AUSTRALIA
Wanting More
Tuesday, 6 May, 2008
Wanting More
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Australia has experienced 16 years of economic growth, prompting some governments to claim we've never had it so good. But the boom has passed many Australians by, as food and basics become increasingly expensive.
This week, Insight asks - are wages keeping up with the cost of living? And how much is 'enough'?
Have Your Say: Are your wages keeping up with the costs of living, and what would help relieve the financial pressure?
Meet the guests
Unemployment is at an all time low. However, 1.2 million wage and salary-earning households reportedly suffer financial stress, and 80% of the 2.5 million jobs created over the last twenty years are paid less than $600 per week.
Inflation stands at 4.3%, with Australia's food inflation the highest in the developed world.
So how can we deliver more to the low paid? Is a wage rise the answer?
Meanwhile, Australians are turning to credit. Personal debt levels are at unprecedented highs, financially crippling even those on higher wages.
Has it become too easy to credit? Or do we just want too much?
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This week's Insight topic in the news
Australia has had 16 years of economic growth and wages are on the rise but many Australians say they're struggling to balance the family budget. With housing, food and petrol prices at record highs, are wages keeping up with the cost of living or are some of us just living beyond our means?
JENNY BROCKIE: The Government says it's watching petrol prices and is awaiting the results of an inquiry into grocery prices. In July, the Fair Pay Commission will review the minimum wage. So how are the low-paid really managing? Here's Sashka Koloff.
MARIE ANGRILLIS' STORY:
REPORTER: Sashka Koloff
As her neighbours sleep, Marie Angrilli is getting ready for work.
MARIE ANGRILLI: It is tiring, especially if you're not used to it. I sort of lay there for five minutes and think, "I've got to get up, I've got to get up," and then I actually get up but I hit the snooze button in case I fall asleep again.
At 59, she didn't think she'd be working this hard but, when she separated from her husband eight years ago, she had to find a job to pay her mortgage, and got work as a cleaner.
MARIE ANGRILLI: I really didn't have any skills, I'd let them go, and I thought, well, I know the cleaning industry so I will re-enter that.
Because there aren't many fuel-time cleaning positions, Marie works two part-time jobs to make ends meet. From Monday to Friday she cleans two buildings in the city of Melbourne, one in the morning and one in the afternoon.
MARIE ANGRILLI: You're working around office workers so you have to work out of hours.
As the city gears up for the working day, Marie heads home for a few hours sleep. At 2:30 this afternoon she'll wake up, come back into the city and do it all over again.
MARIE ANGRILLI: Because of the way you work you are constantly tired, because I'm sleeping maybe three hours during the day and another three hours at night.
Having the two jobs means Marie spends three hours on the road every day. Petrol prices are biting.
MARIE ANGRILLI: When I first started driving to the city I was putting $40 into my petrol and now I'm putting $70 in it. So for me it's almost doubled.
Marie earns $14.72 an hour with a 15% loading. She says it's not enough.
MARIE ANGRILLI: I suppose nobody thinks their pay's enough but, no, it is not really enough. I put about 40% of my income into paying off my house because I feel I have a limited time to do that and being a low-paid worker you're sort of always thinking, "Well, can I meet the payments "and, if I don't, what happens then?" So it's sort of like standing on the edge of a cliff waiting to fall over.
JENNY BROCKIE: Well, welcome everybody. Thanks for joining us and thank you for coming along, Marie. With a booming economy like we have at the moment, have you tried looking for better-paid, easier work than that?
MARIE ANGRILLI: Well, I am 59 so I feel I really couldn't go into a new career at my stage in life. So that's why I did go back into the cleaning industry because I'd originally done that when my children were small. But then I only did that on a one-shift basis, not a 2-shift basis.
JENNY BROCKIE: Yeah, because it's two ends of the day.
MARIE ANGRILLI: It's that 2-shift basis that really gets to you. If you're doing it one-shift, it's not as bad but it's the struggle between the two shifts.
JENNY BROCKIE: Petrol's obviously a big cost for you.
MARIE ANGRILLI: It is for me.
JENNY BROCKIE: What else are you finding more expensive?
MARIE ANGRILLI: Well, everything's more expensive. Your interest rates are constantly going up and, if the petrol prices go up, well, everything goes up with them, the food and everything. Petrol prices affect everything, so it's a constant rise.
JENNY BROCKIE: How much have you got left over when you've paid for everything you need to pay for?
MARIE ANGRILLI: Very little, very little.
JENNY BROCKIE: Anything?
MARIE ANGRILLI: Um, sometimes yes, sometimes no. It depends on how many bills come in.
JENNY BROCKIE: What was the last thing you ever splurged on, or do you ever splurge?
MARIE ANGRILLI: Um, I do occasionally. The last thing I splurged on was a little - I don't know what you call it - it's a sort of a chicken with little rabbit's ears and I...and when I ..
JENNY BROCKIE: That was a splurge?
MARIE ANGRILLI: Yes.
JENNY BROCKIE: How was the splurge? How much did it cost?
MARIE ANGRILLI: I consider it was a splurge because it was a waste of money really. I could have put that towards something else. It only cost me $15 - $14.95 but I wanted to have it because when I was married, I was married into an Italian family and we used to do the chicken dance all the time and this little thing actually does the chicken dance.
JENNY BROCKIE: See, I find this so interesting, I find this
MARIE ANGRILLI: I thought I just had to have it.
JENNY BROCKIE: OK, but $14.95 for you is a splurge?
MARIE ANGRILLI: It is if I don't really need it, yes.
JENNY BROCKIE: OK, Peder, what about you? You live in Canberra. You're a security guard. How much are you earning an hour?
PEDER FRANTZEN: It's $15.44 an hour.
JENNY BROCKIE: Any overtime?
PEDER FRANTZEN: Very little because I work day shift, so
JENNY BROCKIE: And how many hours a day?
PEDER FRANTZEN: It's 12 hours a day.
JENNY BROCKIE: Are you managing?
PEDER FRANTZEN: We...we struggle here and there, just, I suppose, like anyone does, but it can be tough.
JENNY BROCKIE: How do you struggle? What sorts of things? What are you going without, for example?
PEDER FRANTZEN: We've sometimes had trouble with the rent. As far as dental and, um, insurance, it's just ..
JENNY BROCKIE: You don't do it?
PEDER FRANTZEN: I haven't seen a dentist in a long time.
JENNY BROCKIE: How long?
PEDER FRANTZEN: Jeez, probably three years.
JENNY BROCKIE: And insurance? No insurance?
PEDER FRANTZEN: Not at all.
JENNY BROCKIE: No house insurance, car insurance, nothing like that? Home contents? Nothing?
PEDER FRANTZEN: No.
JENNY BROCKIE: Gavin, what about you? You're a boilermaker from Portland, in Victoria. You earn a bit more. You take home $520 a week, I think. Is that right?
GAVIN RIDDELL: Around about. We're on $25 an hour.
JENNY BROCKIE: $25 an hour. How many people do you support on that wage?
GAVIN RIDDELL: Five and a half, basically. I have three children that I care for and a partner full-time and I've also got a son to my first marriage that I have one night during the week and then every second weekend.
JENNY BROCKIE: And do you have any other income than that $520 a week that's coming in?
GAVIN RIDDELL: That's it.
JENNY BROCKIE: So how are you coping?
GAVIN RIDDELL: At the moment, to be honest, we're not. Every week is a struggle. To have such a large family, we need a large car to move us all and, as we've heard, the price of fuel at the moment is just phenomenal.
JENNY BROCKIE: So how...but how desperate are you? I mean, how bad is it? Are you managing? Are you just managing or...?
GAVIN RIDDELL: No, we're not.
JENNY BROCKIE: What does that mean for you? What are the prospects, then? What do you do?
GAVIN RIDDELL: The prospects for me at the moment, I'm looking at bankruptcy. We're that far behind, I've got no choice but to look at bankruptcy.
JENNY BROCKIE: Is that because of debt as well? How much debt?
GAVIN RIDDELL: I mean, it's...I'm in, I mean, it's not a great deal. I'm in around $50,000 debt but it's a debt that I can't manage.
JENNY BROCKIE: How did you rack up that debt, just out of interest?
GAVIN RIDDELL: Because the first marriage dissolved. I come out of that very badly.
JENNY BROCKIE: Yeah, and often that's the case. If something goes wrong for people, that's the start of the problem. Heidi, you're from Melbourne. You've got two young children, yes? And your husband takes home $550 a week, laying pipes, is that his job?
HEIDI NEICHO: Yes, that's correct.
JENNY BROCKIE: He couldn't be here tonight with us, so tell us how you're getting by.
HEIDI NEICHO: Very similar to the last couple of people speaking. I mean, I just smiled hearing Peder before saying about dental, you know. We...I don't think I've seen a dentist for more than five years and I know my husband hasn't either. Um, week to week, um, I've cut my shopping bill down by $50, you know, and I have a small child with nappies and formula, you know.
JENNY BROCKIE: So how have you cut it down? What are you going without?
HEIDI NEICHO: Um, well, I've cut our petrol right down. Um, I only put $20 in a week and, um, if that. Basically that will get me to the shops, to kinder and back again, um, and the basics. If I wanted to go to see my parents in the country, then that's not an option in our weekly budget. Um, yeah, so it's
JENNY BROCKIE: What happens when you're short? What happens if you fall short?
HEIDI NEICHO: I mean, on small things, I'm very blessed to have, you know, a family that have helped with small things but there have been times where in emergencies, um, for example, like the gentleman just said, we only have the one car and that's what - at the time, what my husband used to get to work. Um, we had to get that repaired and that actually cost a fair amount of money. The loan we got in order to get that repaired was at an exorbitant interest rate.
JENNY BROCKIE: Where did you get the loan?
HEIDI NEICHO: Um, it was ... Am I allowed to say the company?
JENNY BROCKIE: Um, yes, just broadly, was it a non-bank?
HEIDI NEICHO: It wasn't a bank, yeah, it wasn't a bank.
JENNY BROCKIE: Like a cash advance store?
HEIDI NEICHO: Basically, yes. That wasn't because we can't read contracts, that wasn't because we're silly, that was because it was an emergency at that time and, even though we get by just week to week on a very tight budget, if one thing comes out or one emergency rises, there's no spare.
JENNY BROCKIE: So how much did you borrow? How much money did you borrow?
HEIDI NEICHO: $2,000.
JENNY BROCKIE: And how much did you pay back on the loan?
HEIDI NEICHO: Just under $6,000.
JENNY BROCKIE: $6,000 on a $2,000 loan. And did you pay it back?
HEIDI NEICHO: Yes, we have.
JENNY BROCKIE: What don't you have? When we were talking about what you go without, you said the dentist. What don't you have that you would regard as almost essential? What sort of things are you going without?
HEIDI NEICHO: In a way, what I don't I suppose the one thing I feel that I don't have is I actually want to work. I actually don't have a job and I would like to work.
JENNY BROCKIE: What sort of job?
HEIDI NEICHO: Secretarial work, personal assistant work, um, in construction, that sort of thing...um, pretty much.
JENNY BROCKIE: And why haven't you got a job, do you think?
HEIDI NEICHO: We can't afford the child care. I have two small children. In order to put them in full-time child care, I would have to earn an awful amount of money just to cover the child care. I wouldn't actually... I'd be working to pay child care.
JENNY BROCKIE: This is a common story. I've heard it a lot and in fact we're doing this show tonight because it's arisen out of other shows where people have raised these sorts of things. Kim, you earn $13.30 an hour, is that right, helping run a cattery and you've got a $5,000 credit card debt?
KIM RILEY: Yes.
