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Cost of Living in Tasmania
COMPANION REPORT 2 - IMPACTS AND RESPONSES
OCTOBER 2011
Cover image:
Over 5 000 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
INTRODUCTION ............................................................................................. 4
IMPACTS ................................................................................................................. 6
Households ................................................................................................ 8
People ........................................................................................................ 16
Places .......................................................................................................... 24
RESPONSES ....................................................................................................... 32
Increasing productivity ...................................................................... 32
Building financial capability .............................................................. 37
Strengthening consumer protection .......................................... 44
Building networks of support ........................................................ 48
Strengthening the safety net .......................................................... 53
Appendices
Appendix 1 Flanagan, 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 3 Dare, M, Kimber, J and Schirmer, J, 2011 Tasmanian Drought Evaluation Project,
Hobart: University of Tasmania and JS Consulting.
Appendix 4 Community Inclusion Workers, Child and Family Centres Project 2011
Community consultation report for the Social Inclusion Unit, Department of
Premier and Cabinet.
Appendix 5 Council on the Ageing Tasmania, 2011 A sense of belonging: social inclusion
issues for older people in Tasmania, Hobart: COTA Tas.
3
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
1
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 pri ce
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
2
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;
1 The debate about adequate living standards generally occurs with reference to concepts such as a‘ bsolute poverty’ and
‘relative poverty’. Absolute poverty refers to a minimum standard below which no one anywhere in the world should ever
fall and which is the same in all countries and does not change over time. Relative poverty refers to a standard which is
defined in terms of the society in which an individual lives and which therefore differs between countries and over time –
minimum standards can rise and fall if and as a country becomes richer.
http://www.poverty.org.uk/summary/social%20exclusion.shtml
Recent research on poverty in modern Australia (2006 and 2010) has found that the majority of Australians consider the
following items to be essential for a decent life – i.e. that no-one in Australia should have to go without: warm clothes and
bedding, if it’s cold; a substantial meal at least once a day; computer skills; a decent and secure home; a roof and gutters
that do not leak; secure locks on doors and windows; heating in at least one room of the house; furniture in reasonable
condition; a washing machine; a television; up to $500 in savings for an emergency; home contents insurance;
comprehensive motor vehicle insurance; regular social contact with other people; a telephone; presents for family or
friends each year; a week’s holiday away from home each year; medical treatment if needed; able to buy prescribed
medicines; dental treatment if needed; children can participate in school activities and outings; an annual dental check-up
for children; a hobby or leisure activity for children; new schoolbooks and school clothes; a separate bed for each child;
and a separate bedroom for children aged 10 and over. See Saunders, P, and Wong, M, 2009 Still doing it tough: an update
on deprivation and social exclusion among welfare service clients, Sydney: Social Policy Research Centre, p.10; and Saunders,
P, and Wong, M, 2011 Social impact of the Global Financial Crisis, Newsletter No. 108, Sydney: Social Policy Research
Centre, p.6.
2 See Companion Report 1 for further information about the Relative Price Index.
4
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 community’s 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.
5
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.
It’s 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 doesn’t leave
anything for any luxuries.
3
Age Pensioner Couple, North West Coast
Got to constantly juggle bills just to get by.
4
Derwent Valley community consultation
If I get one unexpected bill we will go under and cannot feed ourselves.
5
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
6
unexpected expense . It found that 53% of respondents said they would have difficulty
finding $5 000 to fund an unplanned expense, with regional respondents facing even greater
challenges. It also found t hat 58% of women compared to 48% of men said they would
7
have difficulty raising $5 000 in an emergency .
Anglicare Tasmania recently asked low income Tasmanians about their expenditure on
8
essential services and products, and the decision making that drive s their budget . It found
that the most significant budget strategy employed by households is to prioritise the
9
payment of rent or mortgage costs, followed by electricity and telecommunications . This
entails trade - offs that include food rationing, compro mises 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 stra tegy. 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
3 TasCOSS, 2009 Just scraping by? Conversations with Tasmanians living on low incomes, p.15
4 Community Inclusion Workers, Child and Family Centres Project 2011 Community consultation report for the Social
Inclusion Unit, Department of Premier and Cabinet
5 Ibid
6 Commonwealth Bank & NATSEM, September 2010. Economic Vitality Report, Issue 2.
7 Ibid
8 Flanagan, J, and Flanagan K, 2011 The price of poverty: the cost of living for low income earners, Hobart: Anglicare Tasmania.
