Cost of Living in Tasmania

Companion Report 2 - impacts and responses

October 2011

Cover image:

Over 5000 Tasmanians participated in the community consultation process for the Tasmania Together 10 Year Review, which was held between September and December 2010. The cover image is a cloud tag, which documents the frequency of words that were used in community responses on the theme of cost of living. The larger the word in the cloud tag, the greater is the frequency of use of this word in survey responses received.

Table of Contents

5Introduction

7Impacts

9Households

17People

24Places

32Responses

32Increasing productivity

37Building financial capability

44Strengthening consumer protection

48Building networks of support

53Strengthening the safety net

Appendices

Appendix 1Flanagan, J and Flanagan, K, 2011 The price of poverty: cost of living pressures and low income earners, Hobart: Anglicare Tasmania.

Appendix 2 Fudge, M. 2011 Local voices: enquiry into community assets in Circular Head, Tasmania. Hobart: Relationships Australia Tasmania.

Appendix 3Dare, M, Kimber, J and Schirmer, J, 2011 Tasmanian Drought Evaluation Project, Hobart: University of Tasmania and JS Consulting.

Appendix 4Community Inclusion Workers, Child and Family Centres Project 2011 Community consultation report for the Social Inclusion Unit, Department of Premier and Cabinet.

Appendix 5Council on the Ageing Tasmania, 2011 A sense of belonging: social inclusion issues for older people in Tasmania, Hobart: COTA Tas.

Introduction

This report examines the impacts of cost of living pressures on particular households, population groups, and places. It provides additional detail to that contained in A Cost of Living Strategy for Tasmania, regarding a selection of responses to cost of living pressures facing Tasmanian communities.

Individuals and households can be more included or excluded from social and economic participation depending on the level of cash and non-cash resources available to help them manage costs and sustain a decent quality of life. The question of which groups are most affected by cost of living increases is determined by the complex interplay of price increases, household expenditure and the resources that households have available to absorb price increases.

There are a variety of methodologies available to determine the groups most affected by cost of living increases and depending on the methodology a different ordering of groups is likely to result. A Cost of Living Strategy for Tasmania uses the Relative Price Index (RPI) as the principle methodology for determining groups most likely to be impacted as this approach provides current Tasmanian specific data that accounts for the differing expenditure patterns of household groups.

This report considers data and analysis from a variety of qualitative and quantitative sources in relation to the vulnerability or resilience of various households, people and places experiencing cost of living risk.

Cost of living risk is defined in A Cost of Living Strategy for Tasmania as risk of electricity disconnection, housing eviction and homelessness, food insecurity, ill health due to inability to afford health services, debt and financial pressures, and presentations to emergency relief services.Factors that contribute to cost of living risk include income adequacy, the affordability of essential goods and services, information about the products and prices available in the market, access to support networks and emergency buffers to cope with price shocks, and individual skills and capacity including physical and mental health.

Tasmanians are facing financial difficulty as a result of cumulative cost of living impacts. As a consequence of financial difficulty, people adopt one or more coping strategies such as:

Substitution;

Rationing;

Seeking increased resources through personal, family or community actions;

Falling into the social safety net; and/or

Simply going without the basics.

The Anglicare Report The price of Poverty (Appendix 1) provides a current picture of the impacts of current cost of living pressures for low income households. It identifies a number of ways in which low income Tasmanians are subject to an additional cost in money, time or health which they incur in their attempts to purchase basic goods and services (poverty penalty). It suggests that affordability of essential services is approaching crisis point.

The Relationships Australia Report Local Voices (Appendix 2) identifies community assets and strengths that support a regional communitys resilience and capacity to recover and recreate in the face of economic challenges. It shows the importance of strong social connections and relationships, formal and informal institutions and infrastructure to support and foster participation, as well as the skills and capacities of local people and their willingness to work together to support each other in practical ways and with emotional support.

The Tasmanian Drought Evaluation Project (Appendix 3) highlights the interactive nature of drought impacts and drought initiatives in farming communities, and how it impacts people in different ways depending on their circumstances. It identifies three key forms of support that families and communities need to survive the negative impacts of drought (including cost of living impacts) emotional and social support, financial support and the support of farm production (their means to make a living).

The Community Inclusion Workers Community Consultation Report (Appendix 4) provides insights into how people in rural and urban communities are coping with cost of living pressures, and how they think cost of living issues should be tackled. While some people offered suggestions and good practice ideas, it reports that many people have given up and are simply trying to survive they are weary and resigned to ever increasing costs and a bleak future.

The Council on the Ageing Tasmania (COTA Tas)s report A Sense of Belonging outlines the result of consultation with older Tasmanians about being connected to community and key issues as they age. Although money and cost of living were not raised as key issues, this report featured the cost of activities or being involved, including telecommunications and cost of transport. Key issues were transport and availability of information.

Impacts

The extent to which cost of living pressures become a significant issue for people can depend on how quickly prices increase over time (pace of change) and by how much (rate of change) relative to the income and resources of individuals and households. Cost pressures can be exacerbated when people face an increase which is more than expected, a number of bills hit at the same time and exceed the capacity of regular household income and economic resources to respond, or unexpected and unbudgeted expenses arise because of an emergency or catastrophic event. The resilience and capacity of households, people and places to cope with shocks is a key factor in the level of financial hardship they experience.

Faced with too many price shocks (i.e. the number of price rises and their amount) people are finding it increasingly difficult to absorb these within the family budget.

Its pretty tough ... for instance this month we had registration on the vehicle which was $409; new muffler and service on the vehicle another $200 odd ... and we pay a pretty high rent of $170 a week. So it doesnt leave anything for any luxuries.

Age Pensioner Couple, North West Coast

Got to constantly juggle bills just to get by.

Derwent Valley community consultation

If I get one unexpected bill we will go under and cannot feed ourselves.

Geeveston community consultation

Recent research by the Commonwealth Bank has found that many Australians are worried over pressure on household budgets, and a high proportion would struggle to cope with an unexpected expense. It found that 53% of respondents said they would have difficulty finding $5000 to fund an unplanned expense, with regional respondents facing even greater challenges. It also found that 58% of women compared to 48% of men said they would have difficulty raising $5000 in an emergency.

Anglicare Tasmania recently asked low income Tasmanians about their expenditure on essential services and products, and the decision making that drives their budget. It found that the most significant budget strategy employed by households is to prioritise the payment of rent or mortgage costs, followed by electricity and telecommunications. This entails trade-offs that include food rationing, compromises on electricity consumption, withdrawal from social participation, and the use of credit to pay for essential purchases. Juggling bills and using the money made available through delaying payment of bills is also an important financial management strategy. Some research participants, for example, reported that they delayed bill payments to purchase food and a cycle of small loans from family members. If unable to reduce their electricity usage but also unable to afford the cost of what they use, age pensioners cut back on their food intake, while families accrue arrears and use emergency relief as a coping strategy

Yeah I get what I need first because if I got food first I would go overboard, and then I wouldnt have money for what I need. So I get what I need and then I can see if I need extra loaves of bread.

21 year old part-time carer and student (New Start Allowance)

External shocks on a household can include emergency events such as the breakdown of a car or whitegoods, or as a result of transition in lifecycle (e.g. extra school costs when a child starts high school).

For many people, it only takes one incident a medical emergency, the need for car repairs, an essential appliance breaking down, an unexpectedly large bill or a number of bills arriving at the same time to tip them over the edge and to make a manageable situation unmanageable.

The availability of No Interest Loans to Tasmanians on low incomes is an important way in which the Tasmanian Government is helping vulnerable households to meet the cost pressures associated with these kinds of price shocks. The decision by the Commonwealth Government to provide school uniform and other school cost rebates is another example of the kind of support governments can provide to help offset cost pressures.

If an emergency arises you have no money to put aside. You never get on top. You end up having to borrow and the cycle goes on. If your kids get sick it has to be on pay day, otherwise you cant afford it, then you have to borrow and you have to pay it back.

