Low-income Australians are paying much more for essential products and services than average households amid the living cost crisis, a report has found.
While poverty premium has always existed, the report found that the current living cost crisis has exacerbated it.
Specifically, the report found that people on lower incomes had to pay between 10 and 142 percent more for six types of essential products and services.
“These extra costs are a poverty premium, punishing people who are already earning less. We’ve found that people can pay up to one and a half times more for the same service, pushing them even further behind.”
The report pointed out that people on low incomes were likely to experience food insecurity, a situation where they do not have enough food or rely on emergency relief.
Grocery Costs Up
While bulk buying can help reduce grocery costs, financially struggling Australians often cross out this option as they need to pay for expenses with higher priority, such as rent and utility bills.
The report found that grocery costs for Australian families unable to afford bulk buying could increase from 20 to nearly 95 percent, depending on the products.
In addition, rural Australians could pay up to three times more for some necessities than their urban counterpart due to freight costs, limited shelf life of fresh foods, and supermarket monopolies.
Meanwhile, high inflation caused food prices to jump by nearly 10 percent in 2022.
“While prices have now stabilised, they are still much higher than they were pre-COVID,” the report said.
At the same time, people on lower incomes have to bear higher public transport costs as they are often unable to buy tickets in bulk.
The poverty premium for public transport costs was around 23 percent.
Access to credit and finance is also more expensive for low-income people with poor credit history.
As banks and financial institutions are reluctant to lend to such people, they are likely to end up using services with higher interest rates, such as payday loans, adding more to their financial burden.
Moreover, living on low incomes limits people’s ability to shop for a better energy tariff and mobile phone and data package, resulting in a poverty premium of 20 percent and 142 percent, respectively.
Poor people are also more likely to stick with older vehicles that use more petrol, causing them to pay around 10 percent more for fuel than newer vehicle owners.
Ms. Chambers said many people found themselves in debt spirals while others had to skip meals, avoiding medical appointments and insurance, which in turn cost them more down the track.
“People on low incomes did not create Australia’s cost-of-living crisis. They shouldn’t be asked to pay a higher price for it,” she said.
“We need a plan to stop the lowest paid Australians from being pushed deeper into poverty.”
The report put forward a number of recommendations, including raising government support payments, raising the minimum wage, and providing more affordable options for energy and insurance.
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