Australia’s cost-of-living crisis is hitting young people and low-income earners hard – but boomers are doing alright

 In Home News Section, Uncategorized

The thing about a crisis is that it is, by nature, wild. You can try to manage it, but there’s no guarantee of a clear pathway out.

Australia’s grappling with stubbornly high inflation which has ushered in a cost-of-living crisis.

Other countries are ahead of us in dealing with the pressures persistently high inflation puts on families and economies.

And the message we’re getting is that it’s liable to surprise and flare up.

The Treasurer Jim Chalmers has said ad nauseam that inflation is likely to be “higher than we’d like, for longer than we’d like”.

But it may also worsen. And the official data shows most Australians are not well placed to manage that.

A cautionary tale

Global inflationary pressures related to the pandemic and war in Ukraine began building in mid-2021, and accelerated due to Russia’s invasion of Ukraine in 2022.

Consumers in the UK and the US felt the financial pressure of higher petrol, as well as gas and electricity prices. Food prices also increased.

Fast forward to today and, despite an aggressive interest rate tightening cycle from both the US Federal Reserve and the Bank of England, inflationary pressures remain a clear and present danger.

This week, Britain’s Office for National Statistics released inflation data showing British consumers are still copping it in the hip pocket.

Electricity and gas prices contributed 1.01 percentage points to annual inflation.

Food and non-alcoholic beverage prices continued to rise in April and the annual inflation rate of food and non-alcoholic beverages came in at 19.1 per cent in the year to April 2023.

Crucially, core CPI (excluding energy, food, alcohol and tobacco) rose by 6.8 per cent in the 12 months to April 2023, up from 6.2 per cent in March, which is the highest rate since March 1992.

Chancellor of the Exchequer Jeremy Hunt made it clear Britain’s inflation fight is not over.

“These numbers show there is absolutely no room for complacency in the battle against inflation,” he said. “Food price inflation is still worryingly high.

“That’s why we’ve had food producers in, farmers in, supermarkets in, to talk about what we can do to reduce the pressure there.

Inflation, Hunt added, “is causing enormous pressure on families up and down the country”.

Australia is in the firing line

Inflation began building in Australia in late 2021. The Reserve Bank insisted it would need to see stronger wages growth before lifting interest rates but that was a misunderstanding of the inflationary environment.

Inflation had arrived and it was growing.

Again, fast forward to today, and despite one of the most aggressive interest rate tightening cycles in the Reserve Bank’s history, inflationary pressures remain.

New monthly inflation data will be published on Wednesday. It’s possible it will show inflationary pressures are easing, but it’s also likely there will be pockets of higher inflation – especially regarding food and electricity prices.

It may be part of the reason the ANZ bank believes interest rates are set to remain in “restrictive” territory, as economists say, for quite some time.

That is: Get used to interest rates being high enough to make you think twice about a purchase.

It’s gone too far, hasn’t it?

But what if that purchase – the one you need to think twice about – is crucial to your health and wellbeing?

According to new research from Plan International, almost two-thirds of young women are now struggling to afford period products.

Why? Because real incomes are going backwards due to low wage growth and stubbornly high inflation.

Indeed, the Commonwealth Bank’s internal data shows wages growth is now decelerating — contrary to official lines from the Reserve Bank and Treasury that it’s picking up.

It’s clear the real world effects of this personal budget squeeze are physically hurting younger Australians.

The Plan International Australia April survey revealed 57 per cent of menstruating adults born after 1980 reported it was more difficult to pay for pads, tampons and reusable menstrual health items in 2022 than in previous years.

Many Australians have had enough

To recap, cost-of-living pressures remain intense for many Australians. Despite aggressively fighting inflation with higher interest rates, pockets of inflation – especially around items many of us need – continue to build.

It’s causing harm.

The message from the authorities has been “hang in there” because many households are still well placed to absorb the ongoing financial shocks.

But a chart from the Bureau of Statistics shows this idea to be false.

[Chart: Deposits by age in billion dollars]

It shows younger Australians are not well placed to deal with job insecurity, low wage growth, and soaring rental prices.

“The growth in deposits and savings has largely been a story for the older cohort of society,” says CBA’s Head of Australian Economics Gareth Aird.

“The savings have largely accrued to those 55 and over. And with higher interest rates people with deposits are now earning a higher return on those deposits.”

The “pain” of higher rates, Aird says, is largely being felt by those aged 25-45 — “either recent entrants into the housing market or renters given rents have risen swiftly over the past year.”

Recent Australian Council of Social Service surveys of people on low incomes have revealed the extreme measures they are taking to restrict their energy usage to lower bills.

Roughly 65 per cent are cutting back on heating and cooling, 59 per cent are limiting the use of lights and almost 60 per cent are going without essentials like food and medication to afford bills.

“We know people are getting sick and dying because they have to choose between heating and eating,” says ACOSS CEO Cassandra Goldie.

Has Australia has lost its way?

Stubbornly high inflation, soaring rents, a housing crisis, stubbornly low wages growth and a surge in migration — that even took the Reserve Bank by surprise — are all adding to the financial pressure millions of households are under.

It’s also recently led to physical and mental health problems, because the line that we’re sold by the authorities — that we’re well positioned, financially, to take the hits – is inaccurate for the vast majority under the age of 55.

The Indian Prime Minister’s visit this week was a refreshing chance for this reporter to see what happens when economic policies work.

Preeti Upadhyay runs the Pre-Kinder Academy in Harris Park, in Sydney’s West.

“I would love to show Modi what I have achieved,” she told The Drum.

“You know, coming in as a migrant, and having a business of my own, in such a short time, yes – I would love for him to know that.”

It’s an economic success story, and she was a delight to interview.

The Reserve Bank governor will appear before a Senate Economics Committee on Wednesday.

If you’re reading this column, Governor Lowe, can you please speak your mind on what needs to happen – at a policy level – to materially lower or ease cost-of-living pressures for millions of households?

Or maybe even what we need to thrive?

[Cost of living: Ask us a question or share your story]

(Original ABC Article)