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Cut the cost of living


Cut the cost of living

Many Victorians relying on income support and low wages cannot meet basic living expenses.

Many private renters on income support spend a high proportion of their income on rent, and are forced to cut back their food and health spending. Many income support recipients struggle to pay utility bills and under-use utilities as a way of coping. For example, many age pensioners cannot afford a phone or an internet connection.[1]

For people in the paid workforce, the underemployment rate is at record levels of 8.6 per cent. This is partly related to the increasing shift towards part-time employment.[2] One third of Australians living in poverty have a job.[3] Underemployed households are increasingly seeking the help of community organisations to buy food, pay utility bills, cover children’s education costs, and negotiate mortgage and credit card debt.[4]

Steep rises in the cost of basic goods and services in the last 10 years have affected
all low-income Victorians.

Steep rises in the cost of basic goods and services in the last 10 years have affected all low-income Victorians. While inflation rose 27.9 per cent from 2005 to 2015, this overall figure masks more dramatic price rises for utilities (89 per cent), health services (76 per cent), education (66 per cent) and urban transport fares (40 per cent). Goods and services prices depressing inflation were largely discretionary, often imported items (such as audio-visual equipment), with little bearing on low-income households’ ability to afford food, energy and other essentials.[5]

The Victorian government can take a multi-pronged approach to easing cost of living pressures for people on low incomes, by reducing their biggest household expenses, including energy (through energy efficient housing), education, credit costs, transport and housing.

Budget investments

Cut people’s bills with energy efficiency

The Victorian government can help people on low incomes cut their cost of living by funding expanded home energy efficiency programs.

People on low incomes face a ‘triple whammy’. They are more likely to live in poor quality, energy-inefficient homes, have little ability to pay rising energy costs,[6] and to have health problems exacerbated by poor housing, such as respiratory illness.[7]

People renting are more likely to live in homes with low energy efficiency. Half of Victoria’s rental homes are effectively uninsulated,[8] particularly affecting the state’s 276,000 low-income private rental households.[9] Social housing tenants are also likely to live in old, energy-inefficient homes.[10]

With poor-quality housing and unsustainable energy price rises, many low-income households cannot afford their energy bills. Electricity disconnection rates are almost double their 2010-11 rate, and Victoria’s disconnection rate is the highest in Australia.[11] Unaffordable energy bills are a leading cause of financial hardship.[12]

Energy-efficient housing helps to cut people’s bills and promotes good health, including by protecting against cold and heat.[13]

With poor-quality housing and unsustainable energy price rises, many low-income households cannot afford their energy bills. Electricity disconnection rates are almost double their 2010-11 rate, and Victoria’s disconnection rate is the highest in Australia.

The Victorian government can expand successful programs to improve low-income households’ energy efficiency, such as the home retrofit and advice programs delivered by the Brotherhood of St Laurence, Kildonan UnitingCare, the Yarra Energy Foundation, and the South East Councils Climate Change Alliance.

Low-income households can also use No Interest Loan Schemes (NILS) and affordable appliance schemes to purchase energy efficient appliances, heating and hot water systems. With more funding, NILS can reach more people, including private and social housing tenants. Subsidies can also help low-income households enjoy the benefits of energy efficiency.[14]

South East Councils Climate Change Alliance delivers warmth and savings

Low-income households in Melbourne’s south-east have enjoyed energy savings under a successful retrofit and behaviour change program. Each retrofit cost $2,885 and achieved averages of 10-11 per cent cuts in total energy use, 13-18 per cent less gas use and similarly cheaper bills, 22 per cent cheaper lighting costs, and a 1.6 degree increase in winter living room temperatures. Householders were very satisfied with the program.[15]

The government can connect trusted service providers to people needing better energy efficiency. Many people fall through the cracks because support is not locally available,[16] and because of reluctance on the part of some energy retailers to assist hardship customers to improve their energy efficiency.[17]

Energy-efficient housing also helps mitigate climate change effects by reducing the use of non-renewable energy sources, and allows households to better cope with increasing cold and heat extremes. Without government support, most low-income households cannot adequately protect themselves against
climate change.

