Falling down a financial rabbit hole

Inflation, or the rising costs of living, is putting thousands of Aussies, including an unprecedented number of Central Coast residents, under immense financial hardship, making it impossible for many to make ends meet.

 

Typically, in Australia, a salary ranging between $80,000 to $90,000 was previously touted to live comfortably - covering necessities such as house rent, mortgage repayments, utilities, transportation, healthcare, food, and leisure activities. Yet sadly, even those individuals earning what used to be an above average salary are now joining the ranks of the new middle class poor.

1 May 2024

ALAN HAYES

 

YOU don't have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change? Rising prices have an obvious negative impact on our financial health. But they can also have a profound effect on our physical and mental wellbeing, which is often overlooked.

 

Yet, while many Australians face losing their home, right now, or simply sacrifice putting food on the table just to make mortgage payments or pay the rent, they’re being told to ‘rest easy’. Why? Because there’s a wealth of cost of living inquiries — more than half a dozen, in fact, some of which are due to report in coming months.

 

The Senate’s cost of living committee is getting close to wrapping up its work, but before members finish their final report, due this month, there was one last witness some would like to call: the Australian Competition and Consumer Commission (ACCC).

 

The Grapevine can reveal that some committee members were keen to call the consumer watchdog to give evidence about its own probe into supermarkets, which has yet to hold a hearing and is due to finish next February.

 

What is known from the ACCC’s inquiry is that many younger Australians and lower income households are spending up to one-quarter of their net income on groceries and that households, to reduce their grocery bills, are shopping around for savings, substituting fresh food with frozen, and cutting back on non-essential items.

 

Some people have also reported skipping meals or sacrificing meals to feed children properly.

 

ACCC Deputy Chair Mick Keogh said, about their survey, that when “taking into account the demographics of those who have already responded, we particularly wanted to hear from more adults under the age of 30, people for whom English is not their first language, and people in rural and regional parts of Australia.

 

“Having responses that reflect the whole community’s experience will help us to identify the right issues that need to be explored more deeply in our inquiry."

 

Findings from the consumer survey will be included as part of the ACCC’s interim report, due by the end of August, by which time the Senate’s cost of living committee will have concluded.

 

Housing, education, and health costs have risen the fastest so far in 2024. Price rises for rent, new home purchases by owner-occupiers, education, insurance, fuel and tobacco have each contributed to the rising cost of living in Australia.

 

So, while Aussies on the Central Coast and elsewhere get squeezed by profiteering corporations – food, electricity, and insurance – who all cry poor, they continue ensure that their online consultants read from the ‘Big Book of Excuses’ as to why they’re ‘financially screwing you’. It’s all about ‘big bucks’ for them, guaranteeing that you fall down the ‘financial rabbit hole’ in to penury. No wonder 50% of Australians have reported cost-of-living and personal debt distress beyond normal levels in the March 2024 quarter. This is an increase on the past three (46%;+4pp), 12 (46%;+4pp) and 18 (40%;+10pp) months respectively.

 

You can also wonder why the greedy corporations are still allowed to ‘jackboot’ their way into big profits, while everyday Aussies continue to pay the price. The stench of profiteering permeates the air, seeping into almost every Aussie household.

 

If you believe that loyalty to a company will put more dollars back in your pocket, then you are wrong! Loyalty is no longer a prerequisite for companies like supermarkets, energy providers and insurers – they’ll squeeze existing customers for their last dollar while offering massive discounts to new consumers. This in itself has a negative impact on the community – stress levels rise, while too much time is spent trying to find a better deal, which will no doubt become a familiar ‘merry-go-round’ each successive year.

 

Little wonder there’s a massive spike in mental distress? People are continually having to jump through the ‘circus hoop’ in an ever difficult conflict to just make ends meet.

 

So, what is the government doing to help?

 

When it comes to groceries, the Albanese government wants to make our supermarkets as competitive as they can be so Australians get the best prices possible. Yet, as reported by the Grapevine on 10 April 2024, reining in the power of Coles, Woolworths and their smaller supermarket rivals is likely to push consumer prices up, not down.

 

On a local level, Federal Member for Robertson, Dr Gordon Reid has been proactive in helping his constituents find a solution by holding a ‘Cost-of-Living’ forum, with more forums planned for the future, to assist people experiencing financial difficulties. It was facilitated in partnership with the State Member for Gosford, Liesl Tesch.

 

The Albanese government says that 13.6 million Australian taxpayers will receive a tax cut from 1 July 2024, and that the tax cuts will also create opportunities for people to take on more hours of work and keep more of what they earn.

 

The Government plans to cut the bottom tax rate, which applies to incomes below $45,000, from 19 per cent to 16 per cent. That will give a tax cut of up to $804 a year to all tax-filers, including those on higher incomes. The 32.5 per cent tax rate reduces to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).

 

At the same time, the Government said they would reduce the Stage 3 tax cuts for higher earners.

 

Stage three was meant to abolish the 37% marginal tax bracket completely and lower the 32.5% marginal tax rate to 30%. It would have also raised the threshold for the top 45% marginal tax rate from $180,000 to $200,000, meaning everyone earning between $45,000 and $200,000 would pay the same 30% tax rate. But this didn't happen!

