Introduction by Croakey: The ‘cost of living crisis’ has become an entrenched framing of political debate in Australia and other countries, affecting political and policy outcomes.
But is it a potentially unhelpful framing?
Would there be better policy outcomes for health if we focused instead on addressing the ‘inequality crisis’?
Marie McInerney investigates these questions, and more, ahead of the 2024-2025 Federal Budget (and please join us in using #HealthBudget2024).
Marie McInerney writes:
Treasurer Jim Chalmers confirmed this week there will be cost‑of‑living support in this month’s 2024-25 Federal Budget, but has rejected urgent calls from leading economists, and health and social welfare advocates to boost JobSeeker and Youth Allowance.
“The Budget will focus on other ways to provide help for people who are doing it especially tough,” he said on Wednesday.
According to two new major economic reports and several health and welfare experts, the Treasurer’s “other ways” to help those who are doing it tough should include immediate boosts to income support and remote area allowances – which are currently not linked to the consumer price index (CPI), unlike the Age Pension.
Leading Indigenous academic Professor Bronwyn Fredericks is concerned the headlines and discussions leading up to the Federal Budget about the ‘cost of living crisis’ do not address equity as they should, to differentiate people for whom rising costs are a brake on elective spending versus those who struggle to put food on the table or participate in work and study.
“I don’t in any way want to pit one group against another, but there is a big difference between not being able to afford rising elite private school fees and not being able to pay for basic food items or pay the rent to put a roof over your head,” said Fredericks, who is Deputy Vice-Chancellor (Indigenous Engagement) at University of Queensland and also Co-Chair of Croakey Health Media.
Fredericks said it was also important to know that some groups and communities have experienced a cost of living crisis for years, even for decades in the case of remote Aboriginal communities struggling to afford food.
“There’s a lot of pressure being put now on supermarkets in metropolitan area for their profit-taking, but there have been issues with remote area food access and security for decades that has not been afforded that sort of attention,” she said.
The issue of food insecurity in remote communities has been dramatically outlined recently by Francis Markham, a Research Fellow at the ANU’s Centre for Aboriginal Economic Policy Research, in an article titled, The Poor Pay More: Why the Remote Area Allowance Needs Urgent Reform.
Markham has estimated that remote Indigenous communities face 39 percent higher prices for basic goods (food and drink, transport, electricity, tobacco products and other goods and services) than those in major urban centres.
That’s due to the combination of small populations and geographical remoteness, which limits buying power and increases freight costs, he said.
“It is untenable that the most economically disadvantaged groups within Australia continue to bear the highest costs for food and other essential goods,” he wrote.
Markham’s report was cited in the latest report of the high profile Economic Inclusion Advisory Committee (see more on its findings and recommendations below), which also calls for changes to the rate and indexation of the Remote Area Allowance.
The Committee notes the Allowance was last increased in July 2000 and points to the huge gap that grows for non-indexed payments amid rising inflation.
It quotes Markham’s calculation that if the Remote Area Allowance had been indexed to inflation since 1984, then its current single rate of $18.20 per fortnight would be $52.50 – if it had kept pace with the Age Pension, it would be $78.50.
It begs the question: cost of living crisis or inequality crisis?
Who gets to be heard in the cost of living crisis?
Dr Lilon Bandler – based at the Matthew Talbot Hostel Primary Healthcare Clinic – offered the following points when asked by Croakey for her thoughts on the cost of living narrative.
In framing the cost of living crisis, more focus should be on those already struggling and financially insecure, but they are rarely given, or have, a voice, she told Croakey.
Housing and accommodation security is a major determinant of the quality of people’s lives. “There is nothing in the [Budget] plans I’ve heard so far to reassure me that my patients will be more likely to get secure accommodation in the next five years,” Bandler said.
Talk of “social and affordable housing” completely fails those who are already homeless or experience accommodation insecurity, and who will only ever aspire to live in public housing.
The obscene profiteering of the supermarkets in the face of daily challenges for the impoverished is distressing when patients describe choosing between medications and food, Bandler told Croakey.
Bandler said Medicare for community primary healthcare (GPs) should be completely abandoned and GPs provided with a salary commensurate with the income of other specialists, for example dermatologists. “Already under-served people in the community cannot pay to see GPs,” she said.
The extraordinary overpayment of government funding to private education providers also fails to acknowledge the need for those who are impoverished – who have a history of trauma or ongoing learning challenges – who need to be provided with an appropriate, resource rich education, in order to achieve their educational aspirations, she said.
Bandler concludes: “Each of these could be an article in their own right!”
Excessive wealth crisis
For Professor of Health Equity Fran Baum – at the University of Adelaide’s Stretton Institute – the real crisis we are facing “is an excessive wealth crisis”.
She calls for a better distribution of the profits from mining to offset the cost of living crisis – “higher tax rates for rich people”.
Baum pointed to the work of the Poverty and Inequality Partnership, led by the Australian Council of Social Service (ACOSS) and UNSW, which recently reported that in 2023 there were 159 billionaires in Australia with average wealth of $3.2 billion each.