JENNY BROCKIE: Are you spending more than you earn?
KIM RILEY: Slightly. I try not to. Um, sometimes I do, though, yeah.
JENNY BROCKIE: So is that your only income or do you have other income as well? 19:16:40
KIM RILEY: Um, I'm subsidised by Centrelink as well because I only work between 16 and 20 hours a week, so Centrelink give me a part payment.
JENNY BROCKIE: And children. Do you have children?
KIM RILEY: I have one, yes.
JENNY BROCKIE: Single mum?
KIM RILEY: Single mum.
JENNY BROCKIE: And do you have a mortgage?
KIM RILEY: I do.
JENNY BROCKIE: How are you coping with that on $13.30 an hour?
KIM RILEY: At the moment, not very good. I'm behind. Um, and I think it's going to take me about 10 months to catch up just by paying a small amount extra.
JENNY BROCKIE: So what are your priorities when you spend money and what do you go without?
KIM RILEY: Um, I think I'm quite mean with the heater. I won't turn it on. It's a gas heater but I'll still say to my daughter, "Put a jumper on." I'll put another layer on, so ..
JENNY BROCKIE: The environmentalists would like you for that.
KIM RILEY: They would, but I live in a wood house so it's very cold.
JENNY BROCKIE: And they are basic things, aren't they?
KIM RILEY: Yeah, just heating would be good.
JENNY BROCKIE: Robyn, you and your husband, Jimmy, are thinking of selling your house in Wollongong - why?
ROBYN TIMLIN: Just we live month to month so, if we make the mortgage payment, that's great this month, but next month, if we don't make it, well, we'll just, we just live month to month.
JENNY BROCKIE: Now, you work in early childhood?
ROBYN TIMLIN: Yes.
JENNY BROCKIE: And your husband works part-time in aged care. How much do you bring in between you each week?
ROBYN TIMLIN: It depends on my husband's work. In a good week, we could bring in $1,000 a week.
JENNY BROCKIE: And how much...? You've got a mortgage. How much is your mortgage?
ROBYN TIMLIN: $275,000.
JENNY BROCKIE: And why is it so hard for you? What are the main things that are making it hard for you?
ROBYN TIMLIN: The interest rates went up, my husband was out of work for a period of time. It's all compounded.
JENNY BROCKIE: How is it impacting day to day on your life? I know you have a story about something that happened to you which I find very interesting. Tell us. Share that story with everyone.
ROBYN TIMLIN: I feel a bit cheeky talking about, listening to everybody else's living circumstance, and I don't propose that we're actually, um We're not suffering to the extent of a lot of people. We're just living week to week, month to month, and I think that we have a good life and that we don't go without a lot.
JENNY BROCKIE: What about petrol? You don't want to tell this story. Come on. I find it very interesting because it's not as though you're on the breadline in terms of your income, is it?
ROBYN TIMLIN: So...no, we're not.
JENNY BROCKIE: But I find it a very interesting story. Please tell everyone.
JIMMY TIMLIN: You want me to tell?
JENNY BROCKIE: Yeah.
JIMMY TIMLIN: Um, well, one day I was at work and I had to go and do a bit of shopping somewhere and I didn't quite reach the shopping centre because I ran out of petrol. I didn't have any cards or any money on me to buy petrol.
ROBYN TIMLIN: You had a card but there was no money.
JIMMY TIMLIN: I had a card, yes, that's right because there was no money in the account because the bank did the sweep for the month and I had to phone Robyn, whinging like a big baby, "I'm stuck in Wollongong, I can't get home".
JENNY BROCKIE: What did you do? Did you just leave the car?
JIMMY TIMLIN: Left the car there.
JENNY BROCKIE: You left the car?
JIMMY TIMLIN: I left the car and walked home. Lucky it was near home. It was a nice sunny day.
JENNY BROCKIE: I find this an extraordinary story too that really it was, you were that low with money.
ROBYN TIMLIN: We don't have money in storage so at the end of the month we get our money swept to our mortgage and, if the money's not there, it doesn't get swept and we don't have anything to live on so, if it's not there, it's not there.
JENNY BROCKIE: So you're really living month to month.
ROBYN TIMLIN: Yep.
JENNY BROCKIE: Chris Bowen, you're assistant Treasurer and Minister for Competition Policy and Consumer Affairs. We hear a lot about food and petrol prices over and over again and just last week we saw inflation going right up. It's now 4.2%. I think that's a 16-year high. Do you think the low-paid - and I'm excluding our last two people in this and even some of the other people who have spoken - but our low-paid, do you think they're paid enough?
CHRIS BOWEN, ASSISTANT TREASURER: Clearly, people are doing it tough. We have the highest food-price inflation in the Western world. So things that people have no choice about are going up, whereas things that people have some choice about, like TV screens, have come down over the years. So the cost of living pressures on low-paid workers in particular have been very strong, including the interest rate increases. As well as being a minister, I am an MP for a western Sydney seat. I see this every day. Real estate agents in my area tell me that about 25% of the houses for sale have been repossessed. Every time you see an auction sign go up in the suburb I live in, you think, "There's another person being repossessed."
JENNY BROCKIE: But for those people, they hear all the time about boom times, they hear about how Australia's doing so well and we're experiencing this resources boom.
CHRIS BOWEN: It's one of the great disconnects of recent modern economic history. Australia has done well but many people have missed out, and that is something that is a priority for the new government, to try and even that up a little.
JENNY BROCKIE: We'll talk to you a bit later on about what you can do about it. Chris Richardson in Canberra, you're the director of Access Economics. How accurately does the inflation rate that we hear about, this 4.2% inflation rate, reflect what's really being felt by low-income workers, not just by everybody in the community, by the lower-paid?
CHRIS RICHARDSON, DIRECTOR, ACCESS ECONOMICS: Well, it's certainly low-income workers are feeling it worse than that. If you look at what's happened in the last little while, the costs of housing, shelter and energy have jumped a lot, and they are absolutely fundamental to the low-paid. They are big parts of their day-to-day budget. The long-term impact of the big increase in the cost of buying a house in recent years is increasingly showing up in interest rates and in rent. Food prices, greater prosperity around the world and some dumb policies with putting food into ethanol as energy means that food costs have gone up and energy costs in general have gone up as China and much of the rest of the world is having an industrial revolution. So the pain of faster inflation is being felt particularly for the low-paid.
JENNY BROCKIE: Helen, you've been talking to low-paid workers in Australia for a new research project that you're doing. What is a low-paid worker? How many people in Australia would be regarded as low-paid, and what's the definition?
DR HELEN MASTERMAN -SMITH, AUTHOR, LOW PAY PROJECT: The definition we use is that which the OECD uses, which is two-thirds of the median income. So the latest ABS statistics, if we apply that definition, would produce an hourly wage of $16.50 an hour, a weekly wage of $630 a week, or an annual wage of $32,500 a year. So a person can be low-paid on any of those counts.
JENNY BROCKIE: A few people in this room are earning less than that.
DR HELEN MASTERMAN -SMITH: Yes, many are. In terms of the incidence or rate of low pay in Australia, our calculations put the figure at about one in four workers is low-paid and, when we take junior employees out of the equation, we're looking at about one in five. So it's quite a widespread phenomenon. That's based on 2004 data.
JENNY BROCKIE: So that's millions of people.
DR HELEN MASTERMAN -SMITH: Yes, we are talking millions of people.
JENNY BROCKIE: We are looking at whether there's a case for higher wages or whether it would just create more problems and whether wages are keeping up with the cost of living. Sharan Burrow, you're arguing for a $26-a-week wage rise when the Australian Fair Pay Commission reviews the minimum wage in July. How did you come up with that figure of $26 a week?
SHARAN BURROW, PRESIDENT, ACTU: When we looked at the last year, we said that we had to at least strike a rate where people got a CPI increase that meant they didn't go backwards again this year in real terms, and that comes to $26 or around 4% at that rate. But can I say that we're very worried, even about that, when you understand that in just the last 12 years we think people's living standards have gone up by $60 to $70 a week. So $26 is barely going to make the grade for some people to give them some relief.
JENNY BROCKIE: Gary Brack, what's your response to that? Do you support the idea of an increase in July?
GARRY BRACK, CHIEF EXECUTIVE, EMPLOYERS FIRST: We say there is room for a modest increase but you've got to be careful about the level of that. We don't support the ACTU view about $26. What you've got to look at is what will happen down the track. If you raise those costs by an appreciable margin, you'll end up with disemployment - that is, employers who won't create jobs or who will reduce the number of jobs that do exist already.
JENNY BROCKIE: So when you say you support a modest increase, what sort of increase would be acceptable to you?
GARRY BRACK: Well, we say, as we did in the last case, that $10 would be an appropriate figure. And we do know also that if you increase it by more then you'll start to add to the nervousness of employers about that low level of jobs and, importantly, when you look at what manufacturing has done, it's gone offshore or it's lost to offshore suppliers.
JENNY BROCKIE: Alright, Chris Bowen, do you agree with what Gary's saying?
CHRIS BOWEN: Oh, no. We've put in a submission which does call for an increase in the minimum wage. We haven't put a figure on it. Governments don't generally put figures on it when they put in the submission.
JENNY BROCKIE: Would you like to just pluck one out of the air for us, to give us an idea? Somewhere between $10 and $26 maybe?
CHRIS BOWEN: Funnily enough, I wouldn't like to pluck one out of the air but we've put in a submission dealing with the cost of living pressures and also the balance to be reached in the Australian economy, and we've put the submission that there is an argument for an increase in the minimum wage and it's up to the Fair Pay Commission just what that increase is.
JENNY BROCKIE: Heidi, listening, what do you think about this?
HEIDI NEICHO: I'm actually quite shocked, to be perfectly honest. I'm actually quite shocked. Um, $10 is just insulting to me, um, and my family and what my husband does for a living, and that's just my opinion. Um, $26, you know It's hard enough for us to budget simple small wages, you know. $10 is insulting.
JENNY BROCKIE: And $26?
HEIDI NEICHO: It's a start.
JENNY BROCKIE: You don't sound thrilled about that either.
HEIDI NEICHO: Look, no, no, to be perfectly honest, $26 is a good start and it's heading in the right direction for smaller for families of wages, of low-earning wages, to actually start bringing it up a bit.
JENNY BROCKIE: Sharan Burrow, I'd like to put something to you because we have one of the highest minimum wages in the OECD and wages have been rising every year. We look pretty good compared to a lot of other countries on this scale.
SHARAN BURROW: Only on paper. We say with the rise in just one year of four interest rate payments, rents are up by 7.1%, at a basic level $48 more in mortgage or rent, $20 more in petrol, 18.9% increase in a year. You've got a food bill of 5.7% and the costs go on. 30% increase in CEO salaries in just one year, profits at a 30-year high relative to wages share, businesses need people to earn a bit more money as well.
JENNY BROCKIE: Garry, just quickly.
GARRY BRACK: Where are the low-paid by and large employed? And the fact is that a lot of them are in the retail sector - profits are not up by that margin. They're in the hospitality and tourism sector. Restaurants report higher incomes but much higher outgoings, so their profits are actually down. In the mining sector, people at very low levels of skill are still getting very high incomes. That's because they've got the money to do it. They're exporting billions of dollars worth of stuff, they've got jobs there that people are upgrading to, they're learning to drive big trucks. People who are unskilled yesterday are picking up big money today because there was the productivity.
JENNY BROCKIE: What about people like Marie sitting at the end of the line here?
GARRY BRACK: And that's the cleaning contracting industry, so you tender for a job in the cleaning contracting industry knowing that if you put another couple of dollars on you don't get the job, so you tender down. Now, that's part of the reality of that industry. You have the contract or the tender to clean this school for the next three years. At the end of that three years, you tender again for the job and you lose it because somebody else undercuts you. They keep the employees on.
