Low income Australians are paying a ‘poverty premium’ for basic services, Anglicare says

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Low-income households face higher living costs than other families because they are financially penalised for being unable to buy groceries in bulk, pay costs annually instead of monthly, or upgrade to a more fuel-efficient car.

Anglicare Australia says those financial penalties accumulate and see low income households paying more for the same basic essentials over time, which pushes them even further behind.

It says those extra costs are a “poverty premium” that punish Australians already earning less.

In a new report, Poverty Premium: The high cost of poverty in Australia, Anglicare has identified six major areas of the economy where low income households are forced to pay what is essentially a poverty tax.

The areas include: food and groceries, transport, energy, credit and finance, data and communications, and home and car insurance.

“It costs more to be poor,” the report says.

“People living on low-incomes often pay more for the same basic goods and essential services than people on higher incomes. There are so many examples,” it says.

Groceries, energy bills, and phone data

Anglicare’s researchers have calculated the additional costs people on low incomes routinely experience.

Hidden costs can arise when someone is unable to pay more up-front, when someone is forced to make small payments to keep control of their finances, from someone’s geographic location and an inability to shop around, and a reliance on older vehicles or appliances.

The researchers say examples of the “poverty premium” include people on low incomes spending:

  • 93 per cent more on groceries
  • 20 per cent more on energy
  • 23 per cent more on public transport
  • 45 per cent more on credit and loans
  • 10 per cent more on fuel for less efficient cars
  • 61 per cent more on insurance, and;
  • 142 per cent more on phone data

“We note these are not the only areas where the poverty premium can arise,” the paper says.

“Yet all these areas can be considered essential services, because they are services that people will continue to consumer even if the prices rise. They are things people need.”

An example of poverty premiums: food and groceries

Anglicare says poverty premiums can be found everywhere, and they have different impacts on people’s lives.

For example, food is one of the areas given a lower priority by people on low incomes when making tough budgetary decisions.

That’s because food is not a fixed cost like rent, or directly deducted and subject to penalties for late payments like energy and phone bills.

Anglicare says more than two million Australian households have run out of food in the last year due to limited finances, sometimes skipping meals or going whole days without eating, and the lack of money to buy food in bulk has exacerbated the problem.

“Buying in bulk is often much cheaper per unit price,” the report says.

“However, bulk buying requires people to have the funds available to spend more up-front, and the refrigerator or cupboard space to store goods they won’t use immediately.

“For people in insecure housing situations, overcrowded properties or share houses, space is at a premium. Bulk buying might also require access to a car to transport large items home.”

Anglicare says for people unable to buy in bulk, and who purchase smaller amounts more regularly, a poverty premium applies on every purchase.

In its report, it compares the prices of some common household items available at Coles supermarkets that households regularly purchase, and found the poverty premium for families unable to buy in bulk ranged from 22 per cent to 93 per cent.

See below.

The ‘cost of being poor’

Anglicare says the idea of the poverty premium is not new.

It says the concept was first coined in the 1960s to explain how people living in poverty can pay more for essential goods and services than people not in poverty, and it’s also been identified as the “poverty penalty” or “the cost of being poor”.

But no matter the name, Anglicare says the reliance on market forces works against people on low incomes because the market assumes that people have the time and capability to shop around, when that’s not always the case.

“People balancing caring responsibilities with casual low-waged jobs rarely have the time to drive to multiple supermarkets to get the best price or call multiple providers to get the best deal,” the paper says.

“The energy market is complicated for everyone, let alone those who are digitally excluded.

“The market repeatedly fails to deliver for people on low incomes, and the poverty premium is the result,” it says.

It says the South Australian Council of Social Service in 2017 identified 10 examples of poverty premiums in Australia, and Anglicare has drawn from that work to calculate its premiums in this report.

How to combat the problem: raise JobSeeker

Anglicare’s executive director, Kasy Chambers, says the most effective thing politicians can do to lessen the impact of poverty premiums is to lift Australians out of poverty by raising Centrelink payments above the poverty line.

“JobSeeker and related payments are now so low that they trap people in poverty,” the report says.

“The weekly rate of JobSeeker is barely above half of the Henderson poverty line.

“During the pandemic, it was proven that raising government support payments can effectively eliminate poverty. Research, including by Anglicare Australia, documented the profound impact this had on poverty levels and on people’s lives.

“People were able to afford fresh food, fill their prescriptions, pay their bills on time, and secure decent homes,” it says.

Anglicare says the minimum wage should also become a living wage, there should be far more solar and energy efficiency programs available for public and community housing, and more telecommunications companies should be required to offer products specifically for low income customers, among other things.

“For decades, media and political commentary has told us that if people on low income just made better choices, or stopped wasting their money, poverty would not be such an issue,” the report says.

“Yet we see in this report that people on low incomes have to be more savvy, more prudent, more resilient than other people,” it says.

By business reporter Gareth Hutchens (Original ABC Article)