Is Inflation Really That Scary? You May Be Falling Into “Money Illusion”— Sydney Auction Clearance Rate at 70%

Weekly Market Focus

Against the backdrop of inflation, rising interest rates and persistently increasing living costs, many people feel growing financial pressure. Data shows household expenses have broadly increased, inflation has climbed back to 3.8%, and the Reserve Bank of Australia has lifted rates again by 0.25%. This series of changes has created a strong sense of unease, as if personal finances are continually deteriorating. But the key question is: is reality truly worsening, or are our perceptions of money being amplified?

This phenomenon is known as the “money illusion.” Some people respond by becoming extremely frugal and anxious about the future, while others remain overly optimistic and maintain high spending. Over the past few years, many households have had similar experiences — just as savings accumulate, new expenses appear, making it feel impossible to keep up with rising prices, and creating the sense that “the harder you try, the less secure you feel.”

Yet the data tells another side of the story. The cost of living for working households has risen relatively modestly, at around 2.3%; roughly 90% of mortgage holders are still repaying on schedule or even ahead of time; and younger buyers are entering the property market faster than expected. Overall income levels are now higher than before the pandemic, while some increases in living costs have been offset by declines in electricity and healthcare expenses.

This does not mean pressure does not exist — rather, there is a gap between perception and reality. Inflation brings short-term pain, but it also lifts wages, asset values and investment returns. Looking back at income, spending and assets over recent years, many people have not stood still but have moved forward gradually. Understanding this is often more important than focusing solely on price increases.

Last Week’s Auction Results

Sydney: A total of 1,009 properties were taken to auction, with results reported for 654 properties. Of these, 455 were sold, resulting in a clearance rate of 70%. The total auction value reached AUD 503,408,806, with a median price of AUD 1,702,500.

Melbourne: A total of 828 properties were taken to auction, with results reported for 604 properties. Among them, 412 were sold, achieving a clearance rate of 68%. The total auction value amounted to AUD 292,468,850, with a median price of AUD 910,000.