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FAR from being squeezed, working Australians are better off than ever, the latest figures show, with lower costs from interest rates counteracting the higher costs imposed by the carbon tax.

Average wages have climbed 3.7 per cent in the past year (3.9 per cent in the private sector, 3.3 per cent in the public sector). But the living costs faced by working households climbed only 1 per cent in the year to September, an increase that takes account of all of the price rises that have so far flowed from the carbon tax.

The stunningly low cost-of-living increase - half the official inflation rate - is because the Bureau of Statistics' cost-of-living measure incorporates household mortgage interest costs, which have slid 6.7 per cent over the year to September and 2.5 per cent in the past three months. It also gives a high weight to motoring costs, which have slid 0.8 per cent in the past three months as a result of lower petrol prices.

The 1 per cent annual increase in living costs is one of the lowest on record and has only been bettered on other occasions when interest rates have been falling.

In Parliament, Climate Change Minister Greg Combet ridiculed a series of ''notorious'' warnings about the carbon tax from Opposition Leader Tony Abbott.

''He went to the Sanitarium and claimed Weet-Bix prices would be much higher, but breakfast cereal prices fell 0.9 per cent. He went to a dairy farm saying milk would go through the roof. But milk prices are down 0.5 per cent. Senator Barnaby Joyce said a lamb roast would be $100 after the carbon price. But lamb prices are down 2.3 per cent. Tony Abbott said motorists wouldn't be able to get in their car. But there is no carbon price on fuel.''

Other households for which mortgage charges and petrol prices are less important were harder hit. The Bureau of Statistics says the living costs faced by pensioners and households relying on Newstart climbed 2 per cent. The costs faced by self-funded retirees climbed 1.5 per cent.

Separately released figures show private-sector house building approvals up 1.2 per cent in September. Approvals for renovations surged 11.5 per cent. BT Financial Group chief economist Chris Caton said the news was ''not so much a sign of strength as a sign of hope''. Building approvals were volatile and they didn't respond predictably to cuts in interest rates.

The Reserve Bank has cut interest rates by 1.5 percentage points over the past year. Banks have passed on to customers 0.95 points, slicing $184 a month from the cost of servicing a $300,000 mortgage.

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