Chapter 3The impact
The experience of Australian households and the not-for-profit sector
3.1For many Australian households, mounting cost of living pressures have come on the back of years of hardship and economic pain resulting from the COVID-19 pandemic. The committee has heard that the cost of living crisis is driving new cohorts of people—many with solid incomes and stable jobs—to seek support just to make ends meet.
3.2Across the board, not-for-profit organisations widely drew a correlation between growing cost of living pressures and increased demand for their services. However, much of the evidence before the committee suggests that different groups are experiencing cost of living pressures differently, although already disadvantaged cohorts remain at risk and in need of support.
3.3This chapter details the experiences of many Australian households that are facing increasing pressures associated with the rising cost of living, and describes the impact that the growing need for support services is having on the not-for profit sector. Finally, this chapter outlines some of the proposals received by the committee that could assist in alleviating the impacts of the cost of living crisis.
Under mounting pressure
3.4Evidence before the committee repeatedly emphasised that the cost of living is making it harder for many to live within social safety nets and that charities and not for profits are increasingly being approached by individuals impacted by the cost of living crisis.
3.5The evidence presented to the committee demonstrated that the impacts of the cost of living crisis were widespread, and not limited to those on income support or other government payments. Ms Brianna Casey, Chief Executive Officer of Foodbank, told the committee that a 'job is no longer a shield against a cost-of-living crisis'. Reverend Stu Cameron, Chief Executive Officer of WesleyMission, similarly noted the 'changing face of financial stress and poverty in our nation', describing how Wesley Mission is increasingly seeing people in need of support who are employed—sometimes even double-income families.
3.6Research commissioned by Finder found that younger Australians had been particularly affected by cost of living pressures, with 85 per cent of 18 to 28 year olds reporting that they had reduced spending due to the rising cost of living. Over half of this age group (54 per cent) also reporting feeling financially pressured to look for a second job.
Figure 3.1Living cost indexes by group, annual change
Source: ABS data, chart from Business Council of Australia, Submission 20, p. 5
3.7Foodbank provided the committee with some data on the extent of the hardships facing many communities across the country:
1.3 million children are reportedly living in severely food-insecure households, skipping meals, going entire days without eating, and compromising their nutrition;
54 per cent of households cited increased or high costs of living as the reason they could not meet their household needs;
in 54 per cent of food-insecure households, someone was in paid work; and
half a million households would struggle to put a meal on the table tonight.
3.8The Australian Council of Social Services (ACOSS) provided the following survey data to the committee:
96 per cent of respondents receiving welfare payments said the support was inadequate to cover the costs of basic goods;
two-thirds reported skipping meals or eating less;
70 per cent were reducing their use of heating;
half of respondents reported that they were in energy debt or were expecting to go into energy debt; and
96 per cent were paying more than 30 per cent of their income in rent.
3.9Anglicare Australia submitted that nine per cent of individuals they surveyed who were receiving Centrelink payments had experienced homelessness or had 'couch-surfed' while living on income support, while nearly three-quarters (72per cent) reported regularly skipping meals to save money.
3.10Ms Jennifer Kirkaldy from the Salvation Army Australia also noted that around 77 per cent of community members surveyed by the Salvation Army expressed concerns that they would not be able to afford food for their family.
3.11Finder's research also found that nearly a third of Australians had asked a family member or friend for financial help during 2022, with half of that group seeking assistance with paying for groceries.
3.12Uniting Victoria and Tasmania shared some highlights from its own research that found 92 per cent of respondents were cutting back on food and groceries due to rising costs.
3.13Ms Kirkaldy encouraged the committee to consider the human impact of cost of living pressures:
[W]e need to avoid thinking of the economy as a separate and distinct entity to the community. The economy is how we've chosen to exchange our time, talent and treasure. It serves the community, not the other way round.
3.14Ms Kirkaldy emphasised that 'the rising cost of living is hurting all of us but is not hurting us equally'.
3.15Ms Clare Savage, Chair of the Australian Energy Regulator, told the committee that the impact of energy prices was inequitably felt, with those in homes with fewer energy efficiencies experiencing disproportionate cost increases:
Those that are actually in the bottom quartiles by [Australian Bureau of Statistics] standards tend to live in the poorest housing conditions, they have the least energy efficient homes, they are least able to access solar and batteries, which are ways of avoiding network and wholesale costs, and so they tend to pay more with less income.
3.16Ms Kellie Wishart, Chief Executive Officer of CareNet, claimed that households in her area in the eastern suburbs of Melbourne are feeling cost of living pressures in terms of rent, petrol, utilities, and (more recently) the cost of food. She told the committee:
Previously, giving somebody food was a good way to free up money elsewhere to pay something else. They weren't necessarily saying, 'I can't afford food'…Now they're also saying, 'I can't afford my mortgage and my food.'