JENNY BROCKIE: Marie? What do you say as a worker?
MARIE ANGRILLI: I hear that argument all the time. They cut hours or they cut staff, and we end up suffering that. It's never the contractors themselves that actually carry the burden.
GARRY BRACK: No, I don't think that's a reasonable statement. The tendering process forces prices down. The contractor is getting squeezed in terms of their margin. Of course, employees are bearing part of the brunt of that because there's downward pressure on their wages, but then the comment that was just made by Marie is that they put the pressure on, they lose hours, they cut staff, etc, to reflect the profitability of that industry, unlike the things Sharan was talking about where you've got profitability where there has been massive growth.
JENNY BROCKIE: OK, let's not let's not get stuck on the cleaning industry. There are lot more industries to look at.
SHARAN BURROW: The property owners can afford more, Jenny, that's the point. Look at the growth in property and property services and the profit levels. That contracting squeeze shouldn't happen to the contractors, nor the staff. People have to be serious about what it takes to sustain our economy.
JENNY BROCKIE: Chris Richardson, can I ask you why you think people are struggling when we have one of the highest minimum wages in the OECD?
CHRIS RICHARDSON: Because we don't have a good set of benefits and taxes to deal with this. In many ways we're dealing with the wrong question. Underlying it is the assumption that if we want to make the worse-off in society better off - and we all do - the underlying assumption here is that it's up to employers to pay for it, that they have to be the national welfare system, and that's just wrong. I mean, we have $250 billion raised by the Federal Government and then spent again. That is where we should be getting greater fairness in the system, and it's just failing. What are the highest rates of tax in Australia? They are the rates of tax being paid by people on low wages because, as they move out of welfare and into work, or take on a bit of extra work, they lose an enormous amount of their benefits and they're still paying too much in tax. That's incredibly dumb. We can do much better than that. We can do much better for the low-paid but you can't do it by pushing up wages a lot, and $26 - it's a mistake. You're trying to turn the employers into the welfare system.
JENNY BROCKIE: So welfare system or tax reform or both?
CHRIS RICHARDSON: Both, definitely both. We can do this a lot better and a number of other countries are doing it better. I have to say that on 1 July we will see a substantial shift in what's called the low-income tax offset, LITO, and in fact we have a couple of years of promised improvements in LITO. That's very, very good but we could do better than that and in particular we could turn it into something specifically aimed at those who are low-paid workers - earned income tax credits instead of simply available to everybody there.
JENNY BROCKIE: And what about the idea of a wage increase, Chris? Do you support any kind of minimum wage increase in this round?
CHRIS RICHARDSON: We certainly could. Now, a bunch of sectors will feel pressure, including some of those where the low-paid workers work. But I think that in the short term we will still see good job growth in Australia and that a moderate low-wage increase or minimum-wage increase wouldn't hurt. The big success of 16 years of economic growth has been lots of people down the bottom end of Australian society now have jobs, who didn't before.
JENNY BROCKIE: I'm going back to your modest increase, though. How much is a modest increase that you think would be acceptable in this round?
CHRIS RICHARDSON: Ah, well, let's just say $15. It is between the $10 and the $26, but it's acceptable in the circumstances. You have to realise it comes with a cost. Some people will lose their jobs as a result of $15.
JENNY BROCKIE: Yes, John.
JOHN BUCHANAN, ECONOMICS, SYDNEY UNIVERSITY: This argument has been around for a long time. The determinants of employment level are not just a function of the wage, they're a function of the general economic conditions, and the American experience is very clear on this point. If you don't have rising minimum wages and instead rely on the tax and benefit system to subsidise employers to create low-wage jobs, employers go out and respond to that incentive. You create a whole lot of really low-paid jobs which are then supported by the government.
GARRY BRACK: Chris Richardson made it absolutely clear. he said you push it up too much with your hand on your heart and saying, "Let's take care of these people," and everyone in this room would agree. But in a full-employment economy you will not see the full effect of that but when the economy starts to turn around and go into reverse then will there be a savage impact on those people because the cost of employing them will be higher than the sustainable level of employment and they will therefore lose their jobs at a dramatic rate and they will be the last ones to get them back. That is part of the reality. The Australian Fair Pay Commission has accepted that in its 2006 decision. It makes it clear. Every bit of research tells you that, you push the price up too much, people lose their jobs.
JENNY BROCKIE: But Chris Richardson is still saying $5 more a week than you are?
GARRY BRACK: He also puts the point that we have argued, which John tries to argue against, that says that if you create an artificially high minimum wage those people will lose their jobs and therefore you've got to look for a circuit breaker. Is there a danger that some employers will artificially then create low-paid jobs and leave it to the government to subsidise? If you want the jobs, you've got to create a joint system where employers are prepared to create and retain jobs with the money that is affordable and then you add on an element of government support as he just defined it.
JENNY BROCKIE: Chris Bowen, you're on a knife edge here, aren't you?
CHRIS BOWEN: You're right - we are on a knife edge here. The best impact we could have is to reduce inflation. To do that, we need to reduce government expenditure. At the same time, we need to increase support to working families. So this is the balance that we're dealing with right now in the lead-up to the Budget. I think we'll get the balance right but it's not an easy task.
JENNY BROCKIE: In the meantime, though, low-paid workers are doing it really tough.
CHRIS BOWEN: Absolutely they are, absolutely they are, and the cost of living is going up, absolutely, and that's why we need those tax cuts at the lower level, that's why we're committed to them. We've got economists saying, "Don't do it." Well, they're so necessary. People are relying on them, they need them. They are so necessary to take just a little bit of the pressure off.
JENNY BROCKIE: But only a little bit of pressure.
CHRIS BOWEN: We're not pretending that they're going to fix the world but it's better than nothing.
GARRY ROTHMAN, FINANCIAL COUNSELLOR, UNITING CARE: There's too many casualties going on now. Right now, people are struggling and families are breaking up and people are having nervous breakdowns.
JENNY BROCKIE: Now, Garry, you're a financial counsellor, yeah?
GARRY ROTHMAN: That's right.
JENNY BROCKIE: And is there a change in the people you're seeing?
GARRY ROTHMAN: Absolutely. The biggest area of growth in poverty is working people. It's not in welfare. The growing area for poverty in Australia is people who are working, and people who are working are subsidising their income with debt.
SHARAN BURROW: That's exactly right. It's gone up 20% in just one year.
JENNY BROCKIE: And how often are you seeing those sorts of people and what sort of problems are you seeing?
GARRY ROTHMAN: Financial counsellors across Australia are seeing people on a daily basis. We can't meet the demand on our services. We don't have the capacity to help the people who need our help. We're continually seeing people who are overcommitted, who every dollar that an Australian working family gets is under competition from credit providers. Every dollar that an Australian worker gets is being attacked by utilities, by banks, by fringe lenders, by consumer lease companies.
JENNY BROCKIE: OK, we're going to get on to all of that in just a moment but I'd like to ask you just quickly before the break, are people using that debt for essentials or non-essentials or for both?
GARRY ROTHMAN: Absolutely. We're seeing people I mean, rising housing costs is not a luxury, getting a computer for your kid at school is not a luxury, paying your school fees, even in the public education system, is not a luxury.
JENNY BROCKIE: So it's credit for essentials?
GARRY ROTHMAN: It's credit for essentials.
JENNY BROCKIE: Insight is looking at whether wages are keeping up with the cost of living, but what happens when you want more then you can actually afford. Are some people just wanting more than they actually need? Here's Sashka Koloff.
KANE GAMMELLS' STORY:
REPORTER: Sashka Koloff
Last year Kane Gammell took a loan for $34,000 to buy this car, a V8 Holden Chevrolet ute.
KANE GAMMELL: I wasn't looking at it that seriously until I found out, yeah, I could actually get it. I was looking for a car around $10,000 but he went, "No, no, you can have this." Fine. Why not?
At the time he was earning around $650 a week working in a factory making car parts.
KANE GAMMELL: They said, "Do you have finance? We can do all that." I don't think I even needed my birth certificate. It was driver's licence, bankcard, proof of how much you earn, that was it - just one of your wages. So there wasn't much to it.
When he bought the car, Kane was 20 years old and still on his P-plates. Legally, he knew he wasn't allowed to drive a car this powerful.
KANE GAMMELL: When everything's going your way, you don't sort of question things, do you? I just realised that I could get what I wanted.
He says the company that sold him the car, Northern Motor Group, didn't push the issue either.
KANE GAMMELL: No, nobody. The dealer didn't say anything. Nobody said a thing.
The dealership organised a loan for Kane through GE Money for a term of five years with an interest rate of 9.9% but keeping up with the repayments was harder than he expected.
KANE GAMMELL: The way they said it, the way it was, these are going to be your repayments - you didn't even think of insurance, of rego, of petrol, all these things you just didn't factor into it. They go it's only going to cost you $200 a week. I thought that's fine. I will still have something left over, I can still do these things. But it took a few months to work out, no, you don't.
When he lost his job over Christmas, the car repayments became too much and Kane realised he was falling behind. His mum suggested he get some help to figure out what to do. So he went to see Garry Rothman, a financial counsellor with Broadmeadows Uniting Care.
GARRY ROTHMAN: $9,280, that's how much interest you were paying by borrowing that much money off GE. Paying over $9,000 just in interest.
KANE GAMMELL: $3,500 interest in one year?
GARRY ROTHMAN: Yes.
KANE GAMMELL: It's a bit.
Kane now acknowledges he simply wanted more than he needed.
KANE GAMMELL: Definitely. Everything's interest-free, you can buy this, you can buy that.
REPORTER: Do you think it's about greed?
KANE GAMMELL: To a degree, yeah. It's also, um, competing, you know. It's competition, almost, with a lot of things. It's, I got this, that person doesn't, or, you know, he's got that so I want something better, you know. It's always competing with your neighbour, keeping up the Joneses, isn't it?
JENNY BROCKIE: Kane, how much do you think you're responsible for what happened there?
KANE GAMMELL: 100%. I signed the paperwork, I said, yeah, I want it, let's do it.
JENNY BROCKIE: And why was that, do you think? Why didn't you think about things like rego and petrol and insurance and all those things?
KANE GAMMELL: Because I was hearing what I wanted to hear, that I could get the car I wanted, that was it.
JENNY BROCKIE: Garry, how often do you see that?
GARRY ROTHWELL: Well, actually, Kane is in a fortunate position because his asset is worth more than what he owes. Kane's actually an exception. We don't usually see people who come to us who can actually get out of a contract ahead. The usual thing that we see is that people come to us who can't afford to get out of the contract because then they'll still have a debt and they lose their car.
JENNY BROCKIE: And how easily are people getting loans at the moment?
GARRY ROTHMAN: It's interesting that you asked Kane how responsible he was. I mean, Kane was only responsible as much as for the fact that he would have liked to get that car, but the irresponsible part was that a company like GE gave a 19-year-old young man, who had never had credit before, $34,000 with repayments that were more than 25% of his income for a car that he wasn't even legally allowed to drive. Now, if that's not predatory lending, I don't know what is.
JENNY BROCKIE: I should point out that we did invite GE to come on tonight to talk about this but they declined.
GARRY ROTHMAN: It's a shame.
JENNY BROCKIE: We haven't got them here to defend themselves. But you call it predatory lending. Do you see...? What other examples do you have of what you would regard as inappropriate lending?
