The year 2025 began with a wave of price hikes that are burdening us all. What can the government do to reduce the cost of living? We reviewed the State Comptroller’s reports from 2024 and found a series of recommendations that could lead to change
Many Israelis celebrated on the night of December 31, welcoming the new calendar year. However, when the sun rose on the first day of 2025, the entire country woke up not just with a hangover, but with a financial headache.
The new calendar year began with a wave of economic measures that took effect across various sectors, and are estimated to cost each household in Israel between NIS 8,000 and NIS 12,000 per year.
The warning signs were already there, outlined in a series of reports published by State Comptroller and Ombudsman Matanyahu Englman, as well as in statements he made over the past year, in which he cautioned about the rising cost of living.
For instance, in an interview for the "Status Report" podcast, the State Comptroller emphasized: "The cost of living in Israel is skyrocketing, and combined with a high interest rate environment, it is placing a heavy burden on households".
While the immense financial costs of the Swords of Iron War do necessitate belt-tightening, addressing the deficiencies highlighted in the audit reports could help reduce the cost of living and ease the burden on us all.
The concentration crisis
One of the most significant expenses for all of us is food and consumer goods. For example, in 2021, Israelis spent 138 billion shekels on food and non-alcoholic beverages. A key reason why we pay so much lies in the structural issues of Israel’s food and consumer market: market concentration, low competition levels, customs barriers, phytosanitary restrictions, and public health regulations.
How does market concentration in the food industry impact each of us? A State Comptroller’s report published in November 2024 set out to examine this issue. The audit team reviewed 38 food categories – ranging from bread, milk, cheese, and eggs to cola, coffee, and tea, as well as rice, pasta, tuna, and frozen chicken. Time and again, the team encountered the same corporation names: the findings revealed that in 20 out of these 38 categories, just three corporations control more than 85% of the market.
Take instant coffee, heavy cream, and breakfast cereals, for example. If you have these products in your kitchen, chances are they were produced by one of three major corporations that dominate supermarket shelves for these categories.
However, concentration alone is not to blame for high prices. When the Swords of Iron War began, many workers were called up for reserve duty, leading to lower production levels in factories. As a result, supermarket discounts were canceled, and food prices rose. In the first three months of the war alone, food prices increased by 2.9%, and the hikes have not stopped. The Ministry of Economy found that some retailers took advantage of shortages in certain products to significantly raise prices. The Consumer Protection Authority was supposed to step in, but without the necessary legislation, it lacked the tools to effectively deal with these price hikes.
In other reports, including the audit on food price regulation in Israel, the State Comptroller found that food prices in Israel (in terms of purchasing power) are approximately 51% higher than in EU countries and 37% higher than in OECD countries. If you try to eat healthily, you should know that whole wheat bread, which is considered a healthier option, costs approximately 253% more than white bread. Moreover, Israelis pay 82% more for it than consumers in the U.S., the U.K., New Zealand, and Spain.
What about fruits and vegetables? The removal of tariffs on pineapples and the increase in imports have made this tropical fruit a staple in more and more Israeli households. However, the agriculture reform—which was intended to reduce tariffs and increase fruit and vegetable imports—was frozen and effectively canceled before being completed. Although the Ministry of Finance lowered tariffs on grapes, the reduction did not lead to a significant price drop or an increase in supply. And when there isn’t enough produce and competition is lacking—prices go up.
It’s not just food prices that are rising – many other consumer goods are becoming more expensive as well. For example, the State Comptroller found that makeup products in Israel cost up to 403% more than in Europe. A Revlon foundation, for instance, costs approximately NIS 102 in Israel. And in Europe? Only NIS 25. Outrageous? Absolutely.
What can be done? The State Comptroller called on government ministries and relevant authorities to ensure that the "What’s good for Europe is good for Israel" reform, designed to increase competition, is actually reducing import barriers. He further emphasized that ministries and authorities must take additional steps to reduce market concentration in the food and consumer goods sector and promote competition in order to lower the cost of living.
Excessive levies
Even before food costs, the biggest expense for Israelis is housing. Planning to add a room to your apartment? Thinking of selling your home? You may be required to pay an appreciation levy to the local authority, and we’re talking serious money: In 2021, municipalities collected nearly NIS 9 billion in appreciation levies from residents.
An audit on the collection and use of appreciation levies found that the municipalities examined—Jerusalem, Herzliya, Ramat Gan, and Ramat Hasharon—do not publish the individual levy charges imposed on property owners. As a result, residents struggle to verify whether the payment demands they receive are justified.
If you feel that the levy you were charged is too high, you’re probably right. The State Comptroller examined the issue and found that in 95% of cases where arbitrating appraisers were appointed, the originally determined levy was reduced by an average of one-third of the amount set by local planning and building committees. According to a sample by the State Comptroller’s Office, the average reduction amount in 2022 reached NIS 1.1 million.
Drowning in debt
The State Comptroller found that there is still insufficient competition in the credit market. In April 2019, the Bank of Israel launched a credit data repository aimed, among other things, at increasing competition in the consumer credit market (excluding housing loans).
However, evaluations conducted by the Bank of Israel revealed that the repository did not lead to increased customer mobility between banking institutions or to lower credit costs for new customers. By December 2020, only 17% of non-housing loan borrowers had taken loans from a credit provider other than the bank where they hold their checking account.
The repository also failed to boost competition in the household mortgage market, where total outstanding debt stood at approximately NIS 536 billion at the end of 2022. In that year, 97% of household mortgage debt to the financial sector was owed to banking corporations.
In the State Comptroller’s report on inflation preparedness, published in January 2024, it was noted that while banks were diligent in charging higher interest rates on loans and overdrafts, they did not fully compensate account holders with the interest they were entitled to on their deposits. "After the Bank of Israel raised interest rates, the banks increased their profits instead of fully transferring the higher rates to citizens' deposits", said State Comptroller Englman upon the report’s publication.
The meter is running
The rising cost of living isn’t just reflected in weekly supermarket trips, mortgage payments, or bank overdraft interest rates – it also affects transportation.
Have you recently traveled on one of Israel’s toll roads? The State Comptroller’s audit found that the toll rate on the central section of Highway 6 is approximately 60% higher than the rate on Highway 6 North. Meanwhile, toll prices for the Carmel Tunnels have increased by approximately 65% since they opened in 2010, with subscribers potentially paying nearly NIS 900 per month.
Taking a taxi, as we all know, is no cheap affair, and the State Comptroller’s report reveals just how costly it can be. In major cities around the world, such as London, New York, Barcelona, and Berlin, special discounted fares are available for key destinations like airports. But in Israel – there are none.
"Alongside the Swords of Iron War, the cost of living must remain a priority for the prime minister and government ministers", emphasized Comptroller Englman, adding: "At the State Comptroller’s Office, we are committed to addressing the cost of living and recognize that, ultimately, the various details come together to form the bigger picture. For this reason, we will continue to examine various aspects related to the cost of living for the benefit of all Israeli citizens".