North East Tasmania

Households

Companion Report 1 identifies households that are disproportionately impacted by the increasing costs of living, including:

Low income households

Unemployed households

Other households dependent on government pensions and allowances as the principle source of income

Lone person households

Single parent households

Community sector reports and other data show that these households are more likely to experience multiple cost of living risks in relation to food security, electricity usage, transport disadvantage, housing, health risk factors and insurance. However, it is also important to note that these households also have cost of living strengths including resourcefulness and being good managers with the resources they have. A common misconception is that poverty is due to poor money management, when in fact most low income households are very good at managing their finances on a day-to-day basis.

Food insecurity

The 2009 Tasmanian Population Health Survey found more than one-quarter (28.4%) of Tasmanian adults claimed cost as the reason for not buying the quality or variety of preferred food. 42.5% of adults in the least affluent households cited being unable to buy the quality or variety of preferred food due to cost, compared to only 14.0% in the most affluent households. Compared to the state average of 5%, 10% of adults in the lowest income households reported they ran out of food in the last 12 months and could not afford a replacement.

I pay my rent, my power, and other bills...food comes last, if there isnt anything left I dont eat for days...sometimes I ration so I eat every third day.

Geeveston community consultation

The 2009 Tasmanian Child Health and Wellbeing Survey found that 4% of households with children aged 12 years and under had experienced an occasion in the last 12 months when their household had run out of food and could not afford to buy more, while 6% had experienced financial stress leading to difficulties with food security and education expenses. Tasmanian households where food insecurity was more likely to have occurred included sole parent households (9%), those with annual incomes below $40000 (18% of those earning less than $20,000 and 14% of those earning from $20000 to less than $40000), jobless households (10%), and those located in the North region (10%).

A 2009 Anglicare survey of financial hardship among emergency relief clients found that three-quarters (76.8%) of participants always or mostly worried about whether they could afford to buy enough food. A shortage of money had resulted in three-quarters (75.1%) of participants going without meals in the previous year, while more than one-third (36.2%) had needed to seek assistance because of the cost of food. The vast majority of emergency relief clients were people dependent on Government pensions and allowances, and many of these were long-term recipients of social security payments.

A 2009 TasCOSS Report found that people hardest hit by cost of living pressures consistently go without food in order to meet other basic living costs, such as housing, utilities, medical expenses and transport. They regularly forgo adequate or nutritious food to make the money stretch further:

My kids went to school with no lunch today.

Food will be the last thing. Theyll make sure that everything else is paid and theyll just make do on next to nothing for groceries or access emergency relief to get them by.

Anglicares 2011 report on the cost of living for low income earners points to the cost of food as one of the most problematic expenses for low income households. For many research participants, food was a notional priority in the disposable income they had left after housing and a number of other costs had been met. Many participants described rationing food by either buying less food in general, or less fresh food than they wanted of felt they needed.

Electricity usage

At 1 August 2010, one in three residential customers received an electricity concession to help with the cost of their power bills.

Low income households are more likely to use Aurora Energys prepaid electricity service, Pay As You Go (APAYG), which is available to Tasmanians as an alternative to standard tariffs. APAYG offers time of use pricing which allows customers to tailor their electricity consumption to cheaper times of the day and week and maintain greater control over their electricity costs. Comparisons between APAYG and standard tariffs are difficult to make as standard tariff customers are charged by consumption for each tariff per quarter while APAYG customers pay according to time of year and time of use. However, on average APAYG prices are higher than prices for standard tariffs. This is principally due to differences in average increases in network costs, the technological costs required to support pre-payment meters, and the costs associated with maintaining a point of sale agent network.

In July 2009 the Tasmanian Government guaranteed that APAYG price rises for concession holders would align with standard tariff increases, to ensure that low income households would not be further disadvantaged. At 30 June 2010, 40089 (17%) of residential customers were using APAYG, of which 17000 (42%) were concession cardholders. This represented a higher proportion of the total number of customers using APAYG than those on standard tariffs. Although a changed timed tariff structure for electricity charges has resulted in the pre-payment APAYG option being more expensive than quarterly billing for standard customers, concession card holders were still likely to find APAYG a cheaper option.

Research undertaken by Anglicare indicates that not all concession card holders are aware of the electricity concession and therefore are not receiving its benefit. Although 90% of the emergency relief clients surveyed by Anglicare were eligible for electricity concessions, only half (50.7%) received a concession. Of the survey participants who were single parents, 66.7% did not receive a concession because they did not know about it.

Households in receipt of a government benefit or allowance are more likely to have their electricity supply disconnected. In the 2009-10 financial year, 1396 residential customers had their electricity supply disconnected. Of these, 544 (38.9%) were concession holders and 218 (15.6%) had been disconnected more than once within a rolling 24 month period. Of the repeat disconnections, more than one-quarter (28.4%) were concession cardholders. Most disconnections were related to inability to pay.

A 2006 TasCOSS-commissioned survey of APAYG customers found that 23% of customers had run out of electricity in the previous year. Single parent households (43%) and households where at least one person was unemployed (33%) were most at risk of running out of electricity. Of the 345 respondents who reported that they had run out of electricity, most (58%) had simply forgotten to recharge their APAYG card, but one in five (21%) had found it hard to find the money for household bills. A 2009 Anglicare survey of emergency relief clients found that participants using APAYG (45.7%) were more likely than participants using other payment methods to go without heating their home or have the electricity supply disconnected.

The 2011 Anglicare report on cost of living notes that some households are managing electricity consumption below the levels they need to keep their homes warm and run important appliances due to lack of income. The APAYG meters allow greater capacity to reduce consumption through rationing and self-disconnection. These households will often use the emergency credit of $16 to help them manage their electricity consumption. Some households are turning off all appliances and lighting when they are down to their last one dollar or two of emergency credit. These households are not appearing in Auroras self-disconnection data.

In winter Im always going into the emergency money. Ive never been disconnected but Ive got down to $2 credit to last and turned off all the power and used candles. But weve never been cut off. In winter Im always up at [emergency relief provider] for power money. I use Pay As You go its more expensive but you dont have the massive bill.

Sole parent, 24 year old mother of four children

APAYG is a popular payment method for households on low income because it prevents customers being confronted with large quarterly power bills, however other pre-payment options are available to standard tariff customers to help them manage bills. These include making regular direct debits from bank accounts or using Aurora Energy's direct debit, CentrePay, EasyPay or PrePay options. TasCOSS believe these are better alternatives to APAYG, but tend not to be as widely publicised.

Transport disadvantage

Low income households, unemployed households, and households dependent on government pensions and allowances are more likely to experience transport disadvantage and difficulty with transport costs such as motor vehicle fuel, registration and insurance. Factors affecting the level of transport disadvantage include proximity to services, adequacy and availability of public transport services, ability to use alternative methods of transport, and ability to access vehicles belonging to others (sharing transport and getting lifts is particularly important for low income groups).

In 2006, only 77.5% of people aged 18 years and over in the lowest income quintile could easily get to the places they needed to go compared with the state average of 88.1%, indicating that this group still faced barriers to accessing transport.

TasCOSS research has found that people at particular risk of transport disadvantage include older people, people with a disability, people with young families, children, students and young people, unemployed people, people on low incomes, and people with poor health. Anglicare research had similar results, finding that people most vulnerable to transport disadvantage include people in rural and regional areas, people with poor health, people with a disability or families raising children with a disability, disadvantaged job-seekers and young people. Research into financial disadvantage among Home and Community Care clients identified people hardest hit by transport costs include those dependent on income support payments, single people without their own home, people vulnerable to exploitation by partners, and people with major health issues.

Housing

Low income households spend a higher proportion of gross weekly income on housing. Nationally, low-income owners with a mortgage spent 27% (or $281) of their gross weekly income on housing costs, compared with 18% (or $384) for all households. Low-income households renting from a private landlord spent 28% (or $236) of their gross weekly income on housing costs, compared with 18% (or $267) for all households.

In order to purchase a home and service a home loan, many households now rely on having two incomes. Home owners or home purchasers are generally regarded as groups less likely to be affected by financial hardship. However, the 2009 Anglicare report on emergency relief clients found that some low income home purchasers, most of whom were income support recipients, were facing considerable hardship. The 2011 Anglicare report on cost of living also found that low income home owners are not immune from financial difficulty. It found that the costs directly associated with their home ownership that cause problems are rates, maintenance costs and water and sewerage bills. Most of these households managed the cost pressures through bill juggling and opting for small regular bill payments and prepayment options across a range of purchases and services.