GARRY ROTHMAN: I think one of the most common things that financial counsellors see is the results of unsolicited increases to credit card limits. I think probably everyone in this room may have received a letter from a bank offering to increase their credit limit and, in most parts of Australia, they can do that without assessing people's capacity to pay.
JENNY BROCKIE: But how much is it also, Garry, about people sometimes just wanting too much?
GARRY ROTHMAN: How often is it? It's the minority of the cases. In the majority of cases, people are trying to get by, people are trying to live and their incomes aren't high enough, the ease to get debt is just too easy. There's lack of responsibility from lenders, and this is a recipe for disaster. An unregulated market like we've got is causing real problems. It's not working. We need better legislation, we need better consumer protection.
JENNY BROCKIE: Daniel, you have a significant personal debt too. How much do you owe?
DANIEL MOREHEAD: Around $50,000 at the moment.
JENNY BROCKIE: $50,000 - and what did you spend that money on? How did that get so high?
DANIEL MOREHEAD: I've got two car, three car loans, a personal loan, credit cards, um
JENNY BROCKIE: Three car loans?
DANIEL MOREHEAD: I had two car loans, I sold one car but sort of kept that loan going because I didn't have enough money to pay it out. That was also through GE as well.
JENNY BROCKIE: And how many cars do you have?
DANIEL MOREHEAD: I've got two cars at the moment.
JENNY BROCKIE: Why have you got two cars?
DANIEL MOREHEAD: I've got one for myself and one for my partner.
JENNY BROCKIE: And how else did your debt rack up?
DANIEL MOREHEAD: Just over-commitment, really. I mean, one of the loans I took out, one of the personal loans I took out, it was for 15 grand, and that money just got wasted. I mean, like, I put some of the money to a wedding but the rest of it, I don't know where it went. Probably 10 grand just gone, just on things, I don't know.
JENNY BROCKIE: What sort of things?
DANIEL MOREHEAD: Some of it we used to pay out some other little loans, brought an airconditioner, you know, just little things, bits and pieces that we didn't really need, but the money was in the account and we sort of took it.
JENNY BROCKIE: So how much do you regard what happened to you as mistakes you made yourself and how much do you regard it as just to do with not earning enough money or not, you know?
DANIEL MOREHEAD: I earn twice Some of these people say $500 a week. I'm averaging $1,100 a week take home after tax.
JENNY BROCKIE: So how did you get into that trouble then?
DANIEL MOREHEAD: Just like you said, I've got a mortgage as well, just over-commitment and stupidity, I think. We're selling the house at the moment and that money we've got left over from the house, that will cover the 50 grand that I've got in debt and we're just going to rent probably for three or four years and, hopefully, start again.
JENNY BROCKIE: David Bell, is it too easy to get credit? Are the banks giving it out too easily?
DAVID BELL, AUSTRALIAN BANKERS' ASSOCIATION: I don't think the banks are. We have a big responsibility
JENNY BROCKIE: Come on. Let him finish. He's had two sentences... two words to say. Go on, David.
DAVID BELL: We have a very big responsibility in the Australian economy. One is to secure people's deposits, and two is to make sure that we lend responsibly, and all the evidence out there shows that we do lend responsibly. It doesn't make sense for banks to lend money to people who can't pay it back. It just doesn't make sense.
JENNY BROCKIE: How closely do you look at people's ability to pay it back?
DAVID BELL: Banks pay very special attention to people's ability to repay money because, as I said, at the heart of it we don't want to lend money to people who can't pay it back. That's just not in our interests, nor in our customers' interests.
JENNY BROCKIE: Philip Robinson, you and your wife Sandra have $163,000 personal debt between you. How did you rack up that much debt?
PHILIP ROBINSON: Over a period of about six years. I'm different to most other people in this room. I earn very good money and, um, I make no bones about it. I get paid $27 an hour to sit in an office. Um, I earn $75,000-$80,000 a year. When we started, I could service that. Um, my wife lost her job. For three years she couldn't work and it was a case that we had to I felt we had to survive, I had to obtain credit.
JENNY BROCKIE: How did you get the credit?
PHILIP ROBINSON: Very simple. You ring up a banking institution and say I'd like to apply for a credit card. They do the figures over the phone and that's not an issue.
JENNY BROCKIE: Now, what were you...? At this stage, were you servicing the credit card you had effectively?
PHILIP ROBINSON: Yeah.
JENNY BROCKIE: And what were you spending? Were you using the credit for essentials or non-essentials?
PHILIP ROBINSON: Yeah, basically essentials. It sounds pretty ridiculous - $160,000 in unsecured debt. We've got three children, teenagers, and, um
JENNY BROCKIE: And a mortgage?
PHILIP ROBINSON: And a mortgage. I pay over $1,000 a fortnight on a mortgage, and that's interest only. And in the last three years it's gone up almost $300 a fortnight, just on, and it's not a big mortgage - it's less than $300,000.
JENNY BROCKIE: And how would you describe your lifestyle?
PHILIP ROBINSON: Nonexistent.
JENNY BROCKIE: Sandra, you're laughing there. Why are you laughing?
SANDRA ROBINSON: Well, this afternoon when I picked the kids up, I, on the way home, they thought it was a treat because I could buy one bottle of - what was it? - Coke and three little tiny mini-bars which were 70 cents each, and that was a treat to buy.
JENNY BROCKIE: How many credit cards did you have between you? How many do you have now and how many did you have?
PHILIP ROBINSON: We've got none now, we've cut them all up and we're working with a financial counsellor to work through that.
JENNY BROCKIE: How many did you have?
PHILIP ROBINSON: Did we have? I can't remember actually but I think it was somewhere about 9 to 10.
JENNY BROCKIE: 9 to 10 credit cards between the two of you, and were they from banks or non-banks or both?
PHILIP ROBINSON: Both.
SANDRA ROBINSON: We even had one bank that I didn't even apply for a credit card and they sent me out a letter to say, "Your credit card will be able to be picked up at this time "from the branch," and I went in and said ..
JENNY BROCKIE: Are any of these offers and credit cards coming at a time when you weren't coping paying back the debt?
PHILIP ROBINSON: Yep. I've got a classic. I received one today in the mail.
SANDRA ROBINSON: We get them all the time.
JENNY BROCKIE: David, I want to put that to you because you're saying that, you know, you don't lend money to people who can't afford to pay it back. Well, there's an example of somebody being offered credit cards when they clearly can't afford to pay them back.
DAVID BELL: It's clear no system's perfect but there is an important loophole in the law here in Australia and that is under the privacy laws institutions can't tell whether people have a range of credit cards so you could literally have 15 credit cards, not a have a problem on those credit cards, and when you make your application for the 16th you can't tell the institution which receives your application can't tell whether you have problems with the other 15 unless there's a negative report.
GARRY ROTHWELL: No, that's not true. If banks did responsible credit-checking they can see on a person's credit file what credit applications have been made.
JENNY BROCKIE: Can you, David? Can you see that?
DAVID BELL: We have a system here in Australia of what they call negative reporting. It's the only country in the OECD which has that sort of reporting which means you only see problems on people's credit file.
GARRY ROTHMAN: That's not true. That is not true. I've been a credit manager. I know. I'm not just a financial counsellor. When you do a credit check on someone, you see the other applications that have been made.
DAVID BELL: You see other applications but you don't necessarily know whether the person has a credit card.
GARRY ROTHMAN: Right, but if you see nine applications within one year.
JENNY BROCKIE: If you see they've got nine credit cards you might think twice about giving them another one, wouldn't you?
DAVID BELL: I'm pointing out the fact that there is a loophole in Australia. We'd like to be able to close that loophole.
JENNY BROCKIE: Sandra, can I ask you why you kept taking the credit cards?
SANDRA ROBINSON: Because we couldn't survive. It's simple as that. We could not survive in the ..
JENNY BROCKIE: And how did you think you were going to pay it back?
SANDRA ROBINSON: A lot of prayer and hope.
JENNY BROCKIE: Hope? Chris Bowen, what do you think about this? What do you think about people able to get eight or nine credit cards? Is there is case for stronger regulation?
CHRIS BOWEN: There's a case for better regulation. There's a case, certainly at the edges, I think, with fringe lenders. There's certainly a case for much better scrutiny of them and national scrutiny of them. We've heard about emergencies and people needing to borrow $2,000. We don't want to go back to the old days where you had to go cap in hand and beg for money just for emergencies. You do need to strike a balance. A lot of people here, um, we've heard have relied on these things for essentials. So we need to get better regulation, there's no doubt about that, but we don't need to go back to the old days of ...
JENNY BROCKIE: What does better regulation mean?
CHRIS BOWEN: I think more consistent regulation across the country, better transparency, better information, more upfront information.
JENNY BROCKIE: What sort of more upfront information?
CHRIS BOWEN: More upfront information potentially about the long-term costs. We saw on the clip about the young man who didn't realise just how much interest he was going to be paying. We're putting out a paper soon on these things with some various options for regulation across the country.
JENNY BROCKIE: Regular options for regulations on bank lending?
CHRIS BOWEN: Lending across the board.
JENNY BROCKIE: When will that paper come out?
CHRIS BOWEN: Very soon.
JENNY BROCKIE: How soon?
CHRIS BOWEN: It's not my portfolio, but very soon.
DAVID BELL: We would agree with Chris. We think there does need to be improved regulation. For example, there's a whole range of non-bank lenders who don't have very high standards who lend in a predatory fashion who we've been working with consumer groups to try and address these issues and we think they need to be regulated.
JENNY BROCKIE: But we do hear a lot of stories as well, David, about banks offering people vastly more money sometimes than they feel they should be offered.
DAVID BELL: Look, you'll always have There will always be a story like that. It's unfortunate. Banks don't want to do that but the overwhelming vast majority of bank lending is very soundly done.
JENNY BROCKIE: We are going to have to wrap up. But, Chris Richardson, I guess one thing that people would like to know in closing off tonight is whether they can really expect any relief from this struggle and particularly whether inflation's going to keep rising, whether those food and petrol prices are just going to keep going up?
CHRIS RICHARDSON: I fear that that is a risk and potentially quite a big risk. Although many people have read the front-page stories about US recession, the bigger thing that's happening in Australia is that our export prices for coal and iron ore are still leaping. That's throwing a lot of money at the economy. It means that on average the economy will be better off but it also means that inflation is probably likely to continue to rise, that interest rates may well rise further from here and I would say that pressure on food and energy prices is only going to get worse, rather than better, so sure.
JENNY BROCKIE: So what would you like Chris Bowen to take back to Canberra as a result of this discussion that would help low-paid workers? What do you think he could be doing?
CHRIS RICHARDSON: I know it's an area that the Government's looking at and will try to do something over time. But we definitely could do better there, and other countries do.
JENNY BROCKIE: Chris Bowen, your government was elected promising a better deal for working families. We hear that phrase again and again from people in your government. What are you going to deliver them apart from the things we already know about, like the tax cuts?
CHRIS BOWEN: Well, I think Chris is right. There are things that can be done better. We do have a program of reform. We do have, as I say, the increase in childcare rebate, the increase in the low-income tax offset. Can we buck international trends? No, we can't but we can make differences and help people in that process but what people can be assured of is we know the issues.
JENNY BROCKIE: I wonder how people feel, having heard everything here tonight. Marie, we started with you. What do you think about what you've heard?
MARIE ANGRILLI: I think we've just gone around in a circle. It's always, you know, low-paid workers, their wages increase inflation and unemployment and all that but what about other people's work, other people's wages? How come only low-paid workers' wages always affect the economy? What about people on high incomes? How come their wages don't affect the economy?
JENNY BROCKIE: Gavin, what do you think about what you've heard tonight?