9 Ibi d k eeping a phone connected was considered important for emergencies; being available to children, families and
schools, being accessible for casual work, and staying in contact with Cen trelink and community services.
6
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 wouldn’t have money for what I need. So I get what I need and
then I can see if I need extra loaves of bread.
10
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 transit ion 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
11
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 househol ds to meet the cost
pressures associated with th ese kind s of price shocks. The decision by the Commonwealth
Government to provide school uniform a nd 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 can’t afford it, then you have to
borrow and you have to pay it back.
12
North East Tasmania
10
Flanagan and Flanagan 2011
11
TasCOSS , 2009 , p. 30
12
Ibid, p. 31
7
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
13
very good at managing their finances on a day-to-day basis .
14
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
15
afford a replacement.
I pay my rent, my power, and other bills...food come s last, if there isn’t
anything left I don’t eat for days...sometimes I ration so I eat every third day.
16
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
17
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 secur ity and education
18
expenses . Tasmanian households where food insecurity was more likely to have occurred
included sole parent households (9%), those with annual incomes below $40 000 (18% of
13
Landvogt, K, 2008 Money, dignity and inclusion: the role of financial capability. Collingwood: Good Shepherd Youth and
Family Service.
14
Draft Tasmanian Food Security Strategy (unpublished). Food security is defined by the Tasma nian Food Security Council
as “the ability of individuals, households and communities to acquire food that is sufficient, reliable, nutritious, safe,
acceptable and sustainable”. Food insecurity can be a consequence of the cost and availability of food, as well as access to
food supplies. Cost and transport can be critical issues, particularly for people on low incomes. People experiencing food
insecurity may substitute or ration food, compromising on the quality and/or quantity of food. In some cases meals may
be missed altogether, or the support of emergency food relief may be sought.
15
Department of Health and Human Services (DHHS) , 2009 2009 Tasmanian Population Health Survey, selected findings,
Menzies Research Institute.
16
Community Inclusion Worke rs, 2011
17
Department of Health and Human Services (DHHS) 2009, Tasmanian Child Health and Wellbeing Survey: report of survey
findings, North Melbourne: The Social Research Centre, p.28
18
Ibid , p.6
8
those earning less than $20,000 and 14% of those earning from $20 000 to less than
$40 000), 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
19
afford to buy enough food . A shortage of money had resulted in three - quarters (75.1%)
20
of participants going without meals in the previous year , while more than one - third
21
(36.2%) had needed to seek assistance because of the cost of f ood . T he vast majority of
emergency relief clients were people dependent on Government pensions and allowance s ,
22
and m any of these were long - term recipients of social security payments .
A 2009 TasCOSS Report found that people hardest hit by cost of livin g 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
23
to make the money stretch further :
24
“My kids went to school with no lunch today .”
“Food will be the last thing. They’ll make sure that everything else is paid and they’ll
just make do on next to nothing for groceries or access emergency relief to get them
25
by .”
Anglicare’s 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
26
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
27
felt they needed .
Electricity usage
At 1 August 2010, one in three residential customers received an electricity concession to
28
help with the cost of their power bills .
