Olivia lives with the rare Kleefstra Syndrome.

Cut the cost of living for people on low incomes Analysis

Cut the cost of living for people on low incomes

Image: "Shopping..." by Thomas Williams (Flickr).

Despite increasing average living standards in Australia, these benefits are not equally shared. People earning low incomes, especially those renting, experience greater cost-of-living increases and slower income growth, than people on high incomes.

Investing in activities that help low-income households reduce their costs helps protect them from predatory business practices, financial crises and other impacts such as homelessness.

VCOSS welcomes the initiatives in the 2016 Victorian Budget designed to begin addressing the energy cost impact of poor quality housing on public tenants, strengthen protections for energy customers in financial hardship, and improve support for asylum seekers and rural small business people. These programs can expanded to reach all low-income households to provide greater benefits in the future.

Initiatives at a glance

  • $24.3m over three years for Saving Energy Growing Jobs. To help households and small and medium businesses reduce energy usage. Components include:
    • $10m to retrofit 1,500 public housing dwellings and 1,000 dwellings of people with complex medical needs (targeting the poorest stock, and areas with extreme climatic conditions)
    • $3m for the Residential Efficiency Scorecard (to help households get energy efficiency assessments done of their homes)
    • $3m for energy efficiency assessments for small and medium businesses
    • The remainder will go towards expanding the Energy Saver Incentive Scheme and other processes that will help improve access energy efficient products and energy efficiency services.
  • $18m over four years for settlement and asylum seeker support. A range of programs to strengthen support for newly arrived refugees and asylum seekers by building community capacity, strengthening access to education and employment, and facilitating connections sports, arts, culture and community programs and facilities.
  • $5m over three years to continue the Rural Financial Counselling Service. This program provides free financial counselling to primary producers, fishers, and small business owners.
  • $21.6m over four years to increase the capacity of the ESC to carry out new activities. New activities include monitoring and enforcing the new energy customer hardship framework (which will improve protections for most people facing financial hardship due to energy costs) and administering the local government rate capping and variation framework (which will help minimise financial impacts on low income homeowners).
  • The 2016–17 budget also includes a threefold increase in the brown coal royalty that will raise around $250m from Victorian coal producers. This will help support the transition to cleaner energy sources and ensure that Victorians receive a fair value for its natural resources, but this may add to the cost of electricity. However, the impact on consumers is projected to be minimal (no more than $10 per annum for average consumers, according to preliminary calculations by the St Vincent de Paul Society).

Future policy directions

  • The public housing retrofit program in Saving Energy Growing Jobs is badly needed and a good start. In the future, its benefits could be significant if it is expanded to the tens of thousands of public housing dwellings that have poor thermal efficiency. A broader retrofit program should also target poor quality private rental dwellings.
  • The government can assist asylum seekers living in the community who face substantial disadvantage by declaring them eligible for energy and water concessions. Asylum seekers have lower incomes than all concession card holders and extending concessions to them would cost no more than $3m per annum.
  • The effectiveness of concessions will also be improved by increasing the Utility Relief Grant cap to a level commensurate with two typical quarterly bills, and indexing it against energy and water prices. Whilst an initial investment to help low-income households immediately takes resources, these costs will decrease and stabilise as the new energy hardship framework takes effect. This framework, with its emphasis on early intervention, should reduce both the incidence of debt and typical debt levels among customers in hardship.
  • Expansion of No Interest Loan Schemes (NILS) and other microfinance programs will give people facing disadvantage access to affordable credit.
  • Creating a new supplementary emergency relief program to give additional relief funds and operational resources to Victorian community agencies providing emergency financial assistance will support Victorians in financial crises.

Banner image: “Shopping…” by Thomas Williams (Flickr).