areas overlooked in the cost of living debate included real wages growth, increased working hours, the number of bread winners in a household and that prices for consumer technology goods, such as televisions and computers, had ''fallen dramatically''.
''The price of clothing has barely altered since the 1980s, as import tariffs were removed,'' the report said.
''The much stronger Australian dollar has also acted as a barrier to inflation for imported goods, such as cars and computers.''
Major household appliances had not changed in price over 27 years. ''The overall story for living costs in Australia over the past two decades has been one of being in control, not out of control,'' the report said.
''With the exception of the late 1980s, when inflation was still a serious matter for the Australian economy, living costs in aggregate have remained relatively subdued.''
The report said Australians were spending big on services such as childcare, education, holidays, restaurant meals and sports, and devoting a smaller proportion of household expenditure on ''big ticket'' items such as cars, renovations, major household appliances and furniture.
The report also said the carbon tax would push up electricity and gas bills by about 10 per cent, or $200 a year on average, for households, but the compensation package would offset the price rises.
