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Cut the cost of living

Cut cost of living banner imageRising living costs are pushing Victorians on low incomes to the edge. General inflation rates of around two per cent mask more dramatic price rises for essentials like utilities. Incomes are not keeping up with the cost of basic items needed for survival, like housing and electricity.

For people reliant on the Newstart Allowance, payments fall short of a healthy living income by $96 a week for a single person, $58 a week for a couple with one child, and $126 a week for a couple with two children.

For people in paid work, wages are essentially stagnant, growing at a record low rate of 1.9 per cent per annum. Having a job does not necessarily bring financial security. One third of Australians living in poverty are reliant on wages as their main source of income.

Faced with severe income constraints and rising living costs, people are making trade-offs between food and bill payments, going without heating or cooling and relying on charity assistance, credit cards and high-interest fringe loans.

“The things that you have to go without in order to meet those bills… what other people would take for granted, we would consider luxuries.” (‘Nola’, interviewed for VCOSS’s Power Struggles report)

Fund a comprehensive financial wellbeing package

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Assist Victorians struggling with housing and energy costs with a comprehensive new financial wellbeing package.


The Victorian Government can help families meet their essential needs, and prevent financial problems escalating, by funding a comprehensive financial wellbeing package, with a focus on the needs of people facing debilitating housing and energy costs. The package can include:

  • development of a Victorian Financial Inclusion Action Plan
  • investment in emergency relief, financial counselling and No Interest Loan Schemes.

A Victorian Government Financial Inclusion Action Plan would guide investment in financial wellbeing services, bring together government, the private sector and the community sector to identify existing financial resilience initiatives, identify financial inclusion gaps, and coordinate action. Specific investments could be made in emergency relief and financial counselling services to bring about financial wellbeing.

Emergency relief services help people in financial crisis by providing food, clothing, rent and bill payment assistance, and building financial stability. More people are seeking emergency relief for housing, energy and family violence crises. People in financial crisis prioritise housing and utility payments, then seek help with food, medical costs and other essentials to survive. These pressures have only worsened in recent years.

The Victorian Government can help meet emergency relief demand by directly investing in these services. Currently, the Australian Government, local government, philanthropic organisations and community members (through donations and unpaid voluntary work) all contribute to emergency relief services. Victoria remains one of the few states and territories not directly funding emergency relief, even though our housing and energy costs are among the highest in Australia.

Financial counselling services are also under significant pressure. Funding has not increased despite demand growth. Energy costs are partly driving demand – energy-related work takes up 40 per cent or more of most financial counsellors’ caseloads. While funding for family violence-related financial counselling is welcome, other areas of need are under-funded.

More financial counselling funding would enable people to better deal with job loss, poor health, mortgage and rental stress, and debt problems. It would also allow the creation of tailored services for particular at-risk groups, like older people vulnerable to financial abuse. Investment in this area pays off, allowing further development of successful programs that prevent financial stress snowballing into much larger, costlier problems.

No Interest Loan Scheme (NILS) loans can be a lifeline, financing essential household appliances, education and medical expenses, and diverting people away from predatory credit providers and goods rental services. NILS loans can be provided alongside or independent of financial counselling.

The Victorian Government could ensure more people benefit from NILS loans by building on 2017-18 investments like the Morwell ‘Good Money’ store, operated by Good Shepherd Microfinance. For every dollar invested in a NILS loan, $1.59 worth of social and economic value is created. NILS loans save people money, increase their financial independence and standard of living, reduce stress levels and anxiety, and improve confidence and self-esteem.

‘Amber’ – NILS borrower, inner Melbourne

Amber is a single mother with two young children. Since leaving a physically, emotionally and financially violent relationship, she and her children had lived in transitional housing for two years.

Amber needed financial support when she left the relationship. Her ex-partner had been very controlling of finances, and had left Amber with significant debt. She had rented a microwave and television, paying $60 a week for 12 months – three times the amount they were worth. She had also accessed fringe loans and food vouchers in the past.
To address these issues, Amber’s case worker put her in touch with a financial counsellor who helped Amber get all of her finances together to pay off the debt.

Amber took out a NILS loan to pay for driving lessons and her license. She had received a second-hand car from a family member. Prior to taking out the loan, Amber had been taking public transport with her two young children, and needed to catch taxis to get her groceries home twice a week. This was exhausting and expensive.