Low income, lone person and single parent households are more likely to rent rather than own or purchase their home. Public and private renters rate highly in terms of disadvantage in national and Tasmanian studies. They are among the groups most likely to be lacking a number of essentials such as lacking a decent and secure home, home contents insurance and being unable to buy prescribed medication. While older people generally have lower levels of hardship overall, older renters experienced much higher levels of deprivation and were more likely to go without essentials such as decent and secure housing.

In 2007-08, more than one-quarter (26.5%) of all Tasmanian households rented their home. Of all households, 17.2% rented from a private landlord and 6.9% rented from the state housing authority compared with 4.5% nationally . Tasmanian data suggests that public housing and private renters are over-represented in emergency relief statistics and experience high rates of hardship.

Table 1 Hardship by tenure

Indicator of hardship:

this happened to participants household in previous year due to a shortage of money

Tenure

Public housing

Private rental

Could not pay electricity or phone or gas bill

65.3

68.4

Could not pay rent or home loan

30.8

58.1

Pawned or sold something

61.9

60.1

Went without meals

70.2

72.3

Unable to heat your home

52.6

57.8

Had the phone disconnected

34.6

41.5

Had the power off

28.3

27.3

Health risk factors

The costs associated with illness and disability can be an additional financial burden. For example, an unexpected illness can cause unanticipated cost pressures as household budgets suddenly have to accommodate medical and pharmaceutical goods and services result, sometimes exacerbated by reduced economic circumstances (not being able to work as a result of illness or as a result of becoming a primary carer).

Surveys undertaken by the community sector indicate that low income households are more likely to be embarrassed to seek medical services for fear that they would not be able to afford the costs.

My illness means periodically managing a roller coaster of paranoia and mood swings. This can be challenging enough, without added financial stress and feelings of hopelessness. When I see my psychiatrist it costs $185.00 per half hour simply to oversee a change in medication. Part of this is later refunded but its very difficult for vulnerable people to come up with large amounts of cash at the very time help is needed.

Richards story SANE Australia

A 2005 Tasmanian survey found that single parents were much more likely than other Tasmanians to report they had not sought health care when they needed it and /or did not fill a prescription ordered by a doctor due to a shortage of money. Anglicares 2009 survey of emergency relief clients indicated that people aged 35-44 years experienced the greatest difficulty with health-related costs, with 37.1% reporting big problems with the cost of prescriptions and 34.5% with the cost of medical appointments.

Couple only households were more likely to spend disproportionately more per week (5.5%) than the state average (4.8%) on medical care and health expenses. This is likely to be a reflection of the older age profile of Tasmania.

The availability of concessions for households dependent on Government benefits and allowances (eg for prescription medicines and basic hospital and medical treatment) helps in making the cost of medical and health care manageable for these households and has resulted in their weekly household expenditure on medical care and health expenses being 4.1%, less than the state average of 4.8%.

Households most likely to experience financial hardship are also more likely to have health risk factors associated with obesity, smoking and stress.

In 2004-05, nationally, around one-fifth (21%) of adults in low-income households were obese compared with 15% of adults in high income households. 32.1% of households in the lowest income quintile smoked compared with 15.6% in the highest income quintile and these households are more likely to spend a higher proportion of average weekly expenditure (2.6%) on tobacco products, compared with the state average of 1.9%.

Lone person households were more likely to spend slightly more on discretionary spending items such as alcohol (3.7%) than the state average of 3.5%.

Single parent, lone person and unemployed households were more likely to have higher levels of financial stress than other household types. 46.4% of unemployed households experienced at least one cash flow problem in the last 12 months, and 59.5% of jobless single parent households experienced at least one cash flow problem in the last 12 months. Compared with the Australian average of 20%, 29% of unemployed people nationally were at a higher risk of developing mental disorders than the Australian average of 20% and 34% of people living in one parent families with children had a higher risk of developing mental disorders.

Low-income households were less likely to participate in recreational activities. 37.2% of children of single parent households participate in selected sport or cultural activities compared with 23.2% of children in couple families; 50.8% of children in a single parent family where the parent was not employed were even less likely to participate compared to families where the parent was employed 27.8%.

Insurance

Low income households are more likely to be uninsured. In 2003-04, 5% of Tasmanian households (approximately 7200 owner occupied households) did not have building insurance. Households in the bottom two income quintiles accounted for three-quarters (74%) of these uninsured households, exposing those households least able to afford it to greater risk in the event of loss. Low take-up of insurance by low-income groups may in part be due to the affordability aspect of insurance, but also in part to the perception that these products are not for people like them. Non-insurance of building and contents was found to be associated with single parent households.

In regard to health insurance, 12.3% of people without private health insurance were likely to have found cost a barrier to purchasing their medication compared with 6.5% of people with private health insurance. Younger people were more likely than older people to have found the cost of medication a barrier, due in part to older people being eligible for concessions for PBS medication.

Working poor middle income households

While the increasing cost of items such as housing, food, utilities and petrol have become pain points for low-income households, middle income households are also now at risk of financial hardships and becoming part of a growing number of working poor households.

Working poor households are those in which people are in paid employment but are still struggling to make ends meet. Nearly half of working poor households (48%) are supported by one part-time employee only, and these households are likely to include sole parents, full-time students, people having difficulty finding more substantial work opportunities, and those who cannot work longer hours due to disability or illness. One quarter of the working poor (24%) live in households with one full-time employee, and just over one-quarter (28%) live in households with two employees of whom one is part-time.

Working poor households are below the poverty line and often find it difficult to maintain a reasonable standard of living, for example because of the nature of their employment (part-time versus full-time), low levels of pay, or expenses relating to dependent children (couples with children make up a sixty percent of working poor households). While some of these households may not include recipients of Government pensions or allowances, others will comprise a mix of income from wages or salaries and government pensions or allowances. These households are also likely to include people with higher educational qualifications and couples with children. The 2009 Anglicare survey found that among the participants experiencing the greatest difficulty across a range of expenses were home owners with a mortgage, people aged 35-44 years, and families with dependent children (couple and single parent families).

Some of the high and often hidden costs for the working poor include childcare, maintaining a car and acceptable clothing, as well as having to buy products they would otherwise have used their own labour to produce given that many work long and unsocial hours.

I think theres a big gap, like I said, a gap of sorts, those in between, the working poor ok? A gap in the system where we earn too much to be eligible for a lot of things but we dont earn enough to do everything privateWe are missing out because we are not in crisis.

Laura (single mother with 2 children, works part-time and studies part-time)

Emergency relief providers reported that middle-income families were increasingly accessing their services, with the working poor identified as one of the groups experiencing the greatest increase in difficulty.

People

People with disabilities, their carers and families

People with disabilities, their carers and families have consistently been described as groups vulnerable to cost of living pressures due to the strong correlation between disability and poverty.

By the time you pay for rent, hydro, the telephone bill, the groceries, everything is gone. Its really hard.

Disability Support Pensioner, Greater Hobart

In 2009, Tasmania had the highest rate of disability of all states/territories (22.7%), compared with a national average of 18.5%. Rates of profound or core activity limitation were also highest in Tasmania (6.8%). Nationally, 5.8% of the population reported a profound or severe core activity limitation. Tasmania had the second highest proportion of carers (13.3%) after South Australia (13.4%). This was higher than the national average of 12.2%.

People on the Disability Support Pension (DSP) are among the highest users of emergency relief services in Tasmania. In a recent survey of emergency relief clients, almost 60% of people in receipt of the DSP said that they had financial problems regularly or always, a much higher proportion than participants on other types of income support payment. They also ranked among the groups most likely to have more debts and experiencing the most difficulty.

The DSP is one of the highest Commonwealth income support payments equal to the Aged Pension and significantly higher than Newstart or Youth Allowance payments for example, but disability pensioners face a range of additional costs as a result of their disability.