GAVIN RIDDELL: I think if something positive does come out of it, it will be a wonderful thing but I don't see it happening. As you said, things just seem to go round and round. One person says this, one person says that, they try and even each other out and think, well, at the end of the day that will do.
JENNY BROCKIE: And in the meantime, Garry, are we going to see a fierce push back from the employers at that minimum wage case?
GARRY BRACK: Well, there's obviously an argument to be had about how far you go and a realisation, as with every other economic cycle, that the more you push the minimum wages up, the more there's going to be a reversal down the track but what we have seen in a whole range of industries for people with skills is that their wages have grown faster than the rate of inflation and what we've got now is perhaps some of the negative effects of large wage growth. If that wage growth outstrips productivity, then you start to get inflationary impact and then we start to get interest rate rises and it's the cost of debt which is killing a lot of businesses, not just, not just, a question of the wage payments. If you don't get the productivity and the productivity comes really from the higher levels of skill that you have to invest in a developed economy, you can't get productivity out of the lower levels of skill, the economy just doesn't allow you to do that, because those jobs by and large are in Asia and Africa and a variety of other places with whom we can't afford to compete.
JENNY BROCKIE: Quick final word, John, and then we have to wrap it up.
JOHN BUCHANAN: One of the greatest boosts in productivity you can have is strong labour standards. You stop subsidising marginal employers and you force employers to think creatively about how to boost output per labour per hour.
JENNY BROCKIE: We are going around in a circle and the circle is now about to end because we've run out of time. Thank you all very much for joining Insight tonight. It's been great to have you here.
This week, Insight asks - are wages keeping up with the cost of living? And how much is 'enough'?
Have Your Say: Are your wages keeping up with the costs of living, and what would help relieve the financial pressure?
Meet the guests
Unemployment is at an all time low. However, 1.2 million wage and salary-earning households reportedly suffer financial stress, and 80% of the 2.5 million jobs created over the last twenty years are paid less than $600 per week.
Inflation stands at 4.3%, with Australia's food inflation the highest in the developed world.
So how can we deliver more to the low paid? Is a wage rise the answer?
Meanwhile, Australians are turning to credit. Personal debt levels are at unprecedented highs, financially crippling even those on higher wages.
Has it become too easy to credit? Or do we just want too much?
Related sites
This week's Insight topic in the news
- Petrol and food prices drive up inflation
- ACCC to monitor cost of groceries
- Government 'exacerbating inflation problem'
- Aussies using credit cards wisely
- Mortgage stress 'to hit 300,000'
TRANSCRIPT
Australia has had 16 years of economic growth and wages are on the rise but many Australians say they're struggling to balance the family budget. With housing, food and petrol prices at record highs, are wages keeping up with the cost of living or are some of us just living beyond our means?
JENNY BROCKIE: The Government says it's watching petrol prices and is awaiting the results of an inquiry into grocery prices. In July, the Fair Pay Commission will review the minimum wage. So how are the low-paid really managing? Here's Sashka Koloff.
MARIE ANGRILLIS' STORY:
REPORTER: Sashka Koloff
As her neighbours sleep, Marie Angrilli is getting ready for work.
MARIE ANGRILLI: It is tiring, especially if you're not used to it. I sort of lay there for five minutes and think, "I've got to get up, I've got to get up," and then I actually get up but I hit the snooze button in case I fall asleep again.
At 59, she didn't think she'd be working this hard but, when she separated from her husband eight years ago, she had to find a job to pay her mortgage, and got work as a cleaner.
MARIE ANGRILLI: I really didn't have any skills, I'd let them go, and I thought, well, I know the cleaning industry so I will re-enter that.
Because there aren't many fuel-time cleaning positions, Marie works two part-time jobs to make ends meet. From Monday to Friday she cleans two buildings in the city of Melbourne, one in the morning and one in the afternoon.
MARIE ANGRILLI: You're working around office workers so you have to work out of hours.
As the city gears up for the working day, Marie heads home for a few hours sleep. At 2:30 this afternoon she'll wake up, come back into the city and do it all over again.
MARIE ANGRILLI: Because of the way you work you are constantly tired, because I'm sleeping maybe three hours during the day and another three hours at night.
Having the two jobs means Marie spends three hours on the road every day. Petrol prices are biting.
MARIE ANGRILLI: When I first started driving to the city I was putting $40 into my petrol and now I'm putting $70 in it. So for me it's almost doubled.
Marie earns $14.72 an hour with a 15% loading. She says it's not enough.
MARIE ANGRILLI: I suppose nobody thinks their pay's enough but, no, it is not really enough. I put about 40% of my income into paying off my house because I feel I have a limited time to do that and being a low-paid worker you're sort of always thinking, "Well, can I meet the payments "and, if I don't, what happens then?" So it's sort of like standing on the edge of a cliff waiting to fall over.
JENNY BROCKIE: Well, welcome everybody. Thanks for joining us and thank you for coming along, Marie. With a booming economy like we have at the moment, have you tried looking for better-paid, easier work than that?
MARIE ANGRILLI: Well, I am 59 so I feel I really couldn't go into a new career at my stage in life. So that's why I did go back into the cleaning industry because I'd originally done that when my children were small. But then I only did that on a one-shift basis, not a 2-shift basis.
JENNY BROCKIE: Yeah, because it's two ends of the day.
MARIE ANGRILLI: It's that 2-shift basis that really gets to you. If you're doing it one-shift, it's not as bad but it's the struggle between the two shifts.
JENNY BROCKIE: Petrol's obviously a big cost for you.
MARIE ANGRILLI: It is for me.
JENNY BROCKIE: What else are you finding more expensive?
MARIE ANGRILLI: Well, everything's more expensive. Your interest rates are constantly going up and, if the petrol prices go up, well, everything goes up with them, the food and everything. Petrol prices affect everything, so it's a constant rise.
JENNY BROCKIE: How much have you got left over when you've paid for everything you need to pay for?
MARIE ANGRILLI: Very little, very little.
JENNY BROCKIE: Anything?
MARIE ANGRILLI: Um, sometimes yes, sometimes no. It depends on how many bills come in.
JENNY BROCKIE: What was the last thing you ever splurged on, or do you ever splurge?
MARIE ANGRILLI: Um, I do occasionally. The last thing I splurged on was a little - I don't know what you call it - it's a sort of a chicken with little rabbit's ears and I...and when I ..
JENNY BROCKIE: That was a splurge?
MARIE ANGRILLI: Yes.
JENNY BROCKIE: How was the splurge? How much did it cost?
MARIE ANGRILLI: I consider it was a splurge because it was a waste of money really. I could have put that towards something else. It only cost me $15 - $14.95 but I wanted to have it because when I was married, I was married into an Italian family and we used to do the chicken dance all the time and this little thing actually does the chicken dance.
JENNY BROCKIE: See, I find this so interesting, I find this
MARIE ANGRILLI: I thought I just had to have it.
JENNY BROCKIE: OK, but $14.95 for you is a splurge?
MARIE ANGRILLI: It is if I don't really need it, yes.
JENNY BROCKIE: OK, Peder, what about you? You live in Canberra. You're a security guard. How much are you earning an hour?
PEDER FRANTZEN: It's $15.44 an hour.
JENNY BROCKIE: Any overtime?
PEDER FRANTZEN: Very little because I work day shift, so
JENNY BROCKIE: And how many hours a day?
PEDER FRANTZEN: It's 12 hours a day.
JENNY BROCKIE: Are you managing?
PEDER FRANTZEN: We...we struggle here and there, just, I suppose, like anyone does, but it can be tough.
JENNY BROCKIE: How do you struggle? What sorts of things? What are you going without, for example?
PEDER FRANTZEN: We've sometimes had trouble with the rent. As far as dental and, um, insurance, it's just ..
JENNY BROCKIE: You don't do it?
PEDER FRANTZEN: I haven't seen a dentist in a long time.
JENNY BROCKIE: How long?
PEDER FRANTZEN: Jeez, probably three years.
JENNY BROCKIE: And insurance? No insurance?
PEDER FRANTZEN: Not at all.
JENNY BROCKIE: No house insurance, car insurance, nothing like that? Home contents? Nothing?
PEDER FRANTZEN: No.
JENNY BROCKIE: Gavin, what about you? You're a boilermaker from Portland, in Victoria. You earn a bit more. You take home $520 a week, I think. Is that right?
GAVIN RIDDELL: Around about. We're on $25 an hour.
JENNY BROCKIE: $25 an hour. How many people do you support on that wage?
GAVIN RIDDELL: Five and a half, basically. I have three children that I care for and a partner full-time and I've also got a son to my first marriage that I have one night during the week and then every second weekend.
JENNY BROCKIE: And do you have any other income than that $520 a week that's coming in?
GAVIN RIDDELL: That's it.
JENNY BROCKIE: So how are you coping?
GAVIN RIDDELL: At the moment, to be honest, we're not. Every week is a struggle. To have such a large family, we need a large car to move us all and, as we've heard, the price of fuel at the moment is just phenomenal.
JENNY BROCKIE: So how...but how desperate are you? I mean, how bad is it? Are you managing? Are you just managing or...?
GAVIN RIDDELL: No, we're not.
JENNY BROCKIE: What does that mean for you? What are the prospects, then? What do you do?
GAVIN RIDDELL: The prospects for me at the moment, I'm looking at bankruptcy. We're that far behind, I've got no choice but to look at bankruptcy.
JENNY BROCKIE: Is that because of debt as well? How much debt?
GAVIN RIDDELL: I mean, it's...I'm in, I mean, it's not a great deal. I'm in around $50,000 debt but it's a debt that I can't manage.
JENNY BROCKIE: How did you rack up that debt, just out of interest?
GAVIN RIDDELL: Because the first marriage dissolved. I come out of that very badly.
JENNY BROCKIE: Yeah, and often that's the case. If something goes wrong for people, that's the start of the problem. Heidi, you're from Melbourne. You've got two young children, yes? And your husband takes home $550 a week, laying pipes, is that his job?
HEIDI NEICHO: Yes, that's correct.
JENNY BROCKIE: He couldn't be here tonight with us, so tell us how you're getting by.
HEIDI NEICHO: Very similar to the last couple of people speaking. I mean, I just smiled hearing Peder before saying about dental, you know. We...I don't think I've seen a dentist for more than five years and I know my husband hasn't either. Um, week to week, um, I've cut my shopping bill down by $50, you know, and I have a small child with nappies and formula, you know.
JENNY BROCKIE: So how have you cut it down? What are you going without?
HEIDI NEICHO: Um, well, I've cut our petrol right down. Um, I only put $20 in a week and, um, if that. Basically that will get me to the shops, to kinder and back again, um, and the basics. If I wanted to go to see my parents in the country, then that's not an option in our weekly budget. Um, yeah, so it's
JENNY BROCKIE: What happens when you're short? What happens if you fall short?
HEIDI NEICHO: I mean, on small things, I'm very blessed to have, you know, a family that have helped with small things but there have been times where in emergencies, um, for example, like the gentleman just said, we only have the one car and that's what - at the time, what my husband used to get to work. Um, we had to get that repaired and that actually cost a fair amount of money. The loan we got in order to get that repaired was at an exorbitant interest rate.
JENNY BROCKIE: Where did you get the loan?
HEIDI NEICHO: Um, it was ... Am I allowed to say the company?
JENNY BROCKIE: Um, yes, just broadly, was it a non-bank?
HEIDI NEICHO: It wasn't a bank, yeah, it wasn't a bank.
JENNY BROCKIE: Like a cash advance store?
HEIDI NEICHO: Basically, yes. That wasn't because we can't read contracts, that wasn't because we're silly, that was because it was an emergency at that time and, even though we get by just week to week on a very tight budget, if one thing comes out or one emergency rises, there's no spare.