“Their total wealth was $503 billion – so that 3.2 percent of all household wealth was held by 0.0007 percent of all adults,” the Partnership reported in its latest publication: Inequality in Australia 2024: Who is affected and how?
Baum also highlighted the graph below, published in an Australian Parliament policy brief on the extent of inequality and disadvantage in Australia, showing how uneven household worth is: “So there is a cost of living crisis for some and this is largely a class issue,” she told Croakey.
According to the Inequality in Australia 2024 report, the average household wealth of Australia’s highest 10 percent is growing much faster over the past 20 years, from $2.8 million to $5.2 million (an 84 percent increase), than the lowest 60 percent, rising from $222,000 to $343,000 (a 55 percent per cent increase).
Nearly half (45 percent) of the increase in household wealth since 2003 went to the highest 10 percent (those with at least $2.6 million) and half of this increase to wealthy older people (over 64 years).
“These disturbing figures show that people with the lowest income and least wealth are being left behind by the increasing inequality in Australia,” ACOSS CEO Dr Cassandra Goldie said last month when the report was released.
“Without major reform to housing, superannuation tax breaks and income support, the divide between those with the most and those with the least will continue to deepen,” she said.
She recommended a raise in the rate of JobSeeker to at least the pension rate of $80 a day as “the fastest and most efficient way to support those worst affected by income inequality”.
ACOSS also points to the role of income support in addressing other government priorities, including addressing alarming rates of violence against women.
The Inequality in Australia 2024 report recommended the following:
- Increase the lowest income support payments including JobSeeker Payment and Youth Allowance.
- Restore full employment, by tackling inflation directly through policies such as price curbs (e.g. for rents and energy prices), reduced user charges for essential government-funded services such as health and aged care, and strengthening competition in private markets dominated by a few large businesses, reducing reliance on the blunt instrument of high interest rates.
- Reduce tax concessions for investment income (such as the reduced tax rate for capital gains) that primarily benefit those with high income.
- Reform the tax treatment of housing to discourage speculative investment that inflates home prices (such as curbing negative gearing, reducing Capital Gains Tax concessions and extending state land taxes to owner-occupied dwellings)
- Remove inequities in the tax treatment of superannuation contributions and extend the 15 percent tax on superannuation investment income tax to post-retirement accounts, which are currently tax-free.
- Increase minimum hourly wages above inflation.
Boosting economic inclusion
Welfare and health experts are also urging the Federal Government to back many similar recommendations of the Economic Inclusion Advisory Committee 2024 in its latest report, released this week.
The Committee was set up by the Federal Government in 2022 as a result of negotiations by independent ACT Senator David Pocock.
It provides advice ahead of every Federal Budget on boosting economic inclusion and tackling disadvantage, including policy settings, systems and structures, and the adequacy, effectiveness and sustainability of income support payments.
Notably, the advice is non-binding, but the Committee includes Treasury Secretary Dr Steven Kennedy and Department of Social Services Secretary Ray Griggs. It is chaired by former Labor Minister Jenny Macklin, and includes academics, the business sector, Indigenous representation, and members from health and social welfare groups.
This year it draws the Federal Government’s attention to five priority recommendations to address the needs of the most economically excluded Australians:
- Substantially increase JobSeeker and related working age payments and improve the indexation arrangements for those payments.
- Increase the rate of Commonwealth Rent Assistance.
- Create a new employment services system to underpin the goal of full employment and ensure a more positive focus on supporting Australians seeking work.
- Implement a national early childhood development system that is available to every child, beginning with abolishing the Activity Test for the Child Care Subsidy to guarantee all children access to a minimum three days of high-quality early childhood education and care (ECEC).
- Renew the culture and practice of the social security system to support economic inclusion and wellbeing. The committee noted that it heard “over and again of the cycles of often meaningless, wasteful and at times soul-destroying activities that people are forced to undertake to satisfy (payment) activation requirements, often at the expense of actual job searching”.
The Committee also urges the Government to commit substantial investment to address need in public housing and homelessness for Aboriginal and Torres Strait Islander peoples, including maintenance and upgrades, community infrastructure and the Aboriginal and Torres Strait Islander housing sector.
The Brotherhood of St. Laurence (BSL) said many of the Committee’s recommendations – including the projected investment in Australia’s “failing employment services system” – do not require additional funding, simply a better and more compassionate use of existing resources.
“Some recommendations are about stopping existing poor practices and changing conditions within the social security system that can cause harm,” it said in a statement.
Government cutting lives short
These are not only issues for Australia, of course.
Global expert on health inequalities and Director of the United Kingdom Institute of Health Equity (IHE), Professor Sir Michael Marmot, has written to UK party leaders and MPs, warning that a new IHE report confirms that government policies are “cutting people’s lives short”.
The report, England’s Widening Health Gap: Local Places Falling Behind, highlights how the north-south health gap has increased, people’s health has deteriorated, and health inequalities have widened, he said in a statement.
“Put simply, Britain is a poor, sick country, getting sicker, with a few rich and healthy people; the results of a dismal failure of central government policies since 2010,” he wrote in the letter.
“Not only is health the foremost concern of your local constituents, communities and businesses, health is also an indicator of how well a nation is performing. Unfortunately, Britain is performing poorly.”
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