While Amber is still waiting for a permanent home and still feels financial pressure, particularly around Christmas and birthdays, she is now aware of the supports available to her.


Increase crisis payments for people in energy hardship

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Help people deal with energy hardship by increasing the Utility Relief Grant and making it easier to access.


Victorians are facing an energy costs crisis. Electricity prices more than doubled between 2006 and 2016, far in excess of general inflation. Wholesale cost spikes will push prices higher over the coming year. Bill payment difficulties will worsen.

Victoria’s Utility Relief Grant (URG) – a payment for those in temporary financial crisis – can help people through ‘bill-shock’ if increased to reflect current energy costs. The current URG cap is too low, limited to six months’ of usage, up to a maximum of $500. This cap has been in place since at least 2010, despite recent price surges.

Average electricity costs are now approximately $750 for six months, significantly above the current $500 cap. Low-income, high-consumption households will face higher costs, including families with children, and people who live in draughty, poorly insulated rental housing. Reflecting energy cost increases, just over 40 per cent of people in energy retailers’ hardship programs have debts over $1000 when they enter those programs (see figure x).

The URG would be more effective if increased to $750. VCOSS also supports the proposed review of URG administration. The current process is cumbersome and difficult. People must request an application form from their energy or water retailer, and then submit it to the Department of Health and Human Services (DHHS) for assessment. The application process can be made easier by allowing energy and water retailers to send applications directly to DHHS on behalf of customers.

Crisis payments help people stay connected to power

Some people interviewed for VCOSS’s Power Struggles report had stayed connected to energy by using the Utility Relief Grant. ‘Beth’ was able to access the grant while sole parenting and is now very focused on paying her bills on time, to take advantage of discounts. ‘Ursula’ also benefited from the grant and has managed to avoid disconnection despite financial struggles.

Other people’s experiences showed the URG’s inadequacies.

‘Odette’, a sole parent caring for five young children and living in public housing, saw her electricity bill double to about $600 per quarter after the housing office installed an air conditioner for Odette’s medical needs. The URG covered only part of the bill, leaving Odette financially vulnerable. ‘Rachel’ was unable to pay her gas bill despite accessing the URG, and has now permanently disconnected from gas to manage costs.


Invest in energy efficiency upgrades for low-income earners

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Launch a large-scale energy efficiency upgrade program for low-income earners.


The Victorian Government can cut the cost of living for many Victorians by embarking on an energy efficiency upgrade program across social and private rental housing.

An energy efficiency program could include a mix of government-funded upgrades, subsidised upgrades and No Interest Loan Scheme financing. It would build on welcome initiatives for low-income households under Victoria’s Home Energy Assist program, and the Latrobe Valley Home Energy Upgrade program.

With half of energy bills spent on heating, cooling and hot water, energy efficiency upgrades strike at the heart of high power costs. Measures like insulation, draught-sealing, efficient lighting and affordable hot water and heating systems can significantly bring down bills. Energy efficient households cost about 40 per cent less to run. Even relatively minor improvements can achieve valuable savings.

People living in private rental housing have a growing need for affordable energy. Renting is no longer a transitory state for many people, as social housing supply contracts and the affordability of owner-occupied housing worsens. The needs of tenants are changing. Families with young children –and often high, non-discretionary energy needs – now comprise a large proportion of long-term private renters. More older people are living in rental housing as they age, requiring affordable energy supply to meet health and wellbeing needs.

In conjunction with improved modification rights allowing people to make minor, non-structural modifications without landlord consent, an energy efficiency program has the power to overcome financial and tenure barriers to cheaper energy bills.

In the social housing sector, energy efficiency retrofits create a win-win for the Victorian Government and tenants alike, allowing people to stay healthy, live in greater comfort, pay their rent and avoid ‘bill-shock’.

Local government ‘Energy Saver’ program delivers warmth and savings

More than 300 low-income households in Melbourne’s south-east enjoyed energy savings under a successful retrofit and behaviour change program conducted by the South East Councils Climate Change Alliance.

Each retrofit cost $2885 and achieved 10 per cent cuts in total energy use, 13-18 per cent cheaper gas bills, 22 per cent cheaper lighting costs, and a 1.6 degree increase in winter living room temperatures. People were very satisfied with the program.