3.17Ms Wishart detailed how the cost of accessing Foodbank had almost doubled since the start of the pandemic, driving up costs or limiting the reach of not-for-profits, even as demand for their services is rising.
3.18Mr Joel Dignam, Executive Director of Better Renting, told the committee that people are being forced to make trade-offs between key areas of expenditure: '[w]e hear from people cutting back on food, and living in substandard housing, and whose mental and physical health were consequently suffering'.
3.19Significantly, the evidence provided to the committee indicated that mortgage stress is driving some Australians to seek help from charities. Mission Australia submitted:
People are being forced to make stark choices about what they can afford to pay for, and many are having to go without meals, medical care, resources for their children's education, and other items that the Australian community considers to be the basic essentials of life.
3.20Ms Wishart told the committee that CareNet was seeing a growing clientele seeking food relief so that they could make their mortgage repayments. She also described how she was now seeing families with solid incomes coming to CareNet for support to meet their needs.
3.21Similarly, Anglicare Australia observed that, '[m]ore and more people, including those working full time, are struggling to afford essentials such as food, utilities, and rent'.
3.22The Council on the Ageing (COTA) stated that older Australians are having to make 'difficult' decisions in relation to their spending, with many having to forego all but 'non-ultra essentials' (that which they could absolutely not do without). COTA told the committee that older people on low fixed incomes, as well as those with chronic illnesses or health issues, were having to make the deepest cuts to their expenditure, with many cutting back on medication, health services, fresh food, and trips to see family and friends.
3.23COTA submitted that cost of living pressures are not only impacting the financial wellbeing of older Australians, but in so doing are also undermining their sense of self-reliance, health, wellbeing, and patterns and frequency of family and community interact.
Mental health
3.24The committee heard evidence that cost of living pressures are increasingly taking a toll on the mental health of many Australians. For example, research by Uniting Victoria and Tasmania found that half of respondents are experiencing mental health impacts as a result of cost of living pressures.
3.25Rev Cameron told the committee that cost of living pressures now constitute the highest risk of suicide. Suicide Prevention Australia also submitted that cost of living was now one of the highest rated risk factors for suicide. Suicides in New South Wales reportedly increased by five per cent from 2021 to 2022, whilst the number of suicides in Victoria in 2022 reportedly hit the highest number of deaths on record.
3.26Lifeline stated that there is a correlation between low income and income uncertainty with a higher risk of suicide. Beyond Blue observed that there is a 'bi-directional' relationship between financial wellbeing and mental health, claiming that concerted efforts were needed to address the mental health consequences of growing cost of living pressures. Suicide Prevention Australia submitted that those facing severe financial strain may be as much as 20-times more likely to take their own life.
3.27Suicide Prevention drew the committee's attention to the disproportionate impact on First Nations Peoples, who experience both higher rates of financial exclusion as well as higher rates of suicide.
3.28Beyond Blue emphasised the impact of cost of living pressures on small business owners, who are still recovering from financial pressures associated with the COVID-19 pandemic, and vulnerable demographics.
3.29Beyond Blue reported that financial stress was the third most common reason for people accessing its phone support service, with over a third (37 per cent) of respondents to a national survey telling the organisation that cost of living pressures had negatively impacted their mental health over the last year. Lifeline similarly described an uptick in clients reporting financial strain as a key stressor, submitting that all 50 of their busiest days on record have occurred since August 2021.
3.30Lifeline argued that the full impact of financial stressors and the cost of living crisis on the mental health of Australians had not yet been felt.
The poverty premium
3.31The Consumer Action Law Centre argued that there is a 'poverty premium', in which financially disadvantaged Australians are often forced to pay more for essential goods and services, trapping them in financial difficulty.
3.32ACOSS told the committee that inadequate social support payments are 'corrosive of people's sense of dignity' and was harming people's mental and physical health. The Salvation Army submitted that rising cost of living pressures have become the leading reason people seek support from the charity, stating that it has become 'more and more expensive to be poor in Australia'.
Impact on charities
3.33The cost of living crisis is severely impacting Australia's charity and not-for-profit sector in two main ways. First, it places increasing demand on the services charities provide to the community. Ms Kirkaldy told the committee that cost of living pressures have become the leading reason for people needing the Salvation Army's emergency relief services, with one-in-three recipients identifying the cost of living as the reason they need help. Separately, the Salvation Army reported that 15 per cent more Queensland families were in need of their support in late 2022 than the year before.
