Andrew Leigh

INVISIBLE AUSTRALIANS: PUTTING A SPOTLIGHT ON POVERTY

Address to the Anglicare National Congress

Every Thursday and Friday morning, Reverend Doug Newman and his team of volunteers at St Paul’s Church in Spence run the Helping Hand Food Pantry. Since 2007, the pantry has helped people in need access staple foods as well as fresh fruit and vegetables at low cost. Anyone who is struggling to afford their weekly grocery bill can stop by and stock up on food donated by local businesses and community groups. If you stop by one morning, you’ll see all sorts of people using the service. Single men in need of a shave, with their socks showing through the holes in their shoes. Neatly dressed mums with three kids in tow, carefully counting out their grocery budget. Seniors who’ve travelled an hour on the bus to get there and so make their pension stretch a bit further.  

What’s striking about the Helping Hand Food Pantry is not that Reverend Newman and his team turn up rain, hail or shine to run it, or that Canberrans give so generously to support it – although both of these things are very laudable.

What’s really striking about this service is that it operates in a middle class suburb in one of the wealthiest cities in Australia. Even in a prosperous, white-collar place such as Canberra there are people who find it so hard to make ends meet that they rely on the Helping Hand Food Pantry to stretch their finances through the week.  

These people have become almost invisible in our public debates. So today, I want to talk about the ‘invisible people’ in Australian public life – those living in poverty.

After a quarter of a century of economic growth in this country, there’s a sense that poverty isn’t a problem anymore in Australia. Or at least, we have come to believe that being poor is something that happens through catastrophe – like a debilitating accident or an all-encompassing addiction. We’re loath to admit that there are still structural inequalities in our society – inequalities which see some people struggle from their first day to their last simply because of the family they were born into. 

Our complacency about this problem is partly explained by the fact that for many of us, poverty exists in our blind spots. Unlike in North American cities such as Chicago and Los Angeles, our poorest communities ring the edges of our major cities instead of living in the centre. So you and I don’t have to drive through Struggle Street to get to the GPO. The poorest Australians can also be found in regional and remote Australia, in run-down places where industry long ago left town and tourism rarely reaches.   

There’s also the fact that Australia has an extensive and well-targeted social safety net. With pensions, NewStart, family tax benefits and the other forms of support available through our welfare system, some people can’t quite understand how poverty can still be a problem.   

But those of you here today know that poverty is still with us. People who struggle to keep themselves and their families fed, housed and clothed can be found across our cities, in big and small towns, and especially out bush. You work with them, you support them, you minister to them in hard times. 

The theme of this conference is leaving no-one behind. If we are committed to that goal; if we believe all Australians can and should share in this nation’s prosperity, our good work must be backed up by policies and programs which aim to lift Australians out of poverty in a systematic way.

Later on in this speech I’ll have more to say about what some of those interventions might look like. But first I want to spend a few moments bringing the experiences of those living in poverty from our blind spot out into the spotlight.

What do we mean by poverty?

There are a number of different ways to measure poverty. In their work on social and economic disadvantage, the Australian Council of Social Services looks at those who live on half the Australian median income – the so-called ‘poverty line’ approach. This ‘relative poverty’ approach captures the degree of inequality in the bottom half of the population. On this measure, ACOSS estimates that some 2.5 million Australians – more than 1 in 9 of us – currently live in poverty.

Another option is to consider whether households have access to the kinds of goods and services that we, as a community, consider necessary. Like a relative poverty line, this takes into account the fact that while the poorest Australians may be richer than billions of people in India, China and other parts of the world, they are still disadvantaged by the standards that we have here at home. Using this metric, Professor Peter Saunders estimates that about 40 per cent of those with income below the poverty line would be considered seriously disadvantaged, or about 1 million Australians.

In my academic life before entering politics, my particular area of interest was inequality: how the rich have rapidly been pulling away from the rest over the past generation. It gave me cause to look closely at differences between those at the top of the income distribution and those at the bottom. If we’re concerned about poverty, I’ve come to believe that exploring the pressures and challenges faced by those in that bottom quintile is a useful yardstick. Not only must they live on very limited incomes, but they obviously experience deprivation relative to those in higher income brackets.

With around 10 million households in Australia, the bottom fifth comprises about 2 million households. Over 485,000 of these are home to at least one child; more than 166,000 are single-parent households. 

In 2014 dollars, the median household income for these families was $465 a week. That compares with a median of $1514 across all income brackets, and $3,565 for those at the very top. In other words, the top Australian households have incomes that are over 7 times larger than the poorest.  

