Australians are not convinced that inflation (and the resulting higher costs of living) will normalise anytime soon. For the majority of them, this is the overwhelming consensus voiced out in a recent Canstar Consumer Pulse Report.

Of the 2,157 responders, 44 per cent were worried about the rising inflation and its economic aftereffects. The higher (and increasing) costs of living are the main effects of inflation and slower growth. These are the factors that contribute to many Australians struggling to provide food, rent, utilities, and basic daily spending for themselves and their family for 2023. The same issues were also the main concerns during the last few months of 2022.

Many financial analysts predict a long haul financially throughout 2023. This was observed from a few telltale events and numbers last year. Unfortunately, all signs seem to point towards an impending lower performance in 2023.

The Australian government has tried to keep up with possible solutions to at least stop or slow down these unwelcome progressions: Centrelink payment increases, careful financial planning, and analysis by the Reserve Bank of Australia (RBA). These actions can hopefully give proper (and positive) projections to help manage the country’s financial outlook. However, it remains to be seen if these methods will work in reversing the current state of financial flux and pricing struggles.

Government Response: Solution or Stopgap?

The Australian government responded to these critical financial indicators last year by increasing Centrelink payments by as much as 20 per cent more. These changes took effect on the first day of 2023 to protect the most exposed sectors of the country: social security payment recipients, who will be the most financially vulnerable to price increases and inflation.

Still, people are worried about their financial futures. Doubt is a valid reason given all the factors involved. A major 59 per cent of Australians are concerned about rising prices of groceries, rent, electricity and gas, interest rates, and petrol. These expenses are also major issues to manage throughout the year.

The government constructed an initial financial package to address those who will be affected first, and directly by the inflation aftereffects. The government’s additional increases are now in place to stop or at least slow down the economic effects of inflation, which has direct proportional effects on prices and the cost of living. The government is hoping they will be enough if the inflation train is kept a-rolling and the prices of goods continue to increase.

However, the numbers and analysis reports continue to show weak spots in the economy. Earlier last year, the Reserve Bank of Australia (RBA) was confident that they can handle the state of inflation, hoping for a decent finish by year’s end: It ended at quite an opposite 7.3%.

There are two factors at play here that are important: First, the cause of inflation, and wage growth. Unfortunately, both factors were underperforming since 2022. Further down the road, analysts warn of a possible recession if this spirals down even further.

Analysts stressed that inflation was triggered by the prices of items in the market, and is not labor cost-related. However, the 7.3% inflation rate is still a few points farther from the projected ideal of 3.0% the government was trying to target for 2023.

Then, the 3.1% low-performance wage-price index late last year further slowed down economic growth and buying power. Employment growth also trailed not far behind, with a ratio of 400,000 jobs for 14 million working Australians.

Lower Economic Performance?

One of the main indicators of slow growth is the average household’s struggle in spending to provide basic needs. A record low household savings ratio was reported at 6.9%, a new low compared to the post-war era percentage of 9.5%.

While many will point to the worldwide inflation issue as a major source of this slowdown, the country is facing both inflation and employment concerns. Australia has to address these problems to stabilize the economy and buying power of the Australian dollar and the progression is looking uncertain. The hopes of a slight reversal and steady growth lie in managing the inflation rate and addressing its effects on pricing and employment.

To date, at least one of the solutions from the government may address the people’s financial struggles directly (or at least for those who are subscribed to social security payments via Centrelink). Pensioners, students, the younger generation, and some disabled beneficiaries will have some form of relief from the increases in their payments.

Social Services Minister Amanda Rishworth assured recipients that “This will have a significant impact on the hip pockets of young people. Income-free areas for student-income-support recipients will also benefit from indexation, meaning they can earn more before their payment is impacted.”

Addressing Slow Growth and Inflation: Can Increased Payments Make a Difference?

Let’s look at some of the Centrelink changes approved by the government. We now know that pensioners, students, young adults, and those who are disabled and receiving care will benefit from the bigger fortnightly payment. How long this will be effective will depend on the progression of the country’s inflation and how much living expenses will remain stable.

Pensioners with Age Pension, Disability Support Pension, and Carer Payment will get an extra increase of $38.90 (individual) or $58.80 for a couple. A maximum pension ceiling of $1,026.50 a fortnight was approved for individuals. Meanwhile, each couple will get $1,547.60, which includes Pension Supplement and Energy Supplement.

Unemployed individuals without dependents stand to receive extra finances in the form of an increase: From $25.70 fortnightly to $677.20 for their JobSeeker Payment for singles, with Energy Supplement. Parenting Payment Single grew from $35.20 per fortnight to $927.40 with Pension Supplement and Energy Supplement included. For couples with Jobseeker Payments and Parenting Payments, the rate is $23.40 a fortnight to $616.60.

For other Centrelink subscribers, similar increases were also added. Young people, caregivers, and students received a 6 per cent increase that took effect on the 1st of January.

Youth allowance increased within the $19.10 to $41.40 range a fortnight. Austudy beneficiaries received between $32.40 and $41.40 per fortnight. Lastly, citizens with disability support pensions under 21 years old and without children received between $27.40 and $40.70.