3.34Ms Kirkaldy told the committee they were seeing a shift in the types of people looking for support from the Salvation Army: 'we are seeing more people who are employed and more people asking for food instead of vouchers'.
Figure 3.2The Salvation Army Doorways Emergency Relief: Main reasons for seeking assistance in 2022 to January 2023
Source: The Salvation Army, Submission 11, p. 6.
3.35This increasing reliance on the not-for-profit sector, particularly by cohorts that previously did not receive charitable aid, were considered by the committee to be the 'primary' impacts of the cost of living crisis on the sector.
3.36Second, the evidence to the committee pointed to the emergence of a 'perfect storm' facing the not-for-profit sector, which was facing growing demand for its services, even whilst facing mounting costs and increasing pressures on revenue.
3.37Ms Casey told the committee:
…we currently exist in a perfect storm of a cost-of-living crisis, an income crisis and natural disasters that are growing in frequency and intensity. All of this is impacting on not only the demand for food relief but also our supply. Just as it is costing customers more to buy food and groceries, turn on the lights, fuel their vehicles or keep a roof over their heads, it is also costing Foodbank more to source, store and transport essential food and grocery relief at a time when demand for that relief has never been higher.
3.38Ms Casey and Rev Cameron also warned that the sector was facing a fatigued workforce that had responded to disaster after disaster for years.
3.39These 'secondary' impacts of the cost of living crisis make it harder for the sector to respond to the primary effects discussed above.
3.40For example, Mr Toby oConnor from the St Vincent de Paul Society described a 20 per cent increase in requests for his organisation's services in New South Wales and a 65 per cent increase in Western Australia from 2017 to 2020. Similarly, Woolworths told the Committee that they had increased their donations of food to their charity partners to keep up with increasing demand.
3.41Rev Cameron told the committee that Wesley Mission's emergency relief teams had supported two-thirds (67 per cent) more people in 2022, but had nevertheless had to turn away around half of all referrals to them:
[We] are having to make the terrible decision to prioritise people who are experiencing extreme financial difficulty in scaling the amount of support available to spread resources further.
3.42The Brotherhood of St Laurence submitted that its costs are growing faster than its income—particularly for services delivered through government contracts—at a time when demand for its services is growing.
Evidence on potential solutions
3.43The committee received submissions from a number of representatives from the charities and not-for-profit sector that the rate of income support should increase beyond current levels to address the rising costs of living. Mr oConnor warned that, given rising living costs, the levels of assistance that had historically been provided would no longer be sufficient. Mission Australia submitted that '[t]he evidence is clear that current income support levels are not enough to keep Australians out of poverty'. It called for a 'redesign' of the federal income support system to permanently boost payments.
3.44People with Disability called on the Government to index-link the Disability Support Pension, to raise the JobSeeker payment, and to increase Commonwealth Rent Assistance. Other organisations echoed calls for an increase in the JobSeeker rate, including Anglicare Australia and the Salvation Army.
3.45Ms Casey emphasised the need for better data around food insecurity and cost of living pressures, more broadly—particularly for First Nations communities (who, Mr Stuart Foster from the Salvation Army noted, anecdotally appear to be overrepresented among those accessing emergency relief services).
3.46Beyond Blue called for greater investment and better targeted mental health services, particularly for disadvantaged communities.
3.47The committee notes that on 1 January 2023, the Commonwealth halved the number of Medicare-subsidised psychology visits patients can access each year.
3.48Mr oConnor told the committee that the services offered by not-for-profits had become 'a necessary supplement to JobSeeker'. He further stated that whilst government-funded safety nets are enabling many households to afford essentials, they also hide 'the real inadequacy of the income support program'.
3.49Ms Wishart called for more skilled volunteers for not-for-profits addressing cost of living pressures, and said that additional resources are needed to support the sector as it faces increased demand and increased costs.
3.50Mr Tomas Johnson from Uniting Victoria and Tasmania told the committee that 'more systematic and structural reforms' were needed to address the impacts of cost of living pressures on the country's most vulnerable. Specifically, he called for a substantial increase in income support payments; the easing of barriers to accessing income support payments; reforms to better balance employment opportunities with income support; increased investment in affordable housing; and expanded support for those experiencing, or those at risk of, homelessness.
3.51While acknowledging this evidence, the committee notes the impacts that expansionary fiscal policy has on inflation (discussed above), which is driving the cost of living crisis.
Interim committee findings
Finding 4: The cost of living crisis is causing an increase in the demand for services provided by the charitable and not-for-profit sector. Finding 5: As demand for charitable services increases, there is a parallel downturn in the ability of charities to meet this demand due to increased overheads for these organisations and lower levels of charitable giving. |