One of the reasons there is now such a gap between those at the top and those at the bottom is that wages have grown much faster for surgeons and barristers than they have for cleaners and taxi drivers over the past few decades. In my book Battlers and Billionaires, I noted the increase in earnings inequality over the past generation. From 1975 to 2014, real wages for the bottom tenth of workers rose by 23 per cent – from $32,000 to $39,000. The top tenth of earners saw a wages bump of 72 per cent, taking their incomes from $65,000 to $111,000. In percentage terms, wages rose more than three times as fast at the top as at the bottom. In dollar terms, the wage rise at the top was bigger than the total earnings at the bottom!

What is life like at the bottom?

Let’s think for a moment about that bottom group of households, where the total income from all sources – wages, government payments and so on – is $465. I’m sure I don’t need to tell you that getting by on a total income of $465 a week is hard. It amounts to $66 a day. With that money you have to pay rent, buy food, keep the heating on and transport yourself around. In a lot of places across Australia, $66 a day won’t even cover those essentials, let alone more discretionary costs like clothes or school equipment for your kids.  

The ABS Household Expenditure Survey asks people how often they have experienced certain indicators of financial stress in the past 12 months – like being unable to pay their utilities bills on time, having to go without meals or needing to seek financial help from friends and family. One-third of people in the bottom quintile had experienced four or more financial stressors like these in the past 12 months. Less than one thirtieth of people at the top had. The hardship of being unable to afford the basics is compounded by constant stress and worry about the next bill coming in; the next new set of school shoes that must be bought.

A few years ago my fellow inequality researcher Peter Saunders carried out a very moving research project in which he collected the views and experiences of disadvantaged Australians in their own words. One of the participants told him: “I think every one of us in here has forgone, usually it’s food we forgo – it’s the easiest thing to do because we must all pay the rent, that is our first priority.” It’s early in the morning and I’m sure you’re all still full from your breakfast. But just take a moment to imagine having to seriously decide between eating again today and keeping a roof over your head.   

When you’re making those kinds of daily decisions, it’s near impossible to think about planning for the future. Almost one in five Australians have less than $500 set aside in savings for an emergency. That means that if disaster strikes, they can fall badly behind. As another of the participants in Peter Saunders’ project put it: “If something goes wrong it sends you reeling right back. There isn’t any margin for you to try and put anything away, you’re just barely making ends meet…your fridge breaks down, then you can’t pay one of your bills, or three or four of your bills, to replace your fridge because you can’t live without your fridge.”

One skipped bill can kick off a spiral of further financial troubles. For example, here in the ACT it costs over $900 to register your car for a year. If you can’t afford that and end up driving an unregistered auto, the fine is over $450. Similarly, I was catching a tram in Melbourne last month and noticed that if you don’t tap on and off with your Myki – perhaps because you couldn’t afford the fare – you may get slapped with a $75 on-the-spot fine or a $223 infringement notice. If your income is only $66 a day, fines and charges like these are completely beyond your capacity to pay. As I’ll talk about in a minute, that can lead to legal problems which almost uniquely affect those at the bottom of the distribution.

Not having enough money is obviously the biggest problem faced by those at the bottom. But for these Australians, life also features many other hardships that usually go unacknowledged.

For one, the poorest Australians have seven fewer teeth than the rich. You heard that right: if your household income exceeds $80,000, you’re likely to be missing an average of three teeth thanks to tooth decay. But if your household income is below $20,000, you’re likely to be missing ten teeth. That’s an income difference that shows itself with every smile – or not, if your teeth are missing. If you can’t flash the pearly whites, it’s likely to have impacts on your job prospects, your self-esteem, even your romantic prospects.

If that’s not disturbing enough, how about this? The richest fifth of the population can expect to live, on average, six years longer than those in the poorest fifth. That means the wealthiest Australians get to enjoy six more Christmases with their grandchildren than the poor, and six more birthday dinners with friends. We don’t yet know enough about what drives these life expectancy differences, but we do know that health behaviours such as smoking, drinking and exercise don’t completely account for the gap. One worrying strand of research suggests that the stress of poverty may shorten telomeres (molecular caps on chromosomes), thereby reducing a person’s life. 

Those with the lowest incomes are also less likely to be satisfied with their jobs and the neighbourhoods they live in than the top wage earners; much more likely to have experienced pain or been a victim of violence; and be far less engaged with political or civic life.    