These additional costs may be incurred as a result of:

The need for special equipment eg wheelchairs, walking frames, audio devices, custom footwear, guide dog;

Maintenance costs of equipment and assistive technology electric wheelchairs, grooming for guide dogs;

The need for house modifications;

The need for car modifications;

Additional transport costs due to frequent medical appointments and difficulty accessing public transport;

The need for medications especially those not covered by the Pharmaceutical Benefits Scheme (PBS);

The need for additional items such as continence aids and bandages;

The need for additional electricity use e.g. for Multiple Sclerosis and arthritis sufferers who need to regulate their temperature.

There is a range of financial assistance available to people with disabilities, but this assistance does not meet the range of additional costs incurred as a result of having a disability. These additional costs mean that secondary poverty is forced upon households that would otherwise manage if they did not have the costs associated with a disability.

My life is total stress about everything. I have two kids with disabilities. The pension nowhere near meets their needs. I spend $100 per fortnight just on nappies for the two children. The pension doesnt meet the needs of that child and it doesnt address the specific needs to provide for them.

Launceston Participant, Hearing the Voices

With arthritis you need a warm house: thats extra heating and extra wood and on a pension this is too hard.

Burnie Participant, Hearing the Voices

We go into Burnie three or four times a week. Fuel is a huge thingWhen we had Rosie in hospital for three weeks it cost us over $2,000 just with fuel.

Forgotten Families

All of the families interviewed in Anglicare Tasmanias 2007 research described difficulties in managing on their incomes. Families were cutting back on expenditure like insurance, food, clothing and heating. They had delayed paying bills or negotiated repayment arrangements with creditors. Several families had gone into debt to meet their basic needs and to pay for disability-related services.

At the moment I am stuck in an extremely bad cycle of debt. I have put the rent on credit cards, paid the therapists with credit cards. I am about to have to go bankrupt I think. Its been really hard in the last six weeks where Ive diminished all my savings to pay off the reminder of the speech pathology and the remainder of the ABA therapists that I hired last year. Its a very strange position to be in where you have no money to go and buy essentials like food.

People with a disability have been found to be more likely to experience:

Unemployment, low income, and lower socio-economic status;

Additional anxiety and hardship with the cost of food due to specific dietary requirements. Such foods may be more expensive to procure, and higher levels of waste may result from particular circumstances, with associated extra costs to the household.

Difficulties in meeting regular housing costs, such as rates, insurance, mortgage repayments, and maintenance costs. Additional costs were incurred by some, through body corporate fees or the need to modify their homes for a disability.

Difficulty paying electricity bills (reported by 40.4% of people on a DSP in the 2009 Anglicare survey of emergency relief clients).

Barriers to accessing transport, despite a range of concessions and benefits being available to them under the Transport Access Scheme. In 2006, only 71.5% of people with a core activity restriction (disability) could easily get to the places needed. The 2009 Anglicare survey of emergency relief clients found that other transport costs, which included public and community transport and taxis, were a problem for 41.0% Disability Support Pension recipients.

A higher risk of developing mental disorder. Nationally, 43% of people with a severe disability were at a higher risk of developing mental disorders than the Australian average of 20%.

The 2009 Anglicare survey also found that households where the participant or someone in their household had had a serious illness in the previous year had experienced greater difficulties with health costs than those with a disability or mental health issue (44.6% with a serious illness had reported a big problem with the cost of prescriptions compared with 38.0% of people with a disability and 32.8% of people with mental illness, while 38.0% of people with a serious illness had reported a big problem with the cost of medical appointments, compared with 30.7% of people with a disability and 24.8% of people with mental illness). Other transport costs were a problem for 43.2% of households where someone had experienced a serious illness.

Seniors (aged 65 years and over)

In 2009, people aged 65 years and over accounted for 15.3% of the Tasmanian population, compared with 13.5% nationally. Population projections indicate that almost one-third (30.2%) of Tasmanias population will be aged 65 years and over by 2041.

The level of weekly expenditure on goods and services for households in which the reference person was aged 65 years and over ($462) was substantially below the Tasmanian state average of $759 for all households. In 2003-04, these households spent disproportionately more per week than the state average on food (20.2% compared with the state average of 17.8%), medical care and health expenses (7.8% compared with 4.8%), and domestic fuel and power (4.7% compared with 3.7%).

Poverty rates nationally were found to be consistently high among the elderly, particularly single elderly people.

Seniors (65 years and over) were less likely to find cost a barrier to seeing a GP. This may largely be due to increased government assistance for older age groups, by way of Pensioner and Health Care Card concessions. They were also less likely to smoke or have a mobile phone. In 2007-08, current smokers accounted for 8.4% of people aged 65 years and over, compared with 37.3% of people aged 18-24 years. The 2009 Anglicare survey found that while 83.7% of participants had a mobile phone, of those that did not, 74.1% were aged 45 years and over.

Households in which the reference person was aged 65 years and over have been found to be more likely to experience the following:

Live in a couple only household or a lone person household.

Own their home outright. Despite Tasmanias ageing population, the proportion of home owners without a mortgage has decreased over time, from 42.0% in 2000-01 to 36.4% in 2007-08. The decline in outright home ownership may, in part, be due to increasing uptake of flexible low-cost financing options which allow households to extend their existing home mortgages for purposes other than the original home purchase.

Have high net wealth and relatively low income. Typically, wealth accumulates with age. There is also a strong correlation between net worth and home ownership, as for many households, their dwelling is their main asset. Households with high net worth are more likely to own their own home with only a small or no mortgage outstanding, and therefore only have low housing costs. However, people who own their own home without a mortgage can experience difficulties in meeting regular costs, such as rates, insurance, and maintenance costs. Additional costs may also be incurred by some, through body corporate fees or the need to modify their homes for a disability.

Have increased frequency of visits to GPs and prescription of medicines as age increases and as the prevalence of chronic health conditions increases.

Be uninsured. With regard to building and contents, non-insurance was found to be associated with retiree households with a mortgage. With regard to private health insurance, in 2007-08, 57.6% of people aged 75 years and over did not have this kind of insurance. Of those Tasmanians without private health insurance, 65.1% cited cost ('cannot afford it/too expensive') as the main reason for not insuring. Compared to other state/territories, Tasmanians were least able to afford private health insurance.

Spend disproportionately more on discretionary spending items such as recreation (12.8%) than the state average of 12.5%.

Aboriginal Tasmanians

A national study has found that Indigenous Australians are at risk of missing out on a range of essential items, including dental care, a substantial daily meal, prescribed medications, a decent and secure home, school activities and outings for children, and a hobby or leisure activity for children .

Aboriginal Tasmanians have been identified as having lower incomes than non-Aboriginal Tasmanians and being at greater risk of financial stress. In 2008, 31.0% of Tasmanian Aboriginal households were unable to raise emergency money, while 17.9% ran out of cash for basic living expenses.

Aboriginal people have been found to be more likely to experience the following:

Food insecurity, including missing meals due to shortage of money.

Difficulties with utilities bills, electricity disconnections (and often not in receipt of an electricity concession even if eligible) and being unable to heat their home.

Have their phone disconnected.

The cost of wood as a problem for their household.

Be renting their dwelling, living in public housing and over-represented in all categories of the homeless population.

Transport disadvantage in 2002, only 78.0% of Tasmanian Aboriginal people aged 15 years and over reported that they could easily get to places needed).

Participate in gambling activities.

Culturally and Linguistically Diverse Tasmanians

The 2006 Census found that 3% of Tasmanians speak a language other than English at home. It is recognised nationally that refugees and people of non-English speaking background face financial hardship and financial stress as a result of poor access to the employment market. There is also data to suggest that people from Asian and other non-western countries are more likely to be uninsured for buildings and contents.

There are bills to pay, electricity, house rent and when you look at these things you find that you are only left with maybe $20 for the fortnight. It is not enough money. These are some of the things that are really hard.

Young man from Northern Africa, living in Hobart

The problem for me, my house is very cold and the floor [has] no carpet. Very cold. The children are sick every day in winter. Money $420 for rent a fortnight. Very cold...it is not enough heating and it cost me a lot of money to buy the gas.

