Insurance, food and energy have accounted for more than one-fifth of consumer price inflation since 2022, according to an Australia Institute report highlighting the connection between climate impacts and living costs.

This year’s federal election is likely to revolve around the cost of living as voters focus on high prices and interest rates, plus wages that have failed to keep up, the think tank says.

“While the cost of living appears to be taking attention away from climate change, in fact these two crises are strongly linked.,” the report says.

“The world’s failure to mitigate emissions has made a substantial contribution to the cost-of-living crisis.”

Executive director Richard Dennis says competition across major business sectors is needed, but the only way to keep insurance costs down is to slow fossil fuel emissions.

“The more we heat the climate, the more expensive storms, floods and fires will be and, in turn, the more insurance will cost,” he said. “It’s time we started to tax the fossil fuel companies to fund the damage that their previous emissions are already causing.”

Insurance prices have risen faster than general prices since 2015 and the gap has grown significantly since the 2022 eastern Australian flooding, with premiums up 40% since 2021, the report says.

Actuaries Institute research shows nearly one in eight households, or 1.25 million, suffer home insurance affordability stress and pay more than four weeks’ gross income on premiums, it adds.

The report says global reinsurance markets are also affected by climate change.

“This means increases in climate risks and climate impacts abroad, notably including the devastating impact of the 2025 Los Angeles fires, may cause Australian insurance premiums to rise.”

As the world’s second-largest fossil fuel exporter and fifth-largest producer, Australia is making a significant contribution to the problem, the report says.