So not having enough money goes hand in hand with having worse wellbeing and quality of life. It also brings a rather unique set of problems which wealthier Australians may never face.

One of these is the cost of debt and credit. If you’re a high income earner with a few houses and a Platinum Amex, banks are falling over themselves to offer you good interest rates, rewards and low fees. But low-income borrowers have far fewer choices when it comes to accessing credit.

The Senate Economics Committee is currently investigating credit card interest rates through an inquiry proposed by Bill Shorten and Sam Dastyari. The inquiry has heard that interest rates on a standard bank credit card can be as high as 20 per cent. That means someone who carries credit card debt and can only afford to make the minimum repayments each month – or none at all – is paying a very heavy price for being poor.

Low-income Australians are also more frequent users of so-called payday lenders, which offer small loans over short periods at astronomically high rates of interest. In one study, Dean Wilson looked how much these lenders charged to lend $200 over two weeks. He found the typical cost ranged from $48 to $69 – an annual interest rate of up to 700 per cent.

Instead of buying goods outright, poor consumers often get them on credit through companies such as Radio Rentals. My colleague Doug Cameron has been looking closely at this issue because in 2014, almost half of Radio Rentals’ revenue – some $90 million – came directly from people on Centrelink benefits. Adam Mooney from the not-for-profit lender Good Shepherd notes that these contracts see renters paying two or three times what an item really costs: a $650 fridge may end up costing as much as $1800 by the time interest and fees are factored in.

In all of these cases, researchers are measuring the cost of poverty. Being poor actually makes it more expensive to access credit and adds to the amount of debt low-income Australians are weighed down by.   

Another unique problem for those at the bottom of the distribution is coming into contact with the justice system because of unpaid fines and fees. As I mentioned a moment ago, being unable to afford your car registration or public transport fares can see you slapped with a fine. If those fines mount up, state and territory governments have a range of means at their disposal to collect that money, including what’s known as ‘imprisonment in lieu’ orders. Poor Australians can end up ‘paying off’ their fines by doing time in jail.

The number of imprisonment in lieu orders has been increasing in recent years; in Western Australia, for example, 15 per cent of all new admissions to prison are now for fine default. In that same state, the number of Indigenous Australians going to jail for unpaid fines increased by almost 500 per cent between 2008 and 2013 alone.   

It is bad enough that these Australians should be deprived of their liberty for such trivial civil offences. But as many of you would be all too aware, people who go to jail for any reason often then find themselves trapped in a vicious cycle of diminished opportunity that deepens their disadvantage.

It’s a running joke in my office that one of my staff can’t seem to stop getting parking fines. I think she is up to about nine this year alone. Luckily, having a secure job as a parliamentary staffer means she can afford to pay them – albeit with plenty of grumbling and annoyance. But I really worry about what would happen to someone like her who couldn’t afford those mounting fines. It’s a reminder that even little things can have serious consequences for those whose lives are financially precarious. 

What can we do to lift the bottom?

It is clear from all this that right now we are leaving some Australians behind. Those in the bottom quintile face lives of daily hardship, and struggle with problems which should have no place in a prosperous nation like ours.

Acknowledging this is one thing. Fixing it is quite another.

Here are some of the ways I believe we can improve the lives of the poorest Australians, and maybe even ensure that a rising tide lifts the tugboats as well as the ocean liners.

Firstly, two immediate and urgent changes: containing predatory lending and finding alternatives to ‘imprisonment in lieu’ arrangements. We must keep a much closer eye on sky-high interest rates and unfair contract terms in consumer lending. I’m hopeful that the current Senate inquiry will have some useful recommendations in that regard.

Similarly, no-one – not our community, not families and certainly not the individual – is served by the entrenchment of disadvantage that comes about when someone goes to jail because of unpaid fines. We should do everything we can to find alternative pathways for people who find themselves in debt to the state.

Then there’s the bigger policy initiatives.

One of the best ways to lift the bottom is to ensure as many Australians as possible can find good work. This is why it’s so important that we keep the economy growing as Australia transitions out of the mining boom – to make sure there are more jobs for people to go to. It’s also why we need to work hard on ensuring our young people leave school with skills and qualifications employers actually need. A recent report from the Foundation for Young Australians found up to 70 per cent of students may be studying and training for jobs that won’t exist in 20 or 30 years’ time. That’s why Labor has announced plans to teach kids to code from an early age and increase the number of students studying science, technology, engineering and maths subjects. These are some of the skills they’ll need to get tomorrow’s good jobs.

