Affordable living

BUDGET ANALYSIS

This is a long-form analysis of some of the Victorian Government’s key investments in relation to affordable living. For a quick summary of these specific Budget initiatives, click here.

The decision to make a universal Power Saving Bonus the headline Budget initiative on cost-of-living issues is an important recognition that times are tough for many Victorian households. However, the strengths and limitations of this payment are a salient reminder of some underlying and emerging household equity and wellbeing challenges at a state level.

Every dollar counts in a low-income household. So this $250 payment – which is conditional on accessing Victorian Energy Compare – will be welcome, along with any ongoing bill savings achieved by using the independent price comparison website.

Connecting the new cash payment to the Victorian Energy Compare tool, encouraging consumers to shop around, is smart policy, designed to maximise the public value of that existing market tool while also serving broad cost-of-living policy objectives. We are also pleased that the pre-budget announcement confirmed that households who have received a Power Saving Bonus payment in the past – including those who are still to access the current $250 payment for concession households – will be eligible again in 2022-23.

However, for households carrying significant COVID-era utility debts, even greater assistance is needed. In electricity alone, there are 16,495 households in Victoria who are receiving help from their retailers but nonetheless cannot afford ongoing usage. These household are currently in-arrears by an average of $1,916 (latest public data as of 26 December 2021). Consequently, VCOSS will continue to advocate for a flexible, cross-cutting and one-off “Utility Debt Demolition” payment of up to $2,000 for households that require additional targeted support. 

It is significant that the Budget announcements acknowledge the key role of community outreach partners and the importance of one-on-one assistance for Victorians experiencing vulnerability and who need help to navigate the energy market.

Prior to the Budget, VCOSS called on the Government to fund a comprehensive suite of ongoing independent energy advice services. These services are an important complementary measure to both the significant market fairness reforms in the last four years, and the major programs currently underway to upgrade heating and cooling appliances in low-income households. While those reforms and programs are key pieces in the affordability puzzle, the overall complexity and rapid changes in energy mean that “shopping around” for the best deal on electricity and gas will always be an unrealistic expectation for many households, and effective access to these essential services will inevitably require ongoing frontline community support.

In our view, the time for trials is over: rather than rushing to a short-term competitive tender for a new Energy Assistance Program, this next phase must build on past evaluations and include the community sector in a co-design process that establishes a collaborative platform that could be the basis for addressing this inevitable need. We also note that the Budget allocation of $4.5 million per year for two years includes maintenance of the Victorian Energy Compare website. It is vital that the Energy Assistance Program is adequately funded.

Sustained government investment in household-level support to help consumers to effectively navigate the retail markets for electricity and gas is important. However, these programs are not enough to address the deeper structural problems of household energy affordability. Low-income households spend a much greater share of their limited income on energy than other households, and so those that rely solely on retail providers are particularly at-risk from potential bill shocks from wholesale price rises. Shifting the dial on these underlying problems will likely require a combination of long-term strategies, including ongoing household energy efficiency and electrification (reducing the dual-fuel burden of two sets of retailer administration costs), and a targeted top-up energy concession for those who, at the current time, are “solar have-nots” (who are unable to avoid the impact of wholesale price changes).

the time for trials is over… this next phase must build on past evaluations and include the community sector in a co-design process that establishes a collaborative platform that could be the basis for addressing this inevitable need

Finally, beyond the immediate and emerging cost-of-living implications created by our energy system and its ongoing transition, there are other major state-level household challenges that impact on the overall affordable living picture for low-income Victorians. These include the hidden costs of school education, the unaffordability of private renting, and the ongoing challenge of food insecurity.

As highlighted by a recent 20 year review of data from the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey, 13 per cent of Australians continue to experience persistent poverty. This has been exacerbated by COVID-19 and increases in the cost of living, including the recent interest rate rise, all of which are giving rise to additional demand pressures from sections of the community who have not previously required social assistance.

Food insecurity has emerged as a significant concern, with small food relief and emergency relief agencies and organisations unable to keep up with demand. Worryingly, some of these frontline community support providers are reducing vital services at the very time they are needed most, due to inadequate and insecure funding. Further Victorian Government funding is urgently needed to support frontline capacity and boost volunteering.

There is also a Commonwealth Government dimension to this. Beyond this State Budget, VCOSS will continue to call on all stakeholders to learn the key lesson from the real-world experience of the “2020 COVID fairytale”: that raising the ongoing rate of Commonwealth Government income support remains the single most important thing that could be done to substantially and permanently reduce poverty in Victoria. However, in the absence of that national investment, the state must use all the levers and resources at its disposal to support vulnerable Victorians – including the services who are on the frontline with them.