Home retrofits improve energy efficiency without major costs

Improving thermal efficiency with low-cost window coverings and draught-seals can significantly reduce energy bills. Low-income households are more likely to own old and inefficient refrigerators, and cheap but inefficient heaters. Installing energy-efficient appliances is one of the best ways to reduce electricity bills, even more so than building improvements.[18]

 

Help Victorians in financial crisis by developing an emergency relief fund

Emergency relief is a safety net for people living on low incomes or experiencing a temporary financial crisis. As well as relieving financial stress, emergency relief is a referral pathway to housing, health and financial counselling services.

As well as relieving financial stress, emergency relief is a referral pathway to housing, health and financial counselling services.

Emergency relief agencies are facing increasing demand for their services. Income support remains inadequate for basic living expenses, Victoria has a rising homelessness rate, and the number of refugees living in Victoria will increase over coming years. The Victorian government can help meet this demand through dedicated funding for emergency relief services. Victoria is one of the few states and territories not directly funding emergency relief. Funds can be allocated through a state-based emergency relief program.

 

Prevent energy disconnections and hardship by increasing and indexing
the Utility Relief Grant cap

The Victorian government can reduce energy hardship by increasing the Utility Relief Grant (URG) cap. The URG has been capped at $500 since 2010. While designed to help people at risk of disconnection, the $500 cap now only covers less than half the average $1074 debt faced by hardship customers on payment plans.[19] The URG would be more effective in its aim if increased to be commensurate with two typical quarterly gas, electricity or water bills.

The URG cap should be indexed against energy and water prices. There has not been an increase in the cap over the past six years despite electricity prices increasing by more than 64 per cent over the same period.[20]

 

Help asylum seekers access water and energy affordably

Victoria is home to more than 10,000 asylum seekers living in the community on bridging visas. This group faces extreme financial hardship and relies on the support of community organisations to survive, however they must pay full price for energy and water, being ineligible for concessions. Affording this is beyond the ability of people with restricted work rights, who receive little or no income assistance.[21]

The Victorian government can reduce living costs for asylum seekers and their children by extending the 17.5 per cent energy and water concessions to asylum seekers living in the community. This is consistent with the concessions available to asylum seekers for public transport use, and the extension of health and TAFE services to asylum seekers.

Increase people’s access to No Interest Loan Schemes (NILS)

Low-income earners have less ability to deal with unexpected or ‘big ticket’ household expenses. NILS loans are a lifeline in these circumstances, financing basic household appliances, education and medical expenses. NILS loans divert people away from predatory credit providers and goods rental services, with 42 per cent of NILS users either stopping or reducing their use of such credit sources after receiving a NILS loan.[22]

NILS loans save people money, increase their financial independence and standard of living, reduce stress levels and anxiety, and improve their confidence, self-esteem, physical health, personal relationships and community participation. They can also be used by parents to buy technology devices to help their children’s education. For every dollar invested in a NILS loan, $1.59 worth of social and economic value is created. The financial capacity of many NILS customers also improves, with almost half following a budget, paying bills on time, saving money, maintaining emergency savings funds and comparison-shopping more often.[23]

The typical NILS customer is a woman living below the poverty line, reliant on government income support. More customers rent social housing than private housing.[24] VCOSS understands there is sufficient capital available to expand the reach of NILS, but the scheme is constrained by a lack of operational funding. More Victorian government funding would allow NILS to support more people.

 

Increase people’s access to financial counselling

Over the past five years there has been a significant increase in the number of people seeking financial counselling in Victoria. However, there has been no corresponding real funding increase to these services.

Melbourne’s western suburbs, and the Colac, Bass Coast and Horsham districts are particularly neglected.

Financial counselling reduces people’s debt and helps them manage it, prevents legal action (which relieves pressure on the community legal sector), increases housing security, and improves people’s health by reducing stress and anxiety.[25] Community-based financial counselling diverts vulnerable people away from predatory credit providers.

The Victorian government can help people navigate their way out of financial stress by increasing funding for financial counsellors. VCOSS understands Melbourne’s western suburbs, and the Colac, Bass Coast and Horsham districts are particularly neglected. Some funding can be directly targeted at financial counselling for people in energy hardship, which comprises more than 40 per cent of most financial counsellors’ workload.[26] Other priority areas are financial counselling for older Victorians, and early intervention programs reducing mortgage stress rates.

