Could you imagine having to choose between keeping the lights on or buying fresh fruit and vegies?
That’s exactly what a growing number of Australian households are being forced to do.
Energy prices have doubled, and in some cases quadrupled, over the past 5 to 10 years, and households, already close to the poverty line, are struggling.
Real life debt distress
The Salvation Army put me in touch with Patricia Young. She’s a single mum living in the western Sydney suburb of Merrylands.
She’s done the right thing by her family by getting a stable job. Unfortunately, that stable job comes with the minimum wage, and that wage hasn’t risen in years.
What it means is that every month, or every quarter, when the bills come in, her budget is squeezed further and further. Her energy bills have risen so much that she’s now having to choose being watching TV, or keeping the lights on, and buying fruit and vegies.
Her son is in his final year of school, and wants to study at TAFE next year, so I guess the choices she makes are important.
Her message to policy makers is pretty straight forward: she says something needs to be done about rising gas and electricity bills.
There is help
While policy makers wrestle with the energy crisis, there is a workable short-term solution for folks swimming in debt.
Over 12 months ago now I stumbled across the National Debt Helpline. It’s a government-funded service. Trained financial counsellors take calls from right across the country from anxious and stressed out Australians who can’t pay their bills.
Last month the Helpline took a record number of calls for September. Roughly 14,000 people called in looking for advice on how to pay their gas bill.
People were also worried about other expenses like their credit cards, and rent payments.
The financial counsellors are trained to assist even the most anxious borrowers out of their financial funk. There are payment plans on offer, and general counselling as well.
Underlying economic headache
So what else can be done? What’s the underlying problem?
Well take Patricia Young for example. I actually think Ms Young might have the problem a little upside down.
There’s no doubt power prices have risen too steeply over the past decade. As mentioned in previous columns, all sides of politics are to blame for this, as well as greedy multinational companies. However, I believe sluggish wage growth is also a big part of this.
Last week the Bureau of Statistics released third quarter inflation data showing the annual pace of price increases throughout the economy at 1.8 per cent. That’s still below the Reserve Bank’s target of between 2 and 3 per cent.
Australia has an inflation problem. Not enough Australians are out there buying goods and services to push prices up. That in turn is leading to a lack of confidence on the part of business, which in turn is leading to less secure employment, and lower wage growth (workers currently have little to no bargaining power).
It’s a negative feedback look that I’ve written about before, and will probably need to write about again.
Inflation should also be lifting as more Australians find jobs. Notwithstanding the casualisation of the workforce, over 200,000 full-time jobs have been created this year. But despite rising employment, we’re no closer to seeing the wage price index lift higher, and therefore rising power bills, which – in admittedly small doses – are part of a normal economic cycle, are just that much harder to swallow.
Westpac also warns of “deflationary pressures”. It’s complicated, but the bottom line is that demand in the economy isn’t strong enough to push prices (inflation) higher, and that includes wages.
Unfortunately an alarming number of Australians don’t reach out to the National Debt Helpline, and, instead, seek out payday lenders.
The National Debt Helpline’s spokesperson, Fiona Guthrie, also warned of new entrants into the payday lending market who offere high-cost, short-term loans.
Ms Guthrie said as the number of Australians in debt distress rises, more companies seek to profit from vulnerable people.
Australia is not alone in all of this. The Reserve Bank says that the US, Germany and Japan are all experiencing economic growth, and a jobs ‘boom’, but those positive developments are not coming with inflation or wage increases.
For Australia, the issue is particularly difficult to manage because of rising power bills.
If you’re struggling with rising costs, there is help available, but the reality is many Australians now just need to be a little more thrifty – though that’s not ideal for the economy.
And if after reading this column you still can’t get a handle on what’s happening with inflation, wages, and the economy, take heart… the Reserve Bank describes the whole thing as a bit of a “mystery”.