Talking points

• The state’s community sector says growing numbers of households are being squeezed beyond their financial limits.
• Data from the Australian Bureau of Statistics shows Melbourne fuel prices shot up by 29.2 per cent in 2021.
• During the year, beef and veal prices in Melbourne jumped 7.1 per cent, while vegetable prices increased by 6.1 per cent.
• The numbers of people asking Anglicare for help has risen three-fold in the past two years.

The Andrews government is considering borrowing or taxing more to tackle cost-of-living pressures amid warnings the situation is becoming desperate for Victoria’s lowest income earners struggling to cope with soaring prices.

A number of options are on the table for the May 3 state budget and for the campaign leading up to the November 26 election, targeting housing affordability, power prices and education costs.

Shoppers are already feeling a lift in prices across the nation’s supermarkets.Credit:Michele Mossop

Measures could include financial support for concession cardholders struggling with power bills and transport costs; further efforts to help first home buyers enter the market; and support to encourage people to enter TAFE courses and training.

The state’s community sector says growing numbers of households are being squeezed beyond their financial limits by rising prices for petrol, housing, food and other essentials.

Treasurer Tim Pallas told The Age the state government understood the pressure faced by households and was working on measures to drive down the cost of living for Victorians.

He suggested the government would not shy away from adding more debt or raising more revenue from taxes and other sources to cover the cost of extra support for cash-strapped households, as it had done over the course of the COVID-19 pandemic.

“We’ve used the state’s balance sheet to support families and households over the past two years and we will continue to examine what further support we can provide,” Mr Pallas said.

State debt is already high in historic terms. Net debt as a proportion of the state economy is set to rise to the highest level since the early 1970s, while the annual interest expense as a proportion of government revenue is set to rise to the highest level since the recession of the 1990s, and that assumes those interest rates remain low for the foreseeable future.

It follows figures from the Australian Bureau of Statistics showing Melbourne automotive fuel prices shot up by 29.2 per cent in 2021. It was the biggest jump since 1990 and that was before factoring in the impact the war in Ukraine has had on global oil prices.

Costs for other essentials have also soared. During the year, beef and veal prices in Melbourne jumped 7.1 per cent, while vegetable prices increased by 6.1 per cent. Property rates increased 3.4 per cent, health costs by 3.2 per cent, insurance costs by 3.5 per cent and vet bills by 5.8 per cent.

Victorian Treasurer Tim Pallas says the government will continue to examine what further support it can provide to struggling households.Credit:Luis Ascui

However, with the state economy still emerging from the deep pandemic-related slump, the inflation surge in Victoria has been comparatively mild. Nationally, inflation was 3.5 per cent in 2021.

In Melbourne, the overall cost of living increased by 2.5 per cent in annual terms, the lowest of the states, with the average cost of living up by 3.1 per cent in Sydney and by 4.3 per cent in Brisbane.

Mr Pallas said he expected Victoria to follow other states, with prices set to continue rising.

“I see that as being a delay issue,” he said. “I don’t anticipate that Victoria will be substantially different from the nation.”

RMIT economics Professor David Hayward said on Friday that Mr Pallas had few options for providing cost of living relief because of the division of responsibilities between the states and the Commonwealth.

“It’s tough, it’s really tough,” he said.

“I suspect that whatever they’re going to announce is only going to be fairly small, and presumably very targeted.

“Whatever they do is going to come at the expense of the budget, that’s the problem, and the budget is already deeply in the red.”

Reductions or moratoria on state-levied fees, fines and charges might offer an option to Mr Pallas, Professor Hayward suggested.

“Fees and fines is one way that they could make it better because fees and fines are a flat rate and then it’s where you get a hit on low-income people unnecessarily. It’s the flat-rate charges … that are going to have the best impact in distributional terms, so maybe that’s the way to go.”

Warnings from the social services sector that something must be done are growing louder, with Victorian Council of Social Service president Emma King saying petrol price spikes were hurting people on benefits and low-income workers, particularly in the outer suburbs and regions.

“Many people who are living in the outer suburbs, growth corridors or in regional areas, they rely on cars, they don’t have public transport nearby,” Ms King said.

“So they have to be able to fill their tank if they’re going to get their kids to school or go to the doctor or if they do have work and they’re going to be able to get to work, so this has a huge impact on them.

“At the same time, I’ve got the price of food just going through the roof.”

Anglicare Victoria chief executive Paul McDonald said the charity was seeing low-income families being “pincered” in recent weeks by rising housing costs, utilities and fuel, with the spike in petrol and diesel costs flowing through very quickly into families asking for help.

Mr McDonald said Anglicare had seen the numbers of people asking for help rising three-fold in the past two years.

“We’ve got 26 emergency relief centres and 70 per cent of the people coming to them have less than $100 in the bank,” he said.

“It’s no longer the occasional visit to the emergency relief centre. That is now a regular part of their monthly budgeting … it shows how dependent people are on charity to get through.”

Both Anglicare and VCOSS said the most important thing any level of government could do was to permanently raise the rate of JobSeeker and other government benefits.

Federal Treasurer Josh Frydenberg said on Friday his coming budget would contain some relief for families from cost-of-living pressures, but flagged the measures would be targeted and temporary.

”We’ve already taken steps to provide around $30 billion in tax relief since the start of COVID and to reduce childcare costs as well, with more than $10 billion being invested,” he said.

“We’ll see further targeted, proportionate, temporary measures in this budget to address cost-of-living pressures for families and help them during this challenging time.”

One of the options for new public spending is a one-off payment to those in need to deal with higher petrol bills and other price hikes from the surge in oil prices after Russia invaded Ukraine.

With David Crowe

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