JENNY BROCKIE: So how much did you borrow? How much money did you borrow?
HEIDI NEICHO: $2,000.
JENNY BROCKIE: And how much did you pay back on the loan?
HEIDI NEICHO: Just under $6,000.
JENNY BROCKIE: $6,000 on a $2,000 loan. And did you pay it back?
HEIDI NEICHO: Yes, we have.
JENNY BROCKIE: What don't you have? When we were talking about what you go without, you said the dentist. What don't you have that you would regard as almost essential? What sort of things are you going without?
HEIDI NEICHO: In a way, what I don't I suppose the one thing I feel that I don't have is I actually want to work. I actually don't have a job and I would like to work.
JENNY BROCKIE: What sort of job?
HEIDI NEICHO: Secretarial work, personal assistant work, um, in construction, that sort of thing...um, pretty much.
JENNY BROCKIE: And why haven't you got a job, do you think?
HEIDI NEICHO: We can't afford the child care. I have two small children. In order to put them in full-time child care, I would have to earn an awful amount of money just to cover the child care. I wouldn't actually... I'd be working to pay child care.
JENNY BROCKIE: This is a common story. I've heard it a lot and in fact we're doing this show tonight because it's arisen out of other shows where people have raised these sorts of things. Kim, you earn $13.30 an hour, is that right, helping run a cattery and you've got a $5,000 credit card debt?
KIM RILEY: Yes.
JENNY BROCKIE: Are you spending more than you earn?
KIM RILEY: Slightly. I try not to. Um, sometimes I do, though, yeah.
JENNY BROCKIE: So is that your only income or do you have other income as well? 19:16:40
KIM RILEY: Um, I'm subsidised by Centrelink as well because I only work between 16 and 20 hours a week, so Centrelink give me a part payment.
JENNY BROCKIE: And children. Do you have children?
KIM RILEY: I have one, yes.
JENNY BROCKIE: Single mum?
KIM RILEY: Single mum.
JENNY BROCKIE: And do you have a mortgage?
KIM RILEY: I do.
JENNY BROCKIE: How are you coping with that on $13.30 an hour?
KIM RILEY: At the moment, not very good. I'm behind. Um, and I think it's going to take me about 10 months to catch up just by paying a small amount extra.
JENNY BROCKIE: So what are your priorities when you spend money and what do you go without?
KIM RILEY: Um, I think I'm quite mean with the heater. I won't turn it on. It's a gas heater but I'll still say to my daughter, "Put a jumper on." I'll put another layer on, so ..
JENNY BROCKIE: The environmentalists would like you for that.
KIM RILEY: They would, but I live in a wood house so it's very cold.
JENNY BROCKIE: And they are basic things, aren't they?
KIM RILEY: Yeah, just heating would be good.
JENNY BROCKIE: Robyn, you and your husband, Jimmy, are thinking of selling your house in Wollongong - why?
ROBYN TIMLIN: Just we live month to month so, if we make the mortgage payment, that's great this month, but next month, if we don't make it, well, we'll just, we just live month to month.
JENNY BROCKIE: Now, you work in early childhood?
ROBYN TIMLIN: Yes.
JENNY BROCKIE: And your husband works part-time in aged care. How much do you bring in between you each week?
ROBYN TIMLIN: It depends on my husband's work. In a good week, we could bring in $1,000 a week.
JENNY BROCKIE: And how much...? You've got a mortgage. How much is your mortgage?
ROBYN TIMLIN: $275,000.
JENNY BROCKIE: And why is it so hard for you? What are the main things that are making it hard for you?
ROBYN TIMLIN: The interest rates went up, my husband was out of work for a period of time. It's all compounded.
JENNY BROCKIE: How is it impacting day to day on your life? I know you have a story about something that happened to you which I find very interesting. Tell us. Share that story with everyone.
ROBYN TIMLIN: I feel a bit cheeky talking about, listening to everybody else's living circumstance, and I don't propose that we're actually, um We're not suffering to the extent of a lot of people. We're just living week to week, month to month, and I think that we have a good life and that we don't go without a lot.
JENNY BROCKIE: What about petrol? You don't want to tell this story. Come on. I find it very interesting because it's not as though you're on the breadline in terms of your income, is it?
ROBYN TIMLIN: So...no, we're not.
JENNY BROCKIE: But I find it a very interesting story. Please tell everyone.
JIMMY TIMLIN: You want me to tell?
JENNY BROCKIE: Yeah.
JIMMY TIMLIN: Um, well, one day I was at work and I had to go and do a bit of shopping somewhere and I didn't quite reach the shopping centre because I ran out of petrol. I didn't have any cards or any money on me to buy petrol.
ROBYN TIMLIN: You had a card but there was no money.
JIMMY TIMLIN: I had a card, yes, that's right because there was no money in the account because the bank did the sweep for the month and I had to phone Robyn, whinging like a big baby, "I'm stuck in Wollongong, I can't get home".
JENNY BROCKIE: What did you do? Did you just leave the car?
JIMMY TIMLIN: Left the car there.
JENNY BROCKIE: You left the car?
JIMMY TIMLIN: I left the car and walked home. Lucky it was near home. It was a nice sunny day.
JENNY BROCKIE: I find this an extraordinary story too that really it was, you were that low with money.
ROBYN TIMLIN: We don't have money in storage so at the end of the month we get our money swept to our mortgage and, if the money's not there, it doesn't get swept and we don't have anything to live on so, if it's not there, it's not there.
JENNY BROCKIE: So you're really living month to month.
ROBYN TIMLIN: Yep.
JENNY BROCKIE: Chris Bowen, you're assistant Treasurer and Minister for Competition Policy and Consumer Affairs. We hear a lot about food and petrol prices over and over again and just last week we saw inflation going right up. It's now 4.2%. I think that's a 16-year high. Do you think the low-paid - and I'm excluding our last two people in this and even some of the other people who have spoken - but our low-paid, do you think they're paid enough?
CHRIS BOWEN, ASSISTANT TREASURER: Clearly, people are doing it tough. We have the highest food-price inflation in the Western world. So things that people have no choice about are going up, whereas things that people have some choice about, like TV screens, have come down over the years. So the cost of living pressures on low-paid workers in particular have been very strong, including the interest rate increases. As well as being a minister, I am an MP for a western Sydney seat. I see this every day. Real estate agents in my area tell me that about 25% of the houses for sale have been repossessed. Every time you see an auction sign go up in the suburb I live in, you think, "There's another person being repossessed."
JENNY BROCKIE: But for those people, they hear all the time about boom times, they hear about how Australia's doing so well and we're experiencing this resources boom.
CHRIS BOWEN: It's one of the great disconnects of recent modern economic history. Australia has done well but many people have missed out, and that is something that is a priority for the new government, to try and even that up a little.
JENNY BROCKIE: We'll talk to you a bit later on about what you can do about it. Chris Richardson in Canberra, you're the director of Access Economics. How accurately does the inflation rate that we hear about, this 4.2% inflation rate, reflect what's really being felt by low-income workers, not just by everybody in the community, by the lower-paid?
CHRIS RICHARDSON, DIRECTOR, ACCESS ECONOMICS: Well, it's certainly low-income workers are feeling it worse than that. If you look at what's happened in the last little while, the costs of housing, shelter and energy have jumped a lot, and they are absolutely fundamental to the low-paid. They are big parts of their day-to-day budget. The long-term impact of the big increase in the cost of buying a house in recent years is increasingly showing up in interest rates and in rent. Food prices, greater prosperity around the world and some dumb policies with putting food into ethanol as energy means that food costs have gone up and energy costs in general have gone up as China and much of the rest of the world is having an industrial revolution. So the pain of faster inflation is being felt particularly for the low-paid.
JENNY BROCKIE: Helen, you've been talking to low-paid workers in Australia for a new research project that you're doing. What is a low-paid worker? How many people in Australia would be regarded as low-paid, and what's the definition?
DR HELEN MASTERMAN -SMITH, AUTHOR, LOW PAY PROJECT: The definition we use is that which the OECD uses, which is two-thirds of the median income. So the latest ABS statistics, if we apply that definition, would produce an hourly wage of $16.50 an hour, a weekly wage of $630 a week, or an annual wage of $32,500 a year. So a person can be low-paid on any of those counts.
JENNY BROCKIE: A few people in this room are earning less than that.
DR HELEN MASTERMAN -SMITH: Yes, many are. In terms of the incidence or rate of low pay in Australia, our calculations put the figure at about one in four workers is low-paid and, when we take junior employees out of the equation, we're looking at about one in five. So it's quite a widespread phenomenon. That's based on 2004 data.
JENNY BROCKIE: So that's millions of people.
DR HELEN MASTERMAN -SMITH: Yes, we are talking millions of people.
JENNY BROCKIE: We are looking at whether there's a case for higher wages or whether it would just create more problems and whether wages are keeping up with the cost of living. Sharan Burrow, you're arguing for a $26-a-week wage rise when the Australian Fair Pay Commission reviews the minimum wage in July. How did you come up with that figure of $26 a week?
SHARAN BURROW, PRESIDENT, ACTU: When we looked at the last year, we said that we had to at least strike a rate where people got a CPI increase that meant they didn't go backwards again this year in real terms, and that comes to $26 or around 4% at that rate. But can I say that we're very worried, even about that, when you understand that in just the last 12 years we think people's living standards have gone up by $60 to $70 a week. So $26 is barely going to make the grade for some people to give them some relief.
JENNY BROCKIE: Gary Brack, what's your response to that? Do you support the idea of an increase in July?
GARRY BRACK, CHIEF EXECUTIVE, EMPLOYERS FIRST: We say there is room for a modest increase but you've got to be careful about the level of that. We don't support the ACTU view about $26. What you've got to look at is what will happen down the track. If you raise those costs by an appreciable margin, you'll end up with disemployment - that is, employers who won't create jobs or who will reduce the number of jobs that do exist already.
JENNY BROCKIE: So when you say you support a modest increase, what sort of increase would be acceptable to you?
GARRY BRACK: Well, we say, as we did in the last case, that $10 would be an appropriate figure. And we do know also that if you increase it by more then you'll start to add to the nervousness of employers about that low level of jobs and, importantly, when you look at what manufacturing has done, it's gone offshore or it's lost to offshore suppliers.
JENNY BROCKIE: Alright, Chris Bowen, do you agree with what Gary's saying?
CHRIS BOWEN: Oh, no. We've put in a submission which does call for an increase in the minimum wage. We haven't put a figure on it. Governments don't generally put figures on it when they put in the submission.
JENNY BROCKIE: Would you like to just pluck one out of the air for us, to give us an idea? Somewhere between $10 and $26 maybe?
CHRIS BOWEN: Funnily enough, I wouldn't like to pluck one out of the air but we've put in a submission dealing with the cost of living pressures and also the balance to be reached in the Australian economy, and we've put the submission that there is an argument for an increase in the minimum wage and it's up to the Fair Pay Commission just what that increase is.
JENNY BROCKIE: Heidi, listening, what do you think about this?
HEIDI NEICHO: I'm actually quite shocked, to be perfectly honest. I'm actually quite shocked. Um, $10 is just insulting to me, um, and my family and what my husband does for a living, and that's just my opinion. Um, $26, you know It's hard enough for us to budget simple small wages, you know. $10 is insulting.
JENNY BROCKIE: And $26?
HEIDI NEICHO: It's a start.
JENNY BROCKIE: You don't sound thrilled about that either.
HEIDI NEICHO: Look, no, no, to be perfectly honest, $26 is a good start and it's heading in the right direction for smaller for families of wages, of low-earning wages, to actually start bringing it up a bit.