Introduce a Victorian energy broker

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Introduce an independent Victorian Energy Broker.


The Victorian Government can help people reduce their energy costs by introducing a Victorian Energy Broker.

Many Victorians are paying more than they need to for energy. In turn, Victorian Government energy concession costs are higher than they should be. The Independent Review of Energy Retail Markets found households were paying, on average, about 21 per cent more per year for electricity than the cheapest offer available in the market.

A household with average energy needs could save hundreds of dollars a year if they switched from the worst to best market offer.

Low-income households cannot afford to be overpaying. In the face of high energy costs and stagnant incomes, people are making trade-offs – going without food and avoiding children’s education costs to stay connected. Some people turn off heating and cooling, even if this affects their health.

Although better deals are out there, many Victorians find it difficult to engage with the energy market and find a more affordable deal. Energy offers are not easily comparable, even if using the Victorian Government’s ‘Energy Compare’ website. Hundreds of offers are available but few people have the time or skills to make sense of them. Low income and vulnerable households face additional hurdles such as a lack of internet access, communication barriers, and acute financial and personal stresses that make searching for a better energy deal a low priority.

VCOSS welcomes the Victorian Government’s pilot of a brokerage service for CALD and hardship customers, funded in the 2017-18 Budget, and the Independent Review Panel’s recommendation for a not-for-profit brokerage service for concession card holders. However, a Victorian Energy Broker –for all customers – would have benefits that a specialist brokerage service does not.

In tandem with changes to energy marketing and contracting practices, an independent energy broker would see Victoria lead the nation in retail energy market reforms.


Help asylum seekers access energy and water affordably

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Make energy and water concessions available to asylum seekers living in the community in Victoria.


Victoria is home to a small but significant group of asylum seekers living in the community on bridging visas. This group faces extreme financial hardship and relies on community organisation support to survive. But they are ineligible for concessions so pay full price for energy and water. According to one emergency relief provider serving Melbourne’s outer northern suburbs, “limited eligibility for a range of services and the cost of daily living expenses on minimal or no income has edged many asylum seekers into serious financial hardship”.

The Victorian Government can reduce living costs for asylum seekers and their children by giving them energy and water concessions. This would not only help an extremely vulnerable group of people, but help relieve pressure on community services that face growing demand for assistance.

Energy and water concessions are one of the missing links for asylum seekers in extreme financial hardship. This assistance would be consistent with the concessions available to asylum seekers for public transport use, and the extension of health and TAFE services to asylum seekers.


Further strategies


Develop a digital inclusion strategy

Access to digital services such as internet and mobile phones is essential. Without affordable digital services it is increasingly difficult to participate in social and economic life, whether this involves accessing public and community services, consumer information, financial services, health services, information about children’s progress at school, or emergency management advice.

The most recent data shows the digital divide is widening between low-income and more affluent households, as is the divide between older and young people, and people in rural and urban areas in Victoria.

The Victorian Government can develop a strategy to overcome the digital divide, which could include funding community-scale internet access, expanding internet access for social housing tenants, and examining whether concessions should be available for internet services and digital devices for people in need.


Help people participate in economic and community life by reviewing public transport fares and concessions

Victorian public transport fares should be clear and affordable for low-income earners, enabling people to access work, education, community services and support networks.

The current fares system is complex and confusing, involving 17 types of concessions and six types of free travel passes. The system requires a complete overhaul to create simple, fair and proportionate fares that meet the needs of people on low incomes, and people with unique transportation needs, such as people with disability and older people.


Encourage people’s financial resilience through improved access to general insurance

People living on low incomes struggle to find and afford insurance products that meet their needs. They are least able to afford the protection and security provided by insurance, and have the least resources to dedicate to recovery or replacement after a loss.

The lack of adequate insurance leaves vulnerable Victorians at risk of losing key assets they are not able to replace. This is particularly concerning given that risks such as natural disasters, unemployment, the death of a breadwinner, permanent disability, business failure and theft are the main events that can tip people into poverty.

However, people living on low incomes are aware of the benefit of insurance and the need to protect assets. They need higher insurance cover than they can currently afford. The Victorian Government can help to improve the financial resilience of people living on low incomes by funding community organisations to partner with the insurance industry to provide more affordable and accessible insurance products, and by funding financial literacy services to raise awareness of the benefits of insurance products.

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