Woman from North Africa, living in Hobart

The Refugee Council of Australia has noted that lack of financial resources combined with a lack of familiarity with living costs and budgeting can result in new entrants experiencing severe poverty in their first years in Australia. A 2007 Anglicare report on the settlement experiences of refugees highlighted a number of issues relating to cost of living risk:

93% of participants surveyed were dependent on government benefits and allowances as their main source of income.

Budgetary items most commonly cited as causing financial difficulties were food, electricity, medicines and nappies and formula.

Transport problems limited shopping options and being able to find savings from buying in bulk.

High rental costs were putting pressure on household budgets (even after using financial counselling services, some participants remained in financial stress).

Poor quality housing (including properties that were dirty, damp, leaking, had no heating or malfunctioning wood heaters, no hot water and stoves that did not work) was a significant problem.

As a group, refugees have few or no assets or possessions, low income levels and few networks of support. In spite of this some refuges find they are required to find a substantial proportion of their bond and rent in advance.

A recent Sudanese community forum noted:

Community members sacrifice food and other bills to pay urgent bills.

There seems to be a 50/50 split between the use of Aurora Pay As You Go (APAYG) electricity and quarterly bills and there is concern that APAYG is more expensive than quarterly bills.

Many community members pay regular (monthly) amounts to stop the shock of large quarterly bills.

The three main cost of living stressors, in order of priority, are the increasing cost of rent, electricity and groceries.

Covert discrimination can add to the difficulty of finding affordable and appropriate accommodation.

Places

People who live in rural areas significant distances from major population centres, urban fringe areas and areas of high disadvantage, may disproportionately suffer the impacts of cost of living increases on the basis of where they live. This is especially likely to be the case for people living on low incomes.

Broad-acre public housing estates, traditionally located at significant distances from major population centres, can isolate residents from essential services, and reduce their ability to access education, employment and recreation opportunities. These expanding urban fringe areas have seen population growth outstrip the development of adequate infrastructure, such as regular public transport services. They are characterised by high population growth rates, higher proportions of young people (aged 18 years and under), higher unemployment and larger proportions of families with children compared to urban and rural areas. These areas face high demand for travel to the major urban centres for school, work and services.

Key issues for people living in each of areas of location disadvantage include the absence of services and the cost of transport which combine to make a significant impact on costs of living across the board.

Areas of low socio-economic status

In 2006, the ABS Socio-economic Indexes for Areas (SEIFA) Index of Relative Socio-economic Disadvantage (IRSD) revealed that Tasmania had the highest proportion (31.9%) of the population living in areas that fell into the most disadvantaged socio-economic quintile after the Northern Territory (32.0%). Nationally, 18.8% of the population lived in the most disadvantaged socio-economic quintile.

Tasmania had five Local Government Areas (LGAs) in the lowest SEIFA IRSD quintile: Brighton, George Town, Break ODay, Tasman and Derwent Valley. These LGAs ranked not only amongst the most disadvantaged areas in the state, but also in the nation.

The following 39 suburbs/towns were in the lowest SEIFA IRSD decile in Tasmania, and ranked as the most disadvantaged areas in the state: Gagebrook, Rocherlea, Clarendon Vale, Shorewell Park, Bridgewater, Pioneer, Ravenswood, Mayfield, Warrane, Mathinna, Goodwood, Waverley, Chigwell, Parattah, Rokeby, East Devonport, Risdon Vale, Waratah, Derby, St Marys, George Town, Railton, Eggs and Bacon Bay, Ouse, Maydena, Acton, Beaconsfield, Nietta, White Beach, Zeehan, Derwent Park, Hillcrest, Wivenhoe, Fingal, Invermay, Avoca, Primrose Sands, New Norfolk and Westerway. These include urban, regional and rural areas.

There is a higher likelihood that people who live in areas with poorer socio-economic conditions experience low income, food insecurity, comparatively poorer health than people from other areas, transport disadvantage, educational disadvantage and poorer standard of housing and access to medical services. They are also more likely to have low educational attainment, which can affect the ability to obtain information on health services and health risk prevention, as well as limit employment choices and opportunities.

The 2007-08 ABS National Health Survey found that approximately one quarter of people living in the most disadvantaged areas had private health insurance, compared with three quarters (75%) of those living in areas of least disadvantage. They were more likely to be covered by government health concession cards or veteran concession cards, reflecting the greater proportion of people receiving pensions and other income support in more disadvantaged areas.

Place: Transport disadvantage

Anglicares 2009 survey of emergency relief clients found that people from rural areas reported higher rates of hardship than people from urban areas on all indicators except those relating to heating the home and telephone disconnections. There has been growing demand for emergency relief services from people in rural communities.

Private vehicle ownership is an almost necessary expense because of the shortage of public transport services. The 2009 Anglicare survey found that rural households experienced greater difficulty with transport costs than urban households: 36.5% of rural households reported car registration costs as a big problem compared with 31.7% of urban households; 30.6% cited problems with car repair/maintenance costs compared with 29.1%; and 29.6% struggled with petrol costs compared with 29.0%.

The 2009 Anglicare emergency relief survey found that transport costs were a problem for a large proportion of participants, especially the cost of owning and running a private car. The cost of vehicle registration was the biggest issue, with 34.1% of participants describing it as a big problem, compared to 30.4% identifying car repairs/maintenance as a big problem and 29.5% indicating that fuel costs were a big problem. Of particular difficulty was finding lump sums of money to meet the costs of registration and/or repairs. The cost of motor vehicle registration and car repairs is one of the common triggers for seeking emergency financial relief or short-term high interest pay-day loans.

Without transport, their access to education, health services, community support services, cheaper retail outlets and even family support was restricted. For many people, however, the only possible transport was their own car. Income levels meant that these cars were rarely serviced, often uninsured and at times unregistered. The cost of registration was prohibitive for many people and a number of participants reported that they had downgraded their cars at registration time to buy a car with a longer registration.

The focus on car based transport has contributed to dispersed settlement patterns and low density housing, and location of affordable housing in urban fringe areas. Some households may consciously decide to trade off lower housing costs for higher transport costs by deciding to locate on the more affordable urban fringe, but are more vulnerable to rising fuel costs as a result.

Place: Food insecurity

A range of community sector reports have identified the cost of food and groceries to be a significant factor in rural and peri-urban communities. The lack of retail outlets, especially the large supermarkets means that residents are often reliant on smaller shops where food and groceries are more expensive. People interviewed described paying two and three times more for items in their local area compared to major centres. Many people found it cheaper to drive long distances to major centres and buy in bulk. This option of course is only available to people who have access to a private vehicle and those without are reliant more expensive local items.

If I go to Launceston and if Ive got the money, I can get three times the amount of groceries I can get here.

East Coast respondent

Some areas in Tasmania are also currently, or at risk of becoming food deserts. The key characteristics of a food desert are a place where:

Access is difficult (eg limited transport options);

Quality of food is low (eg freshness, nutritious, culturally appropriate etc);

Quantity/range is restricted (ie limited choice);

Prices higher than average (affordability).

While Tasmania is positioning itself to be the nations food bowl, we must also acknowledge and respond to the fact that, there are parts of Tasmania that could be referred to as food deserts. Outside of our urban centres, people can find it very difficult to purchase affordable and healthy food. A key point here is that often low income families move to the urban fringe and rural areas of Tasmania because of low rental costs but these are precisely the places where food deserts are more likely.

The local food shop is very expensive. The food is out of date and theres not much choice. I cant afford the supermarket because of the cost of transport.

51 year old woman, currently homeless, Clarence Plains

Even in larger regional centres such as Queenstown, Smithton, Scottsdale and St Helens there are few retail food outlets, a limited range of nutritious food available, and food is significantly more expensive than in the cities.

I never ever thought I would see, in this rich farming community, a farming family with absolutely no food on the table. Ever. It broke my heart.

Circular Head respondent

Communities are struggling with how to respond to this issue. In Rocherlea, the Northern Suburbs Community Centre has initiated distributing vegetable boxes because residents without private transport or with mobility issues find it difficult to get to the nearest supermarket that is four to five kilometres away. In Clarendon Vale, the Neighbourhood Centre has begun a food cooperative. In St Helens people are car pooling to do their shopping in Launceston. In Dorset and Clarence municipalities, the Tasmanian Food Security Council has funded research to examine the availability of affordable and nutritious food.