If we want to ensure that being born into a disadvantaged family isn’t a sentence to stay there, we should also focus on the things that we know improve social mobility – like good quality education. That means investing in better early childhood services and public schools for poor areas – not so they’re as good as in rich areas but even better, since the kids who’ll go there are starting far behind kids in wealthier places.

I recently visited the Early Years Centre in Heidelberg, where the Children’s Protection Society is delivering high quality early childhood services to disadvantaged children. The children are extremely disadvantaged – sometimes from families where substance abuse and violence have left children to fend for themselves. Some of their stories are harrowing.

The Early Years Centre is an experiment to see whether high-quality early childhood services can turn those lives around. Many of the educators have bachelor’s degrees in early childhood, and most have decades of experience in the field. There are more educators per child than at the typical centre, and the physical amenities are extraordinary.

When I said that the Early Years Centre was an experiment, I wasn’t using a figure of speech. When they apply for a place, parents are told that they have a 50/50 shot of getting in, and that as a condition of applying, they must agree to do a series of follow-up surveys – whether they are successful or not. After application, a team of Melbourne University researchers randomly assign half the families to the centre. The other half are told that they do not have a spot.

Experiments like this were conducted in the United States in the 1960s. You may have heard of some of them – Perry Preschool, the Abecedarian Project, the Early Training Project. Those randomised trials have had a big impact on Australian policymaking. But given that they were done on the other side of the world, in the era of the Beatles, it’s reasonable to think that we might want to see how things have changed. So far as I know, the Early Years experiment is the first Australian experiment of its kind. The findings will help shape our thinking about the extent to which a high-cost model of early childhood can transform lives.   

Lastly, Australia has the best-targeted social safety net in the world, meaning that a dollar of government social spending in Australia does more to redress inequality than it does in any other country. That’s not an accident – it’s a product of means-testing decisions – largely by Labor Governments – that have moved us away from universal programs and towards those directed at the neediest.

But it can still unravel. As a recent academic study has shown, the Howard Government made our social safety net less targeted. In fact, its policy choices meant that the redistributive effect of government payments declined by one-quarter during the Howard years. We need to ensure that government payments and support programs are targeted to those who need them most. It’s the only way to guarantee that the value of those payments is enough to protect a reasonable standard of living for the people receiving them.

We should also be willing to think creatively and try new things in how we deliver government support to the most disadvantaged. One program I’ve studied closely in the past is the Earned Income Tax Credit scheme. This works as a wage subsidy for low-income working families. For example, in the United States, a low-wage single parent with two children who earns another $10 gets an additional $4 tax credit from the government. The beauty of this scheme is that it encourages people into work because the credit can only be earned against wages.

Earned Income Tax Credit schemes exist in the United States, the United Kingdom, and many other developed nations. Careful studies find that they are among the most effective anti-poverty programs ever to have been devised. For example, one analysis estimated that a $1,000 increase in the value of the tax credit led to a more than 7 percent increase in employment and a 9 percent fall in the number of families living below the poverty line. Those are the kind of impressive poverty-reduction outcomes we’d like to see in Australia. We should be open to learning from what has worked elsewhere to achieve them here at home.

*****

In winding up my remarks today, I want to thank each of you for the work you do to make life a little better for the invisible Australians. Civil society organisations like the ones you represent are out in the community every day providing emergency relief, matching people up with services, helping with everything from housing to education, transport to training.

Your most important contribution is in treating the people you serve with dignity. You listen to them when no-one else will; you remind them that their disadvantage does not define their worth. You let them know that someone cares about their struggles, and in so doing, give them the strength to battle on. You look them in the eye when too many of us drop our gaze.

As policymakers, we can do better to back up your efforts. We need to get the big picture policies right so that you can be as effective as possible in helping people on the ground. Poverty and disadvantage aren’t easy problems to fix, but know that my party will always make tackling them a priority.

I hope Reverend Newman and the volunteers at the Helping Hand Food Pantry won’t mind me saying this, but I look forward to the day we can put them out of business. Because when there’s no more mums with kids in tow or single men with holes in their shoes showing up each Thursday and Friday at St Paul’s to fill their shopping bags with donated food, that’s when we’ll know we’ve really succeeded in tackling disadvantage for the poorest Australians amongst us. 

ENDS

MEDIA CONTACT: JENNIFER RAYNER 0428 214 856