The growing cost of living poorly

The Christmas season represents that time of year when Australians of all faiths and persuasions have an opportunity to reflect upon their lives and the lives of others in our society. While for many it is a celebration - of friends and family, of the year gone by and the one before us - spare a thought for the growing number of Australians who found themselves with few of the means to celebrate.

While the “poverty war” has raged during 2005 over the question of whether income inequality and poverty are growing in Australia, social welfare agencies such as Jesuit Social Services continue to experience growing demand for emergency relief to help people cover their bills and afford to bring Christmas cheer to their households.

Whichever way you measure it, persistent poverty is a problem in this country.

While Australians at every income level may have enjoyed some of the benefits of economic growth over the course of the past decade, some new research has shed some light on why so many families continue to grow poorer.

On the December 19, the Saint Vincent de Paul Society released a Social Policy Issues paper, Winners and Losers: The Story of Costs, which investigates why some households seem to be faring so poorly in a growing economy. The conclusion offered is that while the inflation rate has been generally low over the past decade and a half, the official measure obscures that rising costs disproportionately effect lower-income households.

The problem with the official measure of inflation, the Consumer Price Index (CPI), is that it is only a rough guide. As the Australian Bureau of Statistics (ABS) explains, the reference population for the CPI is all private households in the eight major capital cities - which represents about 64 per cent of Australian private households. That all non-metro households are excluded, in addition to the hundreds of thousands of low-income Australians residing in caravan parks, boarding houses, jails and on university campuses, has left the measure blind to how escalating costs affect poor people.

Research conducted by Jesuit Social Services in 2004, culminating in the release of a postcode-level look at social disadvantage in New South Wales and Victoria entitled Community Adversity and Resilience, discovered that the large majority of disadvantaged communities are located in rural areas and on the fringes of our major cities. For example, of the 30 most disadvantaged post codes in Victoria, 23 of them are rural and only 7 can be classified as urban. In many cases, it is the absence of appropriate and affordable services, such as health, education and childcare that compounds the disadvantage of these communities. The rationalisation of public infrastructure and gradual switch to “user pays” services has disproportionately affected these rural and urban fringe communities.

St Vincent de Paul’s research has shown that the particular goods and services upon which lower-income families rely have grown significantly more expensive than the CPI tends to imply. For example, the cost of public transport and renting privately, both of which are far more likely to be used by low-income families, have risen far higher over the past 15 years than the cost of private motoring and owning a house.

Their research indicates that the cost of living for unemployed benefit recipients who are reliant on the rental market and the public transport system have experienced cost increases in the order of 27.8 per cent greater than the underlying inflation rate. At the same time, the cost of living for aged and disability support pensioners who are reliant on the rental market and the public transport system have experienced cost increases in the order of 30 per cent greater than the underlying inflation rate.

It’s not just  unemployed, aged pensioners and disabled people who are feeling the brunt of the growing cost of living. In fact, every household that spends a majority of its income on essential items like educating their children, providing healthcare, childcare and travelling on public transport is growing relatively poorer in comparison to households which can afford life’s luxuries.

At the heart of the problem, the Consumer Price Index tends to mask the price rises for services. While the cost of consumables such as household fittings, imported shoes, luxury cars and overseas travel have all come tumbling down, relative to average inflation since 1990, the cost of goods families cannot do without have soared.

A quick look at the Australian Bureau of Statistics illustrates this point. The costs of healthcare services, for example, are 222 per cent more expensive in Melbourne than they were in 1990, which is some 185 per cent above the official rate of inflation (CPI). While the costs of optical products and pharmaceuticals have fallen relative to inflation, hospital and medical services have risen some 208 per cent above the inflation rate.