Place: Access to services

The centralisation of health services, including dental services and bulk billing general practitioners, means that there is a significant cost associated with accessing public health services. Most specialist medical facilities are located in major urban areas, which necessarily require patients to travel some distance to attend appointments and undergo treatment. Many people on the West Coast, the far North West, the East Coast, and the Tasman Peninsula reported having to travel long distances to access the health care services they required.

A trip to the dentist from our town is $20 in petrol, and a day out of school for the kids, thats the closest dentist. Its alright to say go to the dentist its free, but its not.

East Coast respondent

Accessing Centrelink Services can impose significant costs where travel is required.

Low cost travel may be provided for compulsory education where young people are required to travel long distances, but post compulsory education notwithstanding subsidised fares can be expensive where travel to a major centre is required. Areas outside of major centres offer limited options for Years 11 and 12 and in some cases this is restricted to online learning. Families on the West Coast, East Coast and Tasman Peninsula have described the high costs associated with attending major centres to access post year ten education. Travel costs combined with the expense of accommodation are strong disincentives to continuing education past year 10.

Poor infrastructure, including lack of access to reticulated water, lack of public telephones and ATMs and limited internet access can mean additional costs. People in some areas are reliant on purchasing tank water. This can also mean that strategies for reducing costs such as a home vegetable garden are not able to be implemented.

We cant afford to buy the water its $200 to get the water a load so Ive stopped watering the garden so we cant grow vegies.

Louise

Place: Recreation

Households are less likely to be connected to a computer, the internet and/or broadband if they are located outside the metropolitan area.

Recreational facilities and sporting opportunities may be limited or absent for people living in rural, isolated and even urban fringe areas. Those that choose to travel in order to participate, face additional costs.

The Tasmanian Social and Economic Impact Study into Gambling in Tasmania concluded that gambling may act as a substitute for other forms of recreation and culture expenditure, and the rate of growth of recreation expenditure is negatively correlated with the rate of growth in gambling expenditure. It also concluded that households which participate in gambling have higher than expected expenditure on food, non-alcoholic drinks and alcohol.

Social and recreational options? Bingo, drinking at the hotel, the pokies.

West Coast resident

Electronic Gaming Machines (EGMs) account for three-quarters (74.6%) of total player expenditure, and more than half of this (55.5%) is spent in hotels and clubs, compared with 44.5% in casinos. The Gaming Control Act 1993 has set a maximum limit of 3680 EGMs in Tasmania. At 31 March 2011, there were 3654 EGMs in operation.

The greatest concentration of EGMs is in the Local Government Area (LGA) of Hobart (24.4%) due to the location of Wrest Point Casino, followed by Meander Valley (15.4%) due to the location of the Country Club Casino. The greatest concentration of EGMs outside of these areas is in Launceston (10.2%), Glenorchy (7.3%), Devonport (6.2%), Clarence (4.5%) and Central Coast (3.6%). Together, these seven LGAs account for almost three-quarters (71.6%) of EGMs in the state.

An econometric analysis conducted by the Productivity Commission found that nationally there is a concentration of EGMs in lower socio-economic areas. There is also an inverse relationship between income of an area and the total amount spent on EGMs, and a negative and significant relationship between regional median weekly income and annual average expenditure on EGMs.

The Tasmanian Social and Economic Impact Study into Gambling in Tasmania found that the presence of EGMs (excluding casinos) within disadvantaged communities posed an additional risk to these communities, which already report poor health and wellbeing outcomes. An association exists between the location of EGMs, disadvantaged communities and correspondingly high player losses: Glenorchy reported a loss per capita of $660, compared with Hobart which reported a loss of $195 per adult. Machine revenue has been observed to decrease as the level of disadvantage declines.

In 2008-09, the Tasmanian per capita expenditure on EGMs was $343. This was up from $231 in 2006-07. LGAs with the highest rates of EGM expenditure per capita were:

1. West Coast

$782 (Decile 3 on the IRSD)

2. Devonport

$665 (Decile 4 on the IRSD)

3. Glenorchy

$660 (Decile 3 on the IRSD)

4. Waratah/Wynyard$598 (Decile 5 on the IRSD)

5. Burnie

$545 (Decile 4 on the IRSD)

6. George Town

$480 (Decile 1 on the IRSD)

Figure 1 shows that venues with EGMs appear to be more prevalent in areas of socio-economic disadvantage, with machines in disadvantaged areas earning higher per capita revenue.

Figure 1 - Socio Economic Index for Areas (SEIFA): Index of Relative Socio-economic Disadvantage and EGM venue locations

Source: Department of Health and Human Services 2009, Kids Come First Report 2009: Outcomes for children and young people in Tasmania

A 2007 Prevalence Survey commissioned by the Department of Treasury and Finance found that 71.7% of Tasmanian adults surveyed had participated in gambling at least once in the previous year. This was down from 85% in 2005, although this is likely to be due to raffle tickets no longer being included. The most popular gambling activities in 2007 were lotteries (52.3%), scratch tickets (31.8%), EGMs (28.5%), Keno (25.9%), horse racing (16.8%), casino table games (7.0%), and sports (3.9%).

People most likely to participate in gambling activities were job seekers, people with lower educational attainment, and Aboriginal people. People least likely to gamble were students and older people (aged 60 years and over). Men and women were equally likely to gamble.

While the prevalence of problem gambling in Tasmania has decreased, from 1.7% in 2005 to 1.4% in 2007, the number of problem gamblers in Tasmania is likely to be underestimated.

Problem gambling rates were found to be higher in males, in people aged 18-29 years, and in those living in the Greater Hobart area. Problem and moderate risk gamblers were also much more likely to smoke, with 40% of regular gamblers identified in the 2007 Prevalence Survey as being smokers.

A 2007 Survey for the Gambling Support Program of the Department of Health and Human Services (DHHS) conducted by KPMG, entitled Break Even Gambling Services Client Information Report for the period 1 July 2000 to 30 June 2005, highlighted the long term nature of gambling problems. Of 1071 respondents, 15.5% had experienced gambling problems for 10 years or more, 17.7% for between five and 10 years, 31.9% for between two and five years, and 19.5% for between one and two years. Only 15.3% had had problems for less than a year. The report found that almost half (48.0%) of clients responding to the question about the gamblers occupation were unemployed or not in the labour force: 33.8% were not in paid employment, 11.7% were classed as home duties and 2.5% as students. Of 1434 responses, 75.9% cited EGMs in hotels and clubs as the main source of gambling problems, 40.7% cited EGMs in casinos, 15.3% cited TOTE/racing; 7.0% cited Keno, 5.9% cited casino gaming tables, and1.9% cited lotteries.

The 2007 Prevalence Survey found that 3.6% of moderate risk and problem gamblers reported that most of the time or almost always, gambling left no money for rent; 9.1% reported that gambling left no money for bills, and 12.7% that they experienced substantial debt because of gambling.

Responses

The policy framework for Cost of Living outlined in A Cost of Living Strategy for Tasmania highlights examples of responses that can be made by governments, individuals, markets and communities to address cost of living pressures. This section examines a number of responses outlined in the strategy under the broad categories of:

Increasing productivity

Building financial capability

Strengthening consumer protection

Building networks of support, and

Strengthening the safety net

This section provides additional policy detail regarding the range of available information on specific initiatives across these areas. For example, the Concessions discussion, in the strengthening the safety net section contains a detailed inter-jurisdictional comparison of concessions. The responses discussed are illustrative, not exhaustive and provide supplementary information and an evidence base for the recommendations contained in A Cost of Living Strategy for Tasmania.

Increasing productivity

The extent to which individuals and households can draw down on income and other resources affects how well they can respond to cost of living pressures. The main ways people receive an income is either the salary or wages from working, or support payments (pensions, benefits and allowances) from the government, or a combination of wages and support payments.