The Victorian government can tackle the impact of predatory debt relief services, which often worsen people’s financial situations, by funding public education campaigns about the availability of free, community-based financial counselling, or by funding financial counsellors to advertise their services.

 

Help people facing disadvantage afford public transport

Affordable public transport allows people to attend job interviews, health appointments, look for housing, and access work, education, community services and support networks. The Victorian government can support people facing disadvantage by reviewing fares and concessions, aiming for public transport costs to be proportionate and fair for people living on low incomes. Compared with the general population, people on low incomes tend to be more reliant on public transport, and have to travel further from their homes to access workplaces and services.[27]

Extending the Access Travel Pass to a broader group of people would improve public transport affordability. At present, the pass is only available to people unable to use Myki readers due to a permanent physical disability, cognitive condition or mental illness. The pass could be extended to people with a mental or intellectual disability more generally, to children from low-income families using public transport to attend school,[28] and to homeless people. This would allow some of Victoria’s most disadvantaged people to access public transport, avoid distressing interactions with public transport inspectors, and avoid becoming embroiled in the over-burdened infringements system.

 

Help children facing disadvantage benefit from physical activity

Many children and young people from low-income families are missing out on the benefits of physical activity for health, educational development, and social integration and cohesion, because sport and recreation are too costly for their families. There is a strong correlation between sport participation and family income.[29]

Many children and young people from low-income families are missing out on the benefits of physical activity.

The Victorian government can help disadvantaged children benefit from physical activity by introducing concessions for sport and recreation fees, uniforms and equipment for children and young people from low-income families.

Further strategies

Develop an energy education strategy

Low-income and vulnerable customers want to make informed choices about energy retailers and energy use, but often do not know where to look for information. Education around energy terminology, consumption, discounts and concessions, and the price comparison website can be beneficial.[30] The Victorian government can develop a comprehensive energy education strategy, including long-term funding for community energy education programs, and information about the Energy Compare website.

 

Bridge the digital divide

Access to digital devices and online technology increasingly underpins social and economic participation, whether this involves accessing government services, consumer information, financial services, health services, information about children’s progress at school, or emergency management advice. Staying connected with community and service networks improves people’s wellbeing and social cohesion. Low-income households, older people and people with disability have relatively low digital inclusion rates, meaning they find it more difficult to access and afford digital services than other groups.[31]

The Victorian government can bridge the digital divide by investigating ways of improving digital inclusion for low-income Victorians, including funding community-scale internet access, expanding internet access for social housing tenants (building on the success of projects like the Wired Community@Collingwood project), and examining whether concessions can be made available for internet services and digital devices.

Minimise gambling harm

Victoria has about 30,000 poker machines, often concentrated in communities facing disadvantage.[32] The Victorian government can examine options to reduce the prevalence of poker machines, especially in communities facing disadvantage, and introduce extra measures to reduce the harms associated with them.

 

[1]      W Smith and D Hetherington, The adequacy of the age pension in Australia: An assessment of pensioner living standards, Per Capita, September 2016, pp. 18-28.

[2]      Australian Bureau of Statistics, Labour force, Australia, August 2016, Cat. No. 6202.0.

[3]      Australian Council of Social Service, Poverty in Australia 2014, 2014, p. 32.

[4]      J Hancock and S Oakley, The rising cost of under-employment: Building a policy and program response to improving social inclusion and community for under-employed households, 10 November 2014.

[5]      South Australian Council of Social Service, Cost of living update No. 25: December Quarter 2015, February 2016, pp. 3-4.

[6]      Between 2011 and 2015, Victorian electricity bills increased by approximately 64%, and gas bills increased by approximately 40%: See Australian Energy Regulator, State of the Energy Market 2015, Australian Competition and Consumer Commission, 2015, p. 19.

[7]      E Baker, L H Lester, R Bentley and A Beer, ‘Poor housing quality: Prevalence and health effects’, Journal of Prevention & Intervention in the Community, Vol. 44:4, 2016, p. 229.

[8]      Department of Sustainability and Environment, Housing condition/environmental performance of rental properties in Victoria, July 2009.

[9]      Australian Bureau of Statistics, Housing occupancy and costs 2013-14: Additional tables – low income rental households, Cat. No. 4130.0.

