The SAS and National Centre for Social and Economic Modelling Household Budget Report – which looks at the standard of living for a range of different household types by measuring various costs less expenses – suggests that inequality in living standards worsened in the past decade with the richest 20 per cent gaining more than 10 per cent relative to the lowest 20 per cent.

Families with a head of household aged over 65 were worse off by $29 per year due to lower income from deposit accounts in banks, while the average gain for those aged 25 to 64 was $318 per year.

"Interest rate reductions are clearly a positive for families with housing loans but can be a negative for older families who often don't have loans but do have savings accounts," said NATSEM's principal research fellow Ben Phillips.

But interest rates do not look at other savings older people get, including the ability to take out big lump sum amounts of super tax free once you turn 60.

The report examines the standard of living for a wide range of family types such as couples with children, renters, mortgagees, families with a business income and high and low-income families.

"We find that over the long term the families whose standard of living has increased the most includes families purchasing a home, those whose main source of income is a wage, families in WA, NT and the ACT, couple-only families, and the top 20 per cent of income families," Mr Philips said.

"Families whose standard of living increased the least included the bottom 20 per cent of incomes, renters, families relying mostly on government income, families in Tasmania, Victoria and single parents."

But he said all family groups, on average, are better off than they have been over the past few decades.

Since 1988, Australian households enjoyed a 59 per cent increase in their standard of living with households ahead by around $32,000 each year.

Western Australia and Northern Territory households have gained nearly double that of most other states with gains exceeding $50,000 per year.

The drop in petrol prices, as well as household energy prices from the abolition of the carbon tax, meant that Australia's standard of living returned to trend growth in the second half of 2014.

"These reductions in cost of living, at least temporarily, arrest a recent shift towards very low growth in living standards following outstanding growth through the previous two decades," Mr Phillips said.

The report reveals that the cost of living did not change in the December quarter and increased by just 1.4 per cent over the 12 months to end-December, compared with an income growth of 2.7 per cent for households. "This is a healthy standard of living recovery which, between June 2012 and June 2014 was unchanged," Mr Phillips said.

NT households experienced the largest increase at 2.2 per cent and Tasmanian households the least at 0.8 per cent.

"There are significant differences between the states with regard to income growth which helped the NT to the greatest financial gains beyond the cost of living through 2014 with households ahead by an average of $4603 compared with the ACT falling behind by $2517," Mr Phillips said.

"NSW significantly outperformed the major states with a gain of $1730 compared with Victorian households which only gained $227. After many stellar years WA's growth rate was below average at just 0.7 per cent as the mining incomes boom falls away."

The largest increase in family budgets through 2014 was food costs (+$238) and Health (+$187). But these were offset by reductions in transport costs (-$122) and utilities (-$75).

Mr Phillips said the removal of the carbon price and lower petrol prices drove these reductions.

The report comes as the Abbott government launches a discussion paper on tax reform next week.

Treasurer Joe Hockey has said that he would examine personal tax cuts before 2021 if they were affordable, but has ruled out any immediate cuts or changes to the GST.

The government is also under pressure to look at superannuation tax concessions, which the head of the financial systems inquiry David Murray has pointed out is inequitable because it benefits the wealthy.