A recent report by Fair Work Australia on relative living standards and the needs of low-paid employees noted that the incidence of all forms of financial stress declines consistently with higher levels of household employment, and that those in intermittent or insecure employment are the most at risk of poor outcomes. Workforce participation, as well as contributing to overall productivity and living standards, is important for enabling people to generate the income that pays for their costs of living.

However, not everyone is able to work, or work at a level that provides a sustainable income, and for this reason the Commonwealth Governments provision of income support payments is a crucial social institution. As noted in the Henry Tax Review, the primary focus must be to provide a minimum adequate level of income to people who are unable to support themselves through work or their savings.

The intersections between the income support and the personal taxation systems are particularly relevant, in that the ways in which these combine can create perverse outcomes, such as disincentives to work.

The design of the income support system, including amounts of payments and means test withdrawal rates, should take into account how the income support system and the personal income tax system together affect incentives to work and save.

Henry Taxation Review

The operation of the tax and transfer system is an important component in determining the amount of disposable income available to individuals and households, some of whom fare much better than others. In this context, the effective marginal tax rate becomes an important consideration for low income households who balance cost of living pressures against the financial rewards of paid employment alongside tax paid and the loss of concessions and other benefits as part of income support payments.

Labour force participation

Increasing Tasmanias long term labour productivity growth is a significant challenge for the Tasmanian Government. A high participation rate can help reduce wages pressure, increase income for individuals and the economy more generally, and reduce the number of individuals who are vulnerable to financial pressures. However, the proportion of Tasmanias working age population either working or actively seeking employment is consistently below the national rate.

Tasmanias ageing population is contributing to the challenge. Just over half of the difference between the Tasmanian and national rates is due to the lower participation of people aged 50 to 64 years. A significant component is also due to lower participation rates for those aged 24 to 34 years (many of whom are involved in home duties or child care).

Cost of living pressures are also contributing to the productivity challenge as a result of people struggling to be effective at work due to financial stresses at home. The cumulative impact of cost of living pressure, particularly when it results in choices to ration food, medication and access to health services, can undermine peoples health such that it results in lower workforce participation and productivity. Almost 14% of the current labour force, including the unemployed, has reduced participation, or non-participation, due to ill health.

In Tasmania, 53.5% of income is derived from wages and salaries compared to 61.5% nationally. As well as having the lowest average wages in Australia, Tasmania has the lowest average number of employed people in the household, which also influences household income.

Low-wage employees cycle between low pay and no pay, and /or enduring lengthy periods in low paid work, and although many low-paid workers are relatively protected by living with higher-paid workers, people who experience intermittent or insecure employment are the most at risk of financial difficulty.

In June 2011 there were 236,900 people employed in Tasmania, of which one third (34.2%) or 81,000 were part-time employees. This was the highest proportion of part-time employees of any state or territory. Half of all employed females (51.9%) were working on a part-time basis whereas 18.7% of all employed males were working part-time.

Many part-time workers have no desire to work additional hours. They enjoy the flexibility and work/life balance that part-time work offers. However, there are others who want, and are available to work more hours than they currently have. At September 2010, 9.0% of employed people in Tasmania were part-time workers who would prefer more hours. By not working as many hours as they would like, they may be subject to financial stress, psychological distress and reduced life satisfaction. Underemployment in Tasmania has increased over recent years and is higher in Tasmania than any other state or territory.

While employment generally boosts the capacity of individuals and households to manage their cost of living pressures, unemployment affects not only the level of income, but also other economic resources that help people meet their cost of living. For example, recent research from the UK suggests that problem debt is less about peoples ability to manage money and more to do with the availability and quality of employment.

Over the last 10 years, unemployment in Tasmania has been falling, and in June 2011 was at 5.6%. The reduction in unemployment has been accompanied by a substantial decrease in long-term unemployment in recent years, although the long-term unemployed still make up a large proportion of Tasmanias total unemployed. The long term unemployed are particularly impacted by cost of living pressures due to the effects of prolonged lack of income, loss of skills, experience and self-confidence which compounds over time and affects their ability to obtain work.

Unemployment impacts not only on individuals but also on their families. Tasmania has the highest proportion of children living in jobless families of all states and territories, with 21.6% of all children under 15 years of age living in jobless families. Rates of joblessness are higher for sole parent families, particularly those headed by a female parent and where the youngest child is under 5 years. The older the children, the more likely sole parents are to be employed, which may indicate lack of child care support as a barrier. Persistent joblessness in sole parent households is also higher.

Communities in transition

The distribution of jobs in Tasmania means there are individuals, families and communities for whom joblessness is increasingly an issue. This is particularly the case in communities where industries are in decline and have traditionally employed people in the area. A recent example is the changes occurring in the forest industry. These changes are impacting on businesses and workers and leading to loss of work as well as greater variability in available work.

Although some workers have skills and education levels that let them move into employment in other sectors, other workers are less able to do this due to limited education and formal skills. The skill of the working age population is a key factor in determining workforce participation, and Tasmania has a skill base which is lower than the national average. Foundation skills for social and economic participation life and work skills are developed from early childhood throughout the school years. Investment in the early years and in our education system is critical as a prevention and early intervention strategy for building cost of living capacity in Tasmania.

Tasmanias productivity could be vastly increased with a focus on job opportunities for long term unemployed Tasmanians as well as more secure work for people struggling on low incomes due to part-time or casual employment, as well as people who are under employed.

The recent Anglicare cost of living report highlights that a strategic response to cost of living would include support for skills training, employment assistance programs and targeted employment generation for people with disabilities, the long-term unemployed and people with mental illness or at risk of racial discrimination. These programs would also emphasise working with employers to overcome barriers to employment and support for people to stay in work.

Building financial capability

Financial capability has a quite specific meaning in an economics sense, referring to peoples financial literacy and capacity to access the financial products and educational tools they need to achieve financial stability and build and maintain assets. People with low financial capability experience a range of difficulties associated with meeting cost of living pressures, including limited access to credit, insurance and financial information.

Some approaches to financial capability focus on the importance of individual knowledge of and choice in financial matters and how this affects the way people cope with cost of living pressures and financial stress. These approaches emphasise financial literacy as the way to develop peoples confidence, knowledge and skills for managing products and services and being better able to overcome or avoid financial difficulties.

Financial literacy

The 2008 ANZ Survey of Adult Financial Literacy in Australia found that Australian adults generally are financially literate but there are certain groups who face particular challenges as well as certain areas of money management and products that are not as well understood as they should be. It found that people with low levels of financial literacy were less aware of their rights and responsibilities, for example in relation to insurance policies and making insurance claims, repaying consumer debts, and making complaints against a bank or other financial institution. They were also more at risk of financial loss due to lower use of insurance and being less likely to obtain financial information that would help them purchase less expensive financial products.

Australians are dealing with an increasingly complex financial system, and the National Financial Literacy Strategy notes that this has made financial literacy a necessary and critical skill for consumers. It notes there are significant disparities in knowledge and understanding of financial matters across different groups in the community. Although most people are confident and knowledgeable about simple and familiar topics such as budgeting, they are less knowledgeable about topics such as saving for retirement. The four core elements of the National Financial Literacy Strategy include:

Using educational pathways to build financial literacy;

Providing Australians with trusted and independent information, tools and ongoing support;

Developing additional innovative solutions to drive improved financial wellbeing and behavioural change; and

Building effective partnerships between those involved in financial literacy work.

Financial counselling is another mechanism through which to assist people who have less confidence or expertise to negotiate what is often seen as a complex and daunting financial services system. Through financial counselling, people receive advice and assistance in negotiating with creditors, doing something about outstanding bills or debt recovery, developing budgeting and financial management skills, and exploring financial alternatives. Financial counsellors can also advocate with government or non-government organisations on behalf of vulnerable consumers. Both the Commonwealth and State Governments provide funding for financial counselling services. Even so, there is evidence that waiting times for a first appointment are increasing as more people find themselves less able to manage cost of living pressures in the current economic environment.