JENNY BROCKIE: Sharan Burrow, I'd like to put something to you because we have one of the highest minimum wages in the OECD and wages have been rising every year. We look pretty good compared to a lot of other countries on this scale.
SHARAN BURROW: Only on paper. We say with the rise in just one year of four interest rate payments, rents are up by 7.1%, at a basic level $48 more in mortgage or rent, $20 more in petrol, 18.9% increase in a year. You've got a food bill of 5.7% and the costs go on. 30% increase in CEO salaries in just one year, profits at a 30-year high relative to wages share, businesses need people to earn a bit more money as well.
JENNY BROCKIE: Garry, just quickly.
GARRY BRACK: Where are the low-paid by and large employed? And the fact is that a lot of them are in the retail sector - profits are not up by that margin. They're in the hospitality and tourism sector. Restaurants report higher incomes but much higher outgoings, so their profits are actually down. In the mining sector, people at very low levels of skill are still getting very high incomes. That's because they've got the money to do it. They're exporting billions of dollars worth of stuff, they've got jobs there that people are upgrading to, they're learning to drive big trucks. People who are unskilled yesterday are picking up big money today because there was the productivity.
JENNY BROCKIE: What about people like Marie sitting at the end of the line here?
GARRY BRACK: And that's the cleaning contracting industry, so you tender for a job in the cleaning contracting industry knowing that if you put another couple of dollars on you don't get the job, so you tender down. Now, that's part of the reality of that industry. You have the contract or the tender to clean this school for the next three years. At the end of that three years, you tender again for the job and you lose it because somebody else undercuts you. They keep the employees on.
JENNY BROCKIE: Marie? What do you say as a worker?
MARIE ANGRILLI: I hear that argument all the time. They cut hours or they cut staff, and we end up suffering that. It's never the contractors themselves that actually carry the burden.
GARRY BRACK: No, I don't think that's a reasonable statement. The tendering process forces prices down. The contractor is getting squeezed in terms of their margin. Of course, employees are bearing part of the brunt of that because there's downward pressure on their wages, but then the comment that was just made by Marie is that they put the pressure on, they lose hours, they cut staff, etc, to reflect the profitability of that industry, unlike the things Sharan was talking about where you've got profitability where there has been massive growth.
JENNY BROCKIE: OK, let's not let's not get stuck on the cleaning industry. There are lot more industries to look at.
SHARAN BURROW: The property owners can afford more, Jenny, that's the point. Look at the growth in property and property services and the profit levels. That contracting squeeze shouldn't happen to the contractors, nor the staff. People have to be serious about what it takes to sustain our economy.
JENNY BROCKIE: Chris Richardson, can I ask you why you think people are struggling when we have one of the highest minimum wages in the OECD?
CHRIS RICHARDSON: Because we don't have a good set of benefits and taxes to deal with this. In many ways we're dealing with the wrong question. Underlying it is the assumption that if we want to make the worse-off in society better off - and we all do - the underlying assumption here is that it's up to employers to pay for it, that they have to be the national welfare system, and that's just wrong. I mean, we have $250 billion raised by the Federal Government and then spent again. That is where we should be getting greater fairness in the system, and it's just failing. What are the highest rates of tax in Australia? They are the rates of tax being paid by people on low wages because, as they move out of welfare and into work, or take on a bit of extra work, they lose an enormous amount of their benefits and they're still paying too much in tax. That's incredibly dumb. We can do much better than that. We can do much better for the low-paid but you can't do it by pushing up wages a lot, and $26 - it's a mistake. You're trying to turn the employers into the welfare system.
JENNY BROCKIE: So welfare system or tax reform or both?
CHRIS RICHARDSON: Both, definitely both. We can do this a lot better and a number of other countries are doing it better. I have to say that on 1 July we will see a substantial shift in what's called the low-income tax offset, LITO, and in fact we have a couple of years of promised improvements in LITO. That's very, very good but we could do better than that and in particular we could turn it into something specifically aimed at those who are low-paid workers - earned income tax credits instead of simply available to everybody there.
JENNY BROCKIE: And what about the idea of a wage increase, Chris? Do you support any kind of minimum wage increase in this round?
CHRIS RICHARDSON: We certainly could. Now, a bunch of sectors will feel pressure, including some of those where the low-paid workers work. But I think that in the short term we will still see good job growth in Australia and that a moderate low-wage increase or minimum-wage increase wouldn't hurt. The big success of 16 years of economic growth has been lots of people down the bottom end of Australian society now have jobs, who didn't before.
JENNY BROCKIE: I'm going back to your modest increase, though. How much is a modest increase that you think would be acceptable in this round?
CHRIS RICHARDSON: Ah, well, let's just say $15. It is between the $10 and the $26, but it's acceptable in the circumstances. You have to realise it comes with a cost. Some people will lose their jobs as a result of $15.
JENNY BROCKIE: Yes, John.
JOHN BUCHANAN, ECONOMICS, SYDNEY UNIVERSITY: This argument has been around for a long time. The determinants of employment level are not just a function of the wage, they're a function of the general economic conditions, and the American experience is very clear on this point. If you don't have rising minimum wages and instead rely on the tax and benefit system to subsidise employers to create low-wage jobs, employers go out and respond to that incentive. You create a whole lot of really low-paid jobs which are then supported by the government.
GARRY BRACK: Chris Richardson made it absolutely clear. he said you push it up too much with your hand on your heart and saying, "Let's take care of these people," and everyone in this room would agree. But in a full-employment economy you will not see the full effect of that but when the economy starts to turn around and go into reverse then will there be a savage impact on those people because the cost of employing them will be higher than the sustainable level of employment and they will therefore lose their jobs at a dramatic rate and they will be the last ones to get them back. That is part of the reality. The Australian Fair Pay Commission has accepted that in its 2006 decision. It makes it clear. Every bit of research tells you that, you push the price up too much, people lose their jobs.
JENNY BROCKIE: But Chris Richardson is still saying $5 more a week than you are?
GARRY BRACK: He also puts the point that we have argued, which John tries to argue against, that says that if you create an artificially high minimum wage those people will lose their jobs and therefore you've got to look for a circuit breaker. Is there a danger that some employers will artificially then create low-paid jobs and leave it to the government to subsidise? If you want the jobs, you've got to create a joint system where employers are prepared to create and retain jobs with the money that is affordable and then you add on an element of government support as he just defined it.
JENNY BROCKIE: Chris Bowen, you're on a knife edge here, aren't you?
CHRIS BOWEN: You're right - we are on a knife edge here. The best impact we could have is to reduce inflation. To do that, we need to reduce government expenditure. At the same time, we need to increase support to working families. So this is the balance that we're dealing with right now in the lead-up to the Budget. I think we'll get the balance right but it's not an easy task.
JENNY BROCKIE: In the meantime, though, low-paid workers are doing it really tough.
CHRIS BOWEN: Absolutely they are, absolutely they are, and the cost of living is going up, absolutely, and that's why we need those tax cuts at the lower level, that's why we're committed to them. We've got economists saying, "Don't do it." Well, they're so necessary. People are relying on them, they need them. They are so necessary to take just a little bit of the pressure off.
JENNY BROCKIE: But only a little bit of pressure.
CHRIS BOWEN: We're not pretending that they're going to fix the world but it's better than nothing.
GARRY ROTHMAN, FINANCIAL COUNSELLOR, UNITING CARE: There's too many casualties going on now. Right now, people are struggling and families are breaking up and people are having nervous breakdowns.
JENNY BROCKIE: Now, Garry, you're a financial counsellor, yeah?
GARRY ROTHMAN: That's right.
JENNY BROCKIE: And is there a change in the people you're seeing?
GARRY ROTHMAN: Absolutely. The biggest area of growth in poverty is working people. It's not in welfare. The growing area for poverty in Australia is people who are working, and people who are working are subsidising their income with debt.
SHARAN BURROW: That's exactly right. It's gone up 20% in just one year.
JENNY BROCKIE: And how often are you seeing those sorts of people and what sort of problems are you seeing?
GARRY ROTHMAN: Financial counsellors across Australia are seeing people on a daily basis. We can't meet the demand on our services. We don't have the capacity to help the people who need our help. We're continually seeing people who are overcommitted, who every dollar that an Australian working family gets is under competition from credit providers. Every dollar that an Australian worker gets is being attacked by utilities, by banks, by fringe lenders, by consumer lease companies.
JENNY BROCKIE: OK, we're going to get on to all of that in just a moment but I'd like to ask you just quickly before the break, are people using that debt for essentials or non-essentials or for both?
GARRY ROTHMAN: Absolutely. We're seeing people I mean, rising housing costs is not a luxury, getting a computer for your kid at school is not a luxury, paying your school fees, even in the public education system, is not a luxury.
JENNY BROCKIE: So it's credit for essentials?
GARRY ROTHMAN: It's credit for essentials.
JENNY BROCKIE: Insight is looking at whether wages are keeping up with the cost of living, but what happens when you want more then you can actually afford. Are some people just wanting more than they actually need? Here's Sashka Koloff.
KANE GAMMELLS' STORY:
REPORTER: Sashka Koloff
Last year Kane Gammell took a loan for $34,000 to buy this car, a V8 Holden Chevrolet ute.
KANE GAMMELL: I wasn't looking at it that seriously until I found out, yeah, I could actually get it. I was looking for a car around $10,000 but he went, "No, no, you can have this." Fine. Why not?
At the time he was earning around $650 a week working in a factory making car parts.
KANE GAMMELL: They said, "Do you have finance? We can do all that." I don't think I even needed my birth certificate. It was driver's licence, bankcard, proof of how much you earn, that was it - just one of your wages. So there wasn't much to it.
When he bought the car, Kane was 20 years old and still on his P-plates. Legally, he knew he wasn't allowed to drive a car this powerful.
KANE GAMMELL: When everything's going your way, you don't sort of question things, do you? I just realised that I could get what I wanted.
He says the company that sold him the car, Northern Motor Group, didn't push the issue either.
KANE GAMMELL: No, nobody. The dealer didn't say anything. Nobody said a thing.
The dealership organised a loan for Kane through GE Money for a term of five years with an interest rate of 9.9% but keeping up with the repayments was harder than he expected.
KANE GAMMELL: The way they said it, the way it was, these are going to be your repayments - you didn't even think of insurance, of rego, of petrol, all these things you just didn't factor into it. They go it's only going to cost you $200 a week. I thought that's fine. I will still have something left over, I can still do these things. But it took a few months to work out, no, you don't.
When he lost his job over Christmas, the car repayments became too much and Kane realised he was falling behind. His mum suggested he get some help to figure out what to do. So he went to see Garry Rothman, a financial counsellor with Broadmeadows Uniting Care.
GARRY ROTHMAN: $9,280, that's how much interest you were paying by borrowing that much money off GE. Paying over $9,000 just in interest.
KANE GAMMELL: $3,500 interest in one year?
GARRY ROTHMAN: Yes.
KANE GAMMELL: It's a bit.
Kane now acknowledges he simply wanted more than he needed.
KANE GAMMELL: Definitely. Everything's interest-free, you can buy this, you can buy that.
REPORTER: Do you think it's about greed?
KANE GAMMELL: To a degree, yeah. It's also, um, competing, you know. It's competition, almost, with a lot of things. It's, I got this, that person doesn't, or, you know, he's got that so I want something better, you know. It's always competing with your neighbour, keeping up the Joneses, isn't it?
JENNY BROCKIE: Kane, how much do you think you're responsible for what happened there?
KANE GAMMELL: 100%. I signed the paperwork, I said, yeah, I want it, let's do it.