Low income households are more likely to u se Aurora Energy ’s prepaid electricity service,
29
Pay As You Go (APAYG) , which is available to Tasmanians as an alternative to standard
19
Anglicare surveyed 411 clients of emergency relief and financial counselling services from around Tasmania between 20
April and 1 May 2009. Emergency relief clients are people who need to seek assistance from welfare organisations as a
result of financial difficulty. See Flanagan, K, 2009 Hard times: Tasmanians in financial crisis, Anglicare Tasmania, p. 59
20
Flanagan, 2009 pp.50 - 51
21
Op.cit, p. 65
22
Anglicare Australia 2010, In from the edge: state of the family report, October, 2010, p.2
23
TasCOSS 2009 p.35
24
Ibid , p.30
25
Ibid, p.16
26
Flanagan and Flanagan 2 011, pp.22 - 23
27
Ibid, p.40
28
Office of the Tasmanian Economic Regulator (OTTER) , January 2011, Tasmanian energy supply industry performance
report 2009-10, p.179
Holders of a Tasmanian Pensioner Concession Card or Health Care Card received a rebate in the order of $340 per
annum. In addition, the Tasmanian State Government made a one-off payment of $100 to customers eligible for a
concession as at 1 September 2010.
29
Ibid, p.125
The 2009 Anglicare survey of emergency relief clients reported that g roups of participants most likely to be using APAYG
included households with two children (64.3%), people on Parenting Payment Single (59.6%), public housing tenants
(57.5%), single parent households (56.8%), and people aged 24 years and under (56.8%). Groups leas t likely to use
APAYG were people renting privately. See Flanagan, 2009, p.94
9
30
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
31
APAYG customers pay according to time of year and time of use . However, on average
32
APAYG prices are higher than prices for standard tariffs . This is principally due to
differ ences 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
33
network .
In July 2009 the Tasmanian Government guaranteed that APAYG price rises f or concession
holders would align with standard tariff increases, to ensure that low income households
34
would not be further disadvantaged . At 30 June 2010, 40 089 (17%) of residential
customers were using APAYG, of which 17 000 (42%) were concession card holders. This
represented a higher proportion of the total number of customers using APAYG than those
35
on standard tariffs . Although a changed timed tariff structure for electricity charges has
resulted in the pre - payment APAYG option being more expensiv e than quarterly billing for
standard customers, concession card holders were still likely to find APAYG a cheaper
36
option .
R esearch undertaken by Anglicare indicates that not all concession card holders are aware
of the electricity concession and therefo re are not receiving its benefit. Although 90% of the
emergency relief clients surveyed by Anglicare were eligible for electricity concessions, only
half (50.7%) receive d a concession. Of the survey participants who were single parents,
37
66.7% did not rece ive 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, 1 396 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
38 39
cardholders . Most di sconnections 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
40
running out of electricity . Of the 345 respondents who reported that they had run out of
30
APAYG ‘time of use’ pricing is currently unavailable to residential customers on standard tariffs. Pricing is set in four time
blocks during the day which varies between summer and winter, weekdays and weekends. This allows APAYG customers
to shift their electricity usage in order to take advantage of cheaper rates.
31
For a full comparison refer OTTER 2011, pp.183 - 185
32
OTTER , December 2010, 2011 Aurora Pay As You Go price comparison report, pp.2-3
APAYG rates increased 8.8 % from 1 January 2011, which equates to approximately $100 per year for low consumption
customers and $210 per year for high consumption customers. Standard regulated tariffs increased by 8.8% on 1
December 2010
32
. Following the introduction of these higher power prices and a changed timed tariff structure for electricity charges,
paying in advance using the pre - payment APAYG option is likely to prove more expensive than being billed quarterly. It is
estimate d that households could be paying up to $8 a fortnight (or $216 a year) more by continuing to use this pre -
payment option than being charged standard tariffs by Aurora .
33
OTTER, 2010, Annual Report 2009-10, p.31
34
Aurora Energy 2010, Aurora Annual Report 2009-10: customer care and billing system, p.27
35
OTTER , 2011, p.125
36
OTTER, 2010, p.2
37
Flanagan, 2010, pp.104-105
38
OTTER, 2011 p.129
39
OTTER, 2008, Tasmanian energy supply industry performance report 2007-08, p.131
40
Ross, S, and Rintoul , D, 2006 , Pre-payment meter use in Tasmania: consumer view and issues: a research report carried out
for the Tasmanian Council of Social Service by Urbis Keys Young, TasCOSS, Hobart, p.3
10