 

The tax brackets are now:

 

• $0 - 18,200; Tax free

 

• $18,201 - $45,000; Marginal tax rate 16%

 

• $45,001 - $135,000; Marginal tax rate 30%

 

• $135,001 - $190,000; Marginal tax rate 37%

 

• $190,001 - $200,000 plus; Marginal tax rate 45%

 

Will the new tax cuts cause inflation? Assuming the budget cost of the cuts remains at $20.7bn in the 2024-25 year – rising to $323.6bn over a decade – the effect on inflation is likely to be minimal.

 

Now this all good to help ease the current ‘cost-of-living’ burden, but what about the long term? The problem is that Australia’s tax scales are not indexed to wages growth or inflation. That means that as our incomes rise, including just to compensate for inflation, Australians pay a higher proportion of their income in tax.

 

Even if wage growth doesn’t push a taxpayer into a higher tax bracket, most taxpayers will still earn a bigger share of their income in their highest bracket, so end up paying more tax.

 

Over time, this so-called ‘bracket creep’ increases average tax rates across the income distribution as wages grow.

 

Yet, while the share of tax-filers facing a higher average tax rate each year under the new tax plan will grow over time – from about the top 10 per cent today to around 22 per cent by 2033-34 – the accumulated savings over time means many are likely to still be better off over the next decade - but not by much.

 

But will these savings have any noticeable impact for those people still trying to make ends meet? Unlikely! - Those individuals on the lower end of the income scale will be receiving around $16 a week - a pittance compared to the rising cost-of-living, especially so with the rising cost of rent, groceries and utilities. Many people, like my son, have had to also accept a 25% rental increase or end up living on the street.

 

It won't get much better for those people paying off a mortgage, having to feed a family and balance the household budget. Most insurance premiums - car and home - have seen increases this year already of 40 per cent, let alone the ever-increasing expenses of just trying to survive.

 

One Grapevine reader, whose husband's income is within the 37 percent tax bracket, said that the tax saving they will now get, will only just about  cover the increase in their monthly grocery bill - they don't squander money, but just purchase the necessities. Like many Aussies earning what is considered to be a high income - mortgage payments, healthcare insurance, car insurance and essential living costs quickly erode it - the tax cut still doesn't leave them with wriggle room for the unexpected.

 

What can people do on the home-front to ease the ‘cost-of-living’ burden and to try and avoid falling down a ‘financial rabbit hole’?

 

Take charge at the supermarket by buying the cheaper generic brands; buy in bulk by forming a buying group to make groceries more affordable and have one of the group, on a rotation basis, make a trip to the Sydney markets to buy even cheaper.

 

Forget about loyalty to those companies, who just expect you to pay-up and shut-up every year when their bill arrives, and, seriously, start growing your own food – not just vegetables but fruit and berries, as well. You don’t need a lot of space – you’d be surprised at just how much food can be grown on a home unit balcony or up a trellis.

 

Let’s not forget sprouting seeds in a jar – cheap, nutritious and a great variety to provide a healthy and nutritious supplement to summer meals and winter soups.

 

Most important, forget about the array of household products that promise to clean, disinfect and murder almost everything that flies or crawls – make you own natural, safe and inexpensive household products. All you need is bicarbonate of soda, white vinegar and an essential oil, such as Tea Tree oil or Lavender oil, both of which have antiseptic, antifungal and antibacterial properties.

 

As an author of 38 books on natural living over my lifetime, I’ve made it a personal mission to share my knowledge and encourage people to live the sustainable and natural life that my wife and I live. To give you a start, the following two natural household products will take care of those cleaning and disinfecting chores and save you money.

 

Disinfectant Spray

 

The following disinfectant spray can be used in many different ways to help protect your home against airborne bacteria and viruses. When used in an air-spray it can be used throughout the house but is particularly effective in the bathroom and toilet, and in helping to kill germs in a room when someone is ill.

 

It can also be used as a disinfectant spray to wipe over kitchen and bathroom surfaces where many germs lurk.

 

To make your disinfectant spray, dissolve 40 drops (2 millilitres) of either Lavender pure essential or Tea Tree pure essential oil (do not use oils containing alcohol) in 10 millilitres of methylated spirits. Add this mixture to a pump-spray bottle containing 500 millilitres of water, shake to mix, and use on a fine mist setting whenever needed.

 

All Purpose Cleaner

 

This all-purpose cleaner is suitable for most cleaning chores around the home - it will strip floor wax, dissolve dirt, grease and resinous substances, and clean silver, glass, sinks, bathrooms and drainpipes, stoves, microwave ovens, refrigerators and other whitegoods.

 

Mix thoroughly together 4-litres of hot water, 100-millilitres of *household ammonia, 100-millilitres of white vinegar and 200-grams of bicarbonate soda. Store the liquid cleaner in a tightly sealed bottle until needed.

 

(*Household ammonia contains about 3.7% ammonia and when diluted further, as in this cleaner, it is not environmentally dangerous. Once dispersed it converts quickly in to neutral salts.)