[10]    Just over 40% of Victoria’s public housing stock is more than 30 years old, and 14% of housing stock is now close to obsolescence: See Victorian Auditor-General’s Office, Access to public housing, March 2012, pp. ix, 5.

[11]    Essential Services Commission, Energy retailers comparative performance report: Customer Service, 2014-15, Essential Services Commission, May 2016, pp. 41-42.

[12]    Kildonan UnitingCare, CareRing report: Supporting vulnerable customers together, 1 January—31 December 2015, 2016; Financial and Consumer Rights Council, Rank the energy retailer: Victorian financial counsellors rank the financial hardship policies and practices of energy retailers, August 2016, p. 16.

[13]    E Baker, L H Lester, R Bentley and A Beer, ‘Poor housing quality: Prevalence and health effects’, Journal of Prevention & Intervention in the Community, Vol. 44:4, 2016, pp. 220-221.

[14]    For example, see the Home Energy Efficiency Upgrade Program conducted by the Brotherhood of St Laurence, which used a combination of subsidises and affordable loans.

[15]    South East Councils Climate Change Alliance, Energy Saver Study – Low income energy saver direct care and motivators project – Final Report – Executive Summary, 2 May 2016.

[16]    Financial and Consumer Rights Council, Rank the energy retailer: Victorian financial counsellors rank the financial hardship policies and practices of energy retailers, August 2016, p. 18; consultation with VCOSS members.

[17]    Energy and Water Ombudsman Victoria, A closer look at affordability: An Ombudsman’s perspective on energy and water hardship in Victoria, March 2015, pp. 18-19; Financial and Consumer Rights Council, Rank the energy retailer: Victorian financial counsellors rank the financial hardship policies and practices of energy retailers, August 2016, pp. 17-18; Essential Services Commission, Supporting customers, avoiding labels: Energy hardship inquiry final report, February 2016, pp. 25-27.

[18]    Sustainability Victoria, Energy Efficiency upgrade potential of existing Victorian Houses, December 2015.

[19]    Essential Services Commission, Supporting customers, avoiding labels: Energy Hardship Inquiry Final Report, February 2016, p. 16.

[20]    Australian Energy Regulator, State of the Energy Market 2015, Australian Competition and Consumer Commission, 2015, p. 19.

[21]    Jesuit Social Services, The living conditions of people seeking asylum in Australia, Jesuit Social Services, December 2015, pp. 2-4.

[22]    Centre for Social Impact/Good Shepherd Microfinance, Life changing loans at no interest: An outcomes evaluation of Good Shepherd Microfinance’s No Interest Loan Schemes (NILS), March 2014, p. 8.

[23]    Centre for Social Impact/Good Shepherd Microfinance, Life changing loans at no interest: An outcomes evaluation of Good Shepherd Microfinance’s No Interest Loan Schemes (NILS), March 2014, pp. 8-9.

[24]    Ibid.

[25]    N Brackertz, I wish I’d known sooner! The impact of financial counselling on debt resolution and personal wellbeing, The Salvation Army Australia, 2012; Kildonan UnitingCare, CareRing report: Supporting vulnerable customers together, 1 January—31 December 2015, 2016.

[26]    Financial and Consumer Rights Council, Rank the energy retailer: Victorian financial counsellors rank the financial hardship policies and practices of energy retailers, August 2016, p. 16.

[27]    Infringements Working Group, On track to fairer fares and fines: Public transport position paper, p. 6.

[28]    Westjustice, Fare go: Myki, Transport poverty and access to education in Melbourne’s west, March 2016.

[29]    VicHealth, Participation in physical activity: A determinant of mental and physical health—research summary, October 2010.

[30]    Australian Energy Market Commission, 2016 Retail competition review – final report, 30 June 2016, pp. 46-47, 52-53.

[31]    J Thomas, J Barraket, S Ewing, T MacDonald, M Mundell and J Tucker, Measuring Australia’s digital divide: The Australian digital inclusion index 2016, Swinburne University of Technology, 2016.

[32]    C Livingstone, C Kipsaina and A Rintoul, Assessment of poker machine expenditure and community benefits claims in selected Commonwealth Electoral Divisions, UnitingCare Australia, April 2012.