“A steep rise in living costs, especially for employee households due to higher interest rates, could force Australians to seek higher returns from fixed income assets, including private credit, with another official interest rate potentially coming this year,” Arraj said.

“Self-funded retirees tend to spend less on housing than all other households. Their primary source of income is superannuation or property income, which rose 1.2 per cent this quarter, up from a 0.7 per cent rise in the March 2024 quarter, 3.7 per cent over the year compared to 3.8 per cent for the CPI.”

Arrau said rising living costs are impacting all Australians, especially employee households.

“Employee households recorded the largest increase in living costs of all household types, as they are the most impacted by rising mortgage interest charges according to the Australian Bureau of Statistics,” he said.

“A significant difference between the living cost Indexes and the CPI is that the living cost Indexes include mortgage interest costs rather than the cost of building new dwellings which is included in the CPI.”

He continued that mortgage interest charges rose 26.5 per cent annually, moderating seen since the peak of 91.6 per cent in the June 2023 quarter, reflecting fewer rises in the RBA’s cash rate in the last 12 months and a slowing in the rollover of expired fixed-rate mortgages to a higher variable-rate mortgage.

“Retirees and self-managed superannuation funds should consider diversification into private credit investments, which can deliver to investors yields close to 10 per cent per annum, well above the returns on bank term deposits or online savings accounts, which in June was less than five per cent per annum,” he said.

“Investors in real estate private credit benefit from stringent loan process, lending and compliance policies and security over borrower assets.”