The ANZ paper, Understanding Personal Debt and Financial Difficulty in Australia presents the findings of a qualitative study into why some people fall into financial difficulty and what role financial literacy plays in that outcome. The research shows that people from a broad range of employment, education, occupation and household income levels were affected by financial difficulty. However, compared with those who felt in control of their finances, low income households (under $15 000 a year) were significantly more likely to experience financial difficulty. In many cases, events outside of peoples control occurred that had the effect of either decreasing income or increasing expenses or both, such as job loss, poor health, divorce and relationship breakdown and small business struggle or failure.

Studies have shown that poor families tend to keep track of their expenditures and there is nothing systematically wrong in the way they manage their finance, when compared with wealthier families. What is different is that for the low-income and disadvantaged groups, the consequences of a lack of knowledge or a mistake in planning can be devastating. Their weaker access to financial safety nets and the fact they are more likely to be financially excluded, mean that they can face long-lasting negative effects in a financial crisis. It is this higher vulnerability that should be the drive behind financial education of the most financially disadvantaged rather than preconceptions about their attitude towards money management.

Recent economic downturns have affected consumer confidence and increased peoples concern about ongoing capacity to meet cost of living pressures. During the Tasmania Together 10-Year Review, Tasmanians said that rising costs for everyday essentials were increasingly a challenge where they had previously thought they were managing.

There is a sense that many people have given up and are simply surviving; they are weary and resigned to ever increasing costs and a bleak future.

All felt somewhat defeated and commented that there is nothing we can do, we just have to deal with what weve got.

Community consultation report

There is a view that if people made responsible budget choices, they would be able to manage the cost of living pressures they face. However, the evidence shows that people on low incomes are in fact very good managers of their money. Often the issues are that their income level is inadequate, they cannot get appropriate financial information and/or they cannot access affordable financial products.

Access to affordable financial products

Due to the central role of income and assets in preventing financial vulnerability, priority should be given to improving access and availability of fair and basic financial services and products, such as loans, insurance and basic bank accounts.

Table 2 demonstrates the irrationality of market logic in relation to banking products for low income households. It sets out some of the inclusion strategies that can assist households to afford financial products and build resilience and assets to better cope with cost of living risk.

Table 2 Financial inclusion strategies

Market

Market failure

Inclusion strategy

Financial advice

Too expensive, biased, not marketed (Centrelink)

Free and independent financial information and mentoring

Low cost bank accounts

Previously unavailable; now not sufficiently marketed

Proactive marketing by banks to relevant markets

Savings accounts

Too little income; no confidence in saving

Matched savings schemes widely available

Loans

Cannot afford interest repayments

No Interest Loans widely available

No default fee bank accounts

Available for high bank balance and sometimes very low income

Corporate social responsibility to ensure fairness

Retirement savings/ super

Multiple systemic causes especially for women

Government regulation and subsidisation

Debt consolidation

Exploitative, expensive

More financial counselling; more regulation

Source: Landvogt, K. 2008. Financial capability: a view from the margins of the money system, Brotherhood of St Laurence Lunchtime Seminar. Accessed at http://www.bsl.org.au/pdfs/Kathy_Landvogt_Financial_capability_18Sept08.pdf

One of the resources at the disposal of Tasmanians in terms of managing finances is credit. The cost of credit however is also one example of the cumulative impact of living on a low income. People on low incomes are often excluded from mainstream financial products and as a result are dependent on fringe financial services which come at a higher price. The impact of financing high cost loans on a low income can be people becoming stuck in a debt cycle that leads to serious financial problems.

Financial exclusion occurs when certain groups have limited access to credit, savings, insurance and other financial products. People on low incomes are most likely to experience financial exclusion. They either go without essential items or use fringe financial services such as pawnbrokers, loan sharks and payday lenders.

Nationally, it has been estimated that around 15.6% of the adult population were either fully or partially excluded from financial services - including a basic transaction account, a low rate credit card and basic general insurance.

Burkett and Sheehan have identified five dimensions of financial exclusion as outlined in Table 3.

Table 3 Five As of financial exclusion

Dimensions of exclusion

Explanation

Availability

The kind of service needed does not exist at all or does not exist in an individuals locality.

Access

A lack of access to particular kinds of financial services because of structural factors or issues that an individual faces (such as credit record, language or physical disabilities).

Awareness

A lack of awareness of fair products or a lack of capacity to engage with services. This could be as a result of inadequate promotion of basic, fair products by financial service providers.

Appropriateness

Products are not appropriate to an individuals needs (such as small, regular repayments on loans for someone on a limited budget) or their cultural backgrounds (for example, there is a lack of systems in Australia to meet the needs of the Islamic community who have particular beliefs about the charging of interest).

Affordability

An inability to afford existing products (for instance, few insurance products exist for people living on low incomes) or the cost structures means that people with few financial resources are charged more.

In Australia less than 1 per cent of people have no basic financial products, primarily because the government pays Centrelink and other benefits through bank accounts. This is in contrast to the USA and UK where many do not have a bank account. However research has found that 6 per cent of adults in Australia could be said to be excluded. Nationally it has been estimated 15.6% of the adult population are either fully or partially excluded from financial services - including a basic transaction account, a low rate credit card and basic general insurance, the average annual cost of which has been calculated at $1740. The Centre for Social Impact has identified one of the strongest causes of financial exclusion as the absence of basic affordable products - banks do not generally offer small personal loans to low income consumers. Those who are excluded from mainstream financial services either go without essential items or use fringe financial services such as pawnbrokers and payday lenders. Payday loans are small short term loans that are available even to people with poor credit history. Lenders compensate for additional costs involved in administering small, short-term loans by charging higher prices, for example, high interest rates and charges which have a significant impact on already low incomes and can leave people spiralling into further debt. Fringe banking service, including payday lenders have proliferated in Australia over recent years, exploiting the lack of mainstream providers in the market for small amount loans. In many cases, for low income earns requiring a small loan, they provide their only viable option.

The most common reasons customers give for requesting a payday loan are car registration and insurance, urgent car repairs, rental bond, fridge or washing machine replacement or repair, funeral and medical costs, dental expenses, to avoid bank and credit card fees, multiple utility bills coinciding and traffic or parking fines and legal expenses. These priorities are reflected in Tasmania, with the additional of examples of people seeking loans for rental payments.

In a 2002 survey of emergency relief services clients, 15% of respondents identified loan costs to be a problem or very big problem for their household. In a similar 2008 survey, 24.7% of participants said that loan repayments were a big problem and 42.7% said that they were either a problem or a very big problem. Loan repayments were the reason for 15% of respondents seeking assistance.

When providers do advance small amounts of credit to lower income households it is often in the form of credit cards. Credit is used for different purposes by different income groups, with lower income earners more likely to use credit to overcome financial problems while higher income earners use it to enhance their lifestyles. Over 80% of households own a credit card. For many on low incomes, credit cards are a debt trap, designed to encourage immediate expenditure without provision for a clear and realistic payment arrangement. Lenders indirectly influence an individuals path to financial difficulty the majority of people in the qualitative study with credit cards had received unsolicited credit limit increase offers. In many cases offers were accepted where pre-existing financial issues existed. Acceptance was also underpinned by a perception that it must be okay because the lender had sent it out.

The Brotherhood of St Laurence, in conjunction with the ANZ Bank, has identified that the key factors leading to financial exclusion include the risk assessment policies and conditions attached to financial products, the pricing of these products and that the marketing of financial products is often not designed to meet the needs of people on low incomes. People are unable to meet lending criteria because their income is too low, they do not have sufficient assets or appropriate security or they are not in paid work.

Research has identified education levels can have an impact on exclusion from more complex financial products such as insurance and that people do not bother applying for financial products as they believe they would be refused. The experience of discrimination in the mainstream financial system often leads to a sense that these services are not for us. Customers accessing the fringe lending market often cite the friendly approach by service providers as an advantage.

The Brotherhood of St Laurence, in conjunction with the National Australia Bank, has identified access to small bank loans (under $5000) as a problem for low income earners. Offering low or no-fee transaction accounts, removing ATM fees, setting cheaper interest rates and enabling customers to switch providers without penalty can help address financial transactions that unfairly impact marginalised Australians.

To address this issue, there is a need for lenders to market their products responsibly and to be responsive and appropriately flexible in dealing with customers in fin