Widespread costs of living shocks

I am one of the older generation who are not much affected by the crisis. We usually own our own homes so have no rent to pay and have built up savings through a lifetime of work.

But the reports below do bother me and I wonder what I could do to help. I already provide ultra-cheap rental accomodation to four people but I will have to think of doing more

Just about everywhere you look, there are worsening signs that Australia is no longer the lucky country – for just about all of us.

Just about everywhere you look, there are worsening signs that Australia is no longer the lucky country.

From record-high rents to skyrocketing mortgages, a cost-of-living crisis to the alarming emergence of a ‘working poor’ population, the country faces an unprecedented storm of factors putting pressure on millions of people.

And very few Aussies are immune.

“We’re seeing a new demographic of people turning to charities for support over the past 18 months,” a spokesperson for St Vincent de Paul Society in New South Wales said.

“It has been very concerning to see a growing number of people in employment and families on dual incomes reaching out in a time of desperation because of the cost of living.”

Whether paying a mortgage or renting, working for someone or running a business, earning a little or making a lot, this is a startling look at just how tough things are right now.

Skipping meals or not eating at all

An estimated 3.7 million households are battling serious levels of food insecurity, not-for-profit Food Bank revealed in its 2023 Hunger Report.

Food insecurity describes the need to make “unenviable choices about what and when they eat” such as skipping meals or going whole days without eating.

Foodbank’s research shows an extra 383,000 households are grappling with food insecurity than a year ago.

More than a third of the population – more than the total number of households in Melbourne and Sydney combine – are having to “compromise their meal choices”, the organisation said.

The proportion of Aussies who are experiencing “some level of distress in meeting the most basic needs” when it comes to putting food on the table is racing towards 50 per cent.

“Food insecurity is waking early and sending your child off to school with a rumbling tummy and empty lunch box because you’ve been forced into an impossible choice between paying the rent or buying food that week,” Foodbank chief executive Brianna Casey said.

“Food insecurity is living at home alone as a pensioner, convincing yourself that three meals a day is a luxury, and that two – or even one – will suffice.

“Food insecurity is rushing to the fruit platter at a working lunch in the office because fresh fruit and vegetables have become a treat, rather than a dietary staple.

“Food insecurity is now having a mortgage, a full-time job and a side hustle, yet food is a discretionary spend in the household budget.”

Cutting dangerous corners

As the country brazes for a particularly hot summer, the Australian Council of Social Services warns vulnerable households will go without cooling as a result of cost pressures.

An ACOSS survey released in October shows 74 per cent of people on income supports are slashing spending on cooling, while 62 per cent are cutting back on the use of lighting.

“As we head into a summer of extreme heat, the federal government needs to deliver a substantial package to urgently address energy affordability for people on low incomes,” ACOSS program director of climate and energy, Kellie Caught, said.

“Energy is an essential service, one which has serious implications for people’s health and wellbeing.”

Meanwhile, a recent Australian Bureau of Statistics data release shows seven per cent of people who needed to see a doctor in the 12 months to June delayed the visit or didn’t go at all because of cost-of-living pressures.

“This was double the number compared to 2021-22, when 3.5 per cent of people put off or did not see a GP when they needed because of the cost,” Robert Long, head of health statistics at the ABS, said.

One-in-five people delayed or avoided seeking mental health treatment because of the cost, while 10.5 per cent of patients needing to see a specialist didn’t due to price pressures.

“There was also an increase in people who delayed or didn’t get prescription medication when needed due to cost, from 5.6 per cent in 2021-22 to 7.6 per cent in 2022-23,” Mr Long said.

Crushed by mortgage repayments

Since the Reserve Bank began hiking interest rates back in May last year, the cost of meeting repayments on the average size mortgage has soared.

Those with a home loan balance of $590,000 – the national average – are forking out $1345 more per month, or an extra $16,140 per year.

“That’s a huge amount of extra money to be spending on your mortgage, especially when the cost of almost everything else is also going up,” Graham Cooke, head of consumer research at finance comparison website finder.com.au said.

Even if those huge increases were happening in isolation, rates of distress would be high, but with a cost-of-living crisis on top, countless Aussies are now up against the wall.

Martin North is the principal of economic research firm Digital Finance Analytics and tracks household cash flows, with data indicating more than half of mortgage holders are in cash-flow deficit each month.

That is, half of all mortgage households are now spending more than they earn every month.

“Looking in detail, we find that recent purchasers, especially young growing families, are most exposed,” Mr North said.

Many bought when mortgage rates were sitting around two per cent, and when then-RBA Governor Philip Lowe assured people the official cash rate would likely remain on hold until 2024.

It didn’t. Home loan rates are now sitting at about six per cent.


Aussie homeowners warned ‘perfect storm’ to hit as insurance is cut from budgets

This is a real problem. Recent natural disasters have cost insurace companies big so they have to allow for such big costs in the future. And increased premiums are the only way to do that. My home insurance has trebled in recent times. I can afford that but many can't. So they risk losing everything

Homeowners are crossing their fingers as the cost of living crisis has more Aussies cutting insurance from their budgets.

The increased frequency of extreme climate events, inflation, and Australians’ love for urbanisation in places most likely to be hit by weather have created a “perfect storm” in insurance markets.

Insurance Council of Australia chief Andrew Hall painted the grim picture during an address to the National Press Club on Thursday.

He said the “difficult choice” to forgo insurance or to be underinsured was creating a protection gap – the extent to which potential economic losses are not covered by private insurance.

“It’s the difference between what should or needs to be insured and what isn’t insured,” he said.

Many Australians have tried to maintain cover but Mr Hall said the risk was greatest in areas where “the threat of high natural peril risk is driving the biggest increases in premiums.”

“As the protection gap widens there will be serious implications. The first is the additional vulnerability that households and families, particularly middle and lower-income earners, will face if the worst happens.

“It means that when disasters and accidents occur, they disproportionately up-end the lives of people particularly in vulnerable lower socio-economic groups.”

As a result, he warned, taxpayers will be carrying more additional risk to clean up after a disaster and more pressure on the government’s coffers.

Banks will also be increasingly exposed.

A recent report by the Actuaries Institute suggested nearly one in eight Australian households is facing home insurance affordability stress.

Since the Black Summer bushfires in 2019, Australia has experienced 18, as Mr Hall described, “insurance catastrophes”.

“Last year alone, the insurance industry in Australia paid 302,000 disaster related claims, which caused more than $7.25bn in insured losses,” Mr Hall said.

The ICA boss said proper mitigation was key and pointed to an example of premiums dropping by on average 34 per cent in Roma, Queensland after the construction of a flood levee.

He also urged for a further strengthening of the National Construction Code to make homes more durable for the environment where they’re built.

Mr Hall welcomed the call from national cabinet to stop putting homes on flood plains.

“All too often, we have built our homes in places where we can touch and feel and absorb nature – in bushland, on river frontages, and backing on to beaches,” he said.

“But in so doing, we have put ourselves on flood plains, in fire-prone bushland, or coastal areas in direct paths of cyclones.

“We have ignored the red flags of nature.”

He also urged state governments to wipe the 10 per cent stamp duties on insurance customers.

“If insurance policies for houses or cars did not exist, or were priced out of reach, then the population would demand it of the government.

“For the sake of our future protection and productivity, Australian governments at the state and Federal level must have an eye on reform of insurance taxes.

“There is a clear opportunity here to think about how to incentivise states to lower their insurance taxes to ensure more people have the private cover that will protect.”


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