Australians are spending a record share of their incomes on putting a roof over their heads while the coronavirus pandemic has forced the largest increase in expenditure on food this century.

In changes that will ripple through everything from increases in unemployment benefits to business contracts, the Australian Bureau of Statistics on Wednesday overhauled the way inflation figures are determined in the wake of the COVID-19 outbreak.

Average spending by households on food has climbed to its highest level this century as the pandemic forced us to eat at home.Credit:Louie Douvis

Every year the bureau "re-weights" the consumer price index, updating it to take account of changes in the average spending of a household. Those patterns then determine their share of a notional basket of goods that make up the quarterly inflation result.

The bureau's first inflation basket, released in 1948, showed housing costs – rents and the cost of building a house – accounted for 11.6 per cent of household spending.

Ahead of the pandemic, it had climbed to 22.9 per cent. On Wednesday, it was lifted to an all-time high of 24.1 per cent.

It was driven up by an 8.2 per cent jump in the spending share associated with new dwelling purchases and a 12 per cent increase in spending associated with maintenance and repairs of properties.

Residents in Sydney (25.1 per cent) and Canberra (26.1 per cent) have the highest share of housing costs. Sydney is pushed up by rents and the costs associated with new dwellings, both the highest in the country, while Canberra residents face gas costs.

Food has historically fallen as a share of household spending. In 1948, almost a third of all household spending was on food and drinks, but by 2018 it had dropped to less than 16 per cent.

But with restaurants and cafes shut, and Australians forced into lockdown, the share of household spending on food this year rose to 17.4 per cent of all expenditure. It is the highest level since 2000.

Across almost every food group, spending increased. Spending on bread rose last year as did expenditure on cakes and biscuits, eggs, coffee and tea.

Australians also used the pandemic to sharply increase their spending on pets and accessories, with their share swelling by 11 per cent. More of our average spending is now on pets than banking fees and charges.

Australians now spend a larger proportion of their incomes on pets and accessories than on banking fees and charges.Credit:Jeff Darmanin

Spending on tobacco has climbed to its highest level since 1969 but in this case it is being driven up by the large increases in federal excise.

The bureau said the pandemic had forced it to use more timely data, including the prices of goods scanned at supermarket checkouts, to ensure the consumer price index reflected the nation's spending levels.

"Normally household spending patterns change slowly. The COVID-19 pandemic has caused a sudden, and in some cases, sustained change in household spending patterns," it said.

While households have sharply increased spending on some goods through the pandemic, others have collapsed.

The share of spending on recreation and cultural pursuits has fallen by almost a third. Most of this was driven by the drop in expenditure on travel with international holidays virtually zero.

Spending on financial services have dropped, partly due to falls in official interest rates, and pandemic restrictions and falls in global oil prices meant our expenditure share on petrol dropped by 11.5 per cent on 2019 levels.

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