A new report by Anglicare Australia reveals that low-income households in Australia are facing a “poverty premium” due to the higher cost of living. According to the report, these households are financially penalized for their inability to buy groceries in bulk, pay costs annually instead of monthly, or upgrade to more fuel-efficient vehicles. This poverty premium is a punitive measure for Australians who are already earning less, pushing them further behind as these additional costs accumulate over time.
The report, titled “Poverty Premium: The high cost of Poverty in Australia,” identifies six key areas where low-income households are essentially paying a poverty tax. These areas include food and groceries, transport, energy, credit and finance, data and communications, and home and car insurance.
Anglicare’s research suggests that low-income individuals often pay more for basic goods and essential services than those with higher incomes. For instance, people on low incomes spend 93% more on groceries, 20% more on energy, 23% more on public transport, 45% more on credit and loans, 10% more on fuel for less efficient cars, 61% more on insurance, and a staggering 142% more on phone data.
The report further highlights that these are not the only areas where the poverty premium can arise. It stresses that these areas can be considered essential services as people will continue to consume them even if prices rise.
Food and groceries are a prime example of where poverty premiums are prevalent. Food is often given a lower priority by low-income households when making tough budgetary decisions because it is not a fixed cost like rent or directly deducted and subject to penalties for late payments like energy and phone bills.
Anglicare reports that over two million Australian households have run out of food in the last year due to limited finances. This lack of finances also prevents them from buying food in bulk, which is often cheaper per unit price but requires more upfront payment and storage space.
For those unable to buy in bulk and who purchase smaller amounts more regularly, a poverty premium applies to every purchase. The report found that the poverty premium for families unable to buy in bulk ranged from 22% to 93%.
The concept of the poverty premium is not new. Coined in the 1960s, it explains how people living in poverty can pay more for essential goods and services than those not in poverty. It has also been identified as the “poverty penalty” or “the cost of being poor”. Anglicare suggests that market forces often work against low-income individuals as the market assumes that people have the time and capability to shop around, which is not always the case.
Addressing this issue, Anglicare’s executive director, Kasy Chambers, suggests raising Centrelink payments above the poverty line as a solution. The report states that JobSeeker and related payments are now so low that they trap people in poverty. During the pandemic, it was proven that raising government support payments can effectively eliminate poverty.
Anglicare also suggests increasing the minimum wage to a living wage, implementing more solar and energy efficiency programs for public and community housing, and requiring more telecommunications companies to offer products specifically for low-income customers.
The report concludes by challenging the notion that poverty would not be an issue if people on low income made better choices or stopped wasting their money. Instead, it argues that people on low incomes have to be more savvy, prudent, and resilient than others.
This report is crucial for potential buyers in the Australian property industry, particularly those working with a Northern Beaches Buyers Agent or a Lower North Shore Buyers Agent. Understanding the realities of the poverty premium can help inform decisions and strategies when looking to get help buying in Sydney or elsewhere.