Australians with children are increasingly at risk of living in poverty and being unable to pay their bills, despite record government spending designed to help the poor.
Professor Roger Wilkins, an economist from the University of Melbourne, has published a graphic showing average household incomes among the poor, after tax, have fallen below $51,000 for the first time since mid-2009.
These average household incomes are also below the $51,212 poverty threshold level, working out at $984.85 a week for a couple with one child.
A working couple with two children would need to earn $59,820 a year – or $1,150.39 a week – to barely stay afloat financially.
This suggests a significant number of low-income couples with children are living below the Henderson Poverty Line – based on how much disposable income is needed to pay for housing and the bills.
Household incomes were inflated during Covid when the government temporarily doubled unemployment benefits and gave out JobKeeper subsidies to workers during lockdowns.
But they have since fallen with wages, until recently lagging behind inflation.
‘This is an extraordinary picture,’ Professor Wilkins said.
Australians with children at increasingly at risk of being unable to pay their bills despite a surge in government spending designed to help the poor. Pictured is a Victorian mother
Professor Roger Wilkins, an economist from the University of Melbourne , has published a graphic showing average household incomes after tax have fallen below $51,000 for the first time since mid-2009
‘The post-Covid decline has us back at an average income level not seen since 2009.’
The poverty calculations covered the June quarter before the government’s $300 electricity rebates kicked in.
They helped bring headline inflation in September down to a three-year low of 2.8 per cent, which is between the Reserve Bank of Australia’s 2 to 3 per cent target.
But the RBA is expecting inflation to surge again next year to 3.7 per cent after those federal government rebates expire, following the election.
The Reserve Bank regards those rebates as only a temporary inflation fix, with Governor Michele Bullock earlier this month pointing out government spending was higher than they had anticipated.
‘I should emphasise here it’s not just the federal governments, it’s the state governments as well,’ she said.
‘So in the fact that we’ve had to revise up our public demand forecasts it’s reflected the fact that there’s been more announcements and more things going on.
‘The way we forecast government spending is to take what governments have announced in effect.’
The Reserve Bank regards electricity rebates as only a temporary inflation fix, with Governor Michele Bullock (pictured) this month pointing out government spending was higher than they had anticipated
The Reserve Bank’s November meeting minutes, released on Tuesday, noted Australians consumers were cutting back on spending but this was ‘partly offset by stronger growth in public demand’.
AMP chief economist Shane Oliver said government spending, at a state and federal level, was now growing by 4 per cent a year – more than double the 1.5 per cent pace the RBA was forecasting in 2023.
More government spending than forecast is adding to inflation.
‘It’s debatable how big a contributor it is but it is a contributor,’ Dr Oliver said.
‘It’s a function of a whole bunch of things – spending on the NDIS, state governments trying to get themselves re-elected, cost-of-living expenses – governments subsidising electricity bills.
‘It’s all led to record levels of public spending around the country and that’s meant that interest rates have had to stay higher for longer.’
This means the Reserve Bank is unlikely to cut interest rates until next year, making life harder for both renters and borrowers.
‘It’s made the Reserve Bank’s job harder than would otherwise have been the case,’ Dr Oliver said.
‘When the Reserve Bank says ‘we think there’s excess demand in the economy’ – supply’s not keeping up with demand – they don’t care where the demand’s coming from whether it’s coming from the public sector or households with consumption or businesses investing.’
Coalition senators in a cost-of-living inquiry recommended National Cabinet be reconvened so the federal, state and territory governments could devise ways of reducing government spending to bring down inflation.