JENNY BROCKIE: And why was that, do you think? Why didn't you think about things like rego and petrol and insurance and all those things?
KANE GAMMELL: Because I was hearing what I wanted to hear, that I could get the car I wanted, that was it.
JENNY BROCKIE: Garry, how often do you see that?
GARRY ROTHWELL: Well, actually, Kane is in a fortunate position because his asset is worth more than what he owes. Kane's actually an exception. We don't usually see people who come to us who can actually get out of a contract ahead. The usual thing that we see is that people come to us who can't afford to get out of the contract because then they'll still have a debt and they lose their car.
JENNY BROCKIE: And how easily are people getting loans at the moment?
GARRY ROTHMAN: It's interesting that you asked Kane how responsible he was. I mean, Kane was only responsible as much as for the fact that he would have liked to get that car, but the irresponsible part was that a company like GE gave a 19-year-old young man, who had never had credit before, $34,000 with repayments that were more than 25% of his income for a car that he wasn't even legally allowed to drive. Now, if that's not predatory lending, I don't know what is.
JENNY BROCKIE: I should point out that we did invite GE to come on tonight to talk about this but they declined.
GARRY ROTHMAN: It's a shame.
JENNY BROCKIE: We haven't got them here to defend themselves. But you call it predatory lending. Do you see...? What other examples do you have of what you would regard as inappropriate lending?
GARRY ROTHMAN: I think one of the most common things that financial counsellors see is the results of unsolicited increases to credit card limits. I think probably everyone in this room may have received a letter from a bank offering to increase their credit limit and, in most parts of Australia, they can do that without assessing people's capacity to pay.
JENNY BROCKIE: But how much is it also, Garry, about people sometimes just wanting too much?
GARRY ROTHMAN: How often is it? It's the minority of the cases. In the majority of cases, people are trying to get by, people are trying to live and their incomes aren't high enough, the ease to get debt is just too easy. There's lack of responsibility from lenders, and this is a recipe for disaster. An unregulated market like we've got is causing real problems. It's not working. We need better legislation, we need better consumer protection.
JENNY BROCKIE: Daniel, you have a significant personal debt too. How much do you owe?
DANIEL MOREHEAD: Around $50,000 at the moment.
JENNY BROCKIE: $50,000 - and what did you spend that money on? How did that get so high?
DANIEL MOREHEAD: I've got two car, three car loans, a personal loan, credit cards, um
JENNY BROCKIE: Three car loans?
DANIEL MOREHEAD: I had two car loans, I sold one car but sort of kept that loan going because I didn't have enough money to pay it out. That was also through GE as well.
JENNY BROCKIE: And how many cars do you have?
DANIEL MOREHEAD: I've got two cars at the moment.
JENNY BROCKIE: Why have you got two cars?
DANIEL MOREHEAD: I've got one for myself and one for my partner.
JENNY BROCKIE: And how else did your debt rack up?
DANIEL MOREHEAD: Just over-commitment, really. I mean, one of the loans I took out, one of the personal loans I took out, it was for 15 grand, and that money just got wasted. I mean, like, I put some of the money to a wedding but the rest of it, I don't know where it went. Probably 10 grand just gone, just on things, I don't know.
JENNY BROCKIE: What sort of things?
DANIEL MOREHEAD: Some of it we used to pay out some other little loans, brought an airconditioner, you know, just little things, bits and pieces that we didn't really need, but the money was in the account and we sort of took it.
JENNY BROCKIE: So how much do you regard what happened to you as mistakes you made yourself and how much do you regard it as just to do with not earning enough money or not, you know?
DANIEL MOREHEAD: I earn twice Some of these people say $500 a week. I'm averaging $1,100 a week take home after tax.
JENNY BROCKIE: So how did you get into that trouble then?
DANIEL MOREHEAD: Just like you said, I've got a mortgage as well, just over-commitment and stupidity, I think. We're selling the house at the moment and that money we've got left over from the house, that will cover the 50 grand that I've got in debt and we're just going to rent probably for three or four years and, hopefully, start again.
JENNY BROCKIE: David Bell, is it too easy to get credit? Are the banks giving it out too easily?
DAVID BELL, AUSTRALIAN BANKERS' ASSOCIATION: I don't think the banks are. We have a big responsibility
JENNY BROCKIE: Come on. Let him finish. He's had two sentences... two words to say. Go on, David.
DAVID BELL: We have a very big responsibility in the Australian economy. One is to secure people's deposits, and two is to make sure that we lend responsibly, and all the evidence out there shows that we do lend responsibly. It doesn't make sense for banks to lend money to people who can't pay it back. It just doesn't make sense.
JENNY BROCKIE: How closely do you look at people's ability to pay it back?
DAVID BELL: Banks pay very special attention to people's ability to repay money because, as I said, at the heart of it we don't want to lend money to people who can't pay it back. That's just not in our interests, nor in our customers' interests.
JENNY BROCKIE: Philip Robinson, you and your wife Sandra have $163,000 personal debt between you. How did you rack up that much debt?
PHILIP ROBINSON: Over a period of about six years. I'm different to most other people in this room. I earn very good money and, um, I make no bones about it. I get paid $27 an hour to sit in an office. Um, I earn $75,000-$80,000 a year. When we started, I could service that. Um, my wife lost her job. For three years she couldn't work and it was a case that we had to I felt we had to survive, I had to obtain credit.
JENNY BROCKIE: How did you get the credit?
PHILIP ROBINSON: Very simple. You ring up a banking institution and say I'd like to apply for a credit card. They do the figures over the phone and that's not an issue.
JENNY BROCKIE: Now, what were you...? At this stage, were you servicing the credit card you had effectively?
PHILIP ROBINSON: Yeah.
JENNY BROCKIE: And what were you spending? Were you using the credit for essentials or non-essentials?
PHILIP ROBINSON: Yeah, basically essentials. It sounds pretty ridiculous - $160,000 in unsecured debt. We've got three children, teenagers, and, um
JENNY BROCKIE: And a mortgage?
PHILIP ROBINSON: And a mortgage. I pay over $1,000 a fortnight on a mortgage, and that's interest only. And in the last three years it's gone up almost $300 a fortnight, just on, and it's not a big mortgage - it's less than $300,000.
JENNY BROCKIE: And how would you describe your lifestyle?
PHILIP ROBINSON: Nonexistent.
JENNY BROCKIE: Sandra, you're laughing there. Why are you laughing?
SANDRA ROBINSON: Well, this afternoon when I picked the kids up, I, on the way home, they thought it was a treat because I could buy one bottle of - what was it? - Coke and three little tiny mini-bars which were 70 cents each, and that was a treat to buy.
JENNY BROCKIE: How many credit cards did you have between you? How many do you have now and how many did you have?
PHILIP ROBINSON: We've got none now, we've cut them all up and we're working with a financial counsellor to work through that.
JENNY BROCKIE: How many did you have?
PHILIP ROBINSON: Did we have? I can't remember actually but I think it was somewhere about 9 to 10.
JENNY BROCKIE: 9 to 10 credit cards between the two of you, and were they from banks or non-banks or both?
PHILIP ROBINSON: Both.
SANDRA ROBINSON: We even had one bank that I didn't even apply for a credit card and they sent me out a letter to say, "Your credit card will be able to be picked up at this time "from the branch," and I went in and said ..
JENNY BROCKIE: Are any of these offers and credit cards coming at a time when you weren't coping paying back the debt?
PHILIP ROBINSON: Yep. I've got a classic. I received one today in the mail.
SANDRA ROBINSON: We get them all the time.
JENNY BROCKIE: David, I want to put that to you because you're saying that, you know, you don't lend money to people who can't afford to pay it back. Well, there's an example of somebody being offered credit cards when they clearly can't afford to pay them back.
DAVID BELL: It's clear no system's perfect but there is an important loophole in the law here in Australia and that is under the privacy laws institutions can't tell whether people have a range of credit cards so you could literally have 15 credit cards, not a have a problem on those credit cards, and when you make your application for the 16th you can't tell the institution which receives your application can't tell whether you have problems with the other 15 unless there's a negative report.
GARRY ROTHWELL: No, that's not true. If banks did responsible credit-checking they can see on a person's credit file what credit applications have been made.
JENNY BROCKIE: Can you, David? Can you see that?
DAVID BELL: We have a system here in Australia of what they call negative reporting. It's the only country in the OECD which has that sort of reporting which means you only see problems on people's credit file.
GARRY ROTHMAN: That's not true. That is not true. I've been a credit manager. I know. I'm not just a financial counsellor. When you do a credit check on someone, you see the other applications that have been made.
DAVID BELL: You see other applications but you don't necessarily know whether the person has a credit card.
GARRY ROTHMAN: Right, but if you see nine applications within one year.
JENNY BROCKIE: If you see they've got nine credit cards you might think twice about giving them another one, wouldn't you?
DAVID BELL: I'm pointing out the fact that there is a loophole in Australia. We'd like to be able to close that loophole.
JENNY BROCKIE: Sandra, can I ask you why you kept taking the credit cards?
SANDRA ROBINSON: Because we couldn't survive. It's simple as that. We could not survive in the ..
JENNY BROCKIE: And how did you think you were going to pay it back?
SANDRA ROBINSON: A lot of prayer and hope.
JENNY BROCKIE: Hope? Chris Bowen, what do you think about this? What do you think about people able to get eight or nine credit cards? Is there is case for stronger regulation?
CHRIS BOWEN: There's a case for better regulation. There's a case, certainly at the edges, I think, with fringe lenders. There's certainly a case for much better scrutiny of them and national scrutiny of them. We've heard about emergencies and people needing to borrow $2,000. We don't want to go back to the old days where you had to go cap in hand and beg for money just for emergencies. You do need to strike a balance. A lot of people here, um, we've heard have relied on these things for essentials. So we need to get better regulation, there's no doubt about that, but we don't need to go back to the old days of ...
JENNY BROCKIE: What does better regulation mean?
CHRIS BOWEN: I think more consistent regulation across the country, better transparency, better information, more upfront information.
JENNY BROCKIE: What sort of more upfront information?
CHRIS BOWEN: More upfront information potentially about the long-term costs. We saw on the clip about the young man who didn't realise just how much interest he was going to be paying. We're putting out a paper soon on these things with some various options for regulation across the country.
JENNY BROCKIE: Regular options for regulations on bank lending?
CHRIS BOWEN: Lending across the board.
JENNY BROCKIE: When will that paper come out?
CHRIS BOWEN: Very soon.
JENNY BROCKIE: How soon?
CHRIS BOWEN: It's not my portfolio, but very soon.
DAVID BELL: We would agree with Chris. We think there does need to be improved regulation. For example, there's a whole range of non-bank lenders who don't have very high standards who lend in a predatory fashion who we've been working with consumer groups to try and address these issues and we think they need to be regulated.
JENNY BROCKIE: But we do hear a lot of stories as well, David, about banks offering people vastly more money sometimes than they feel they should be offered.
DAVID BELL: Look, you'll always have There will always be a story like that. It's unfortunate. Banks don't want to do that but the overwhelming vast majority of bank lending is very soundly done.
JENNY BROCKIE: We are going to have to wrap up. But, Chris Richardson, I guess one thing that people would like to know in closing off tonight is whether they can really expect any relief from this struggle and particularly whether inflation's going to keep rising, whether those food and petrol prices are just going to keep going up?
CHRIS RICHARDSON: I fear that that is a risk and potentially quite a big risk. Although many people have read the front-page stories about US recession, the bigger thing that's happening in Australia is that our export prices for coal and iron ore are still leaping. That's throwing a lot of money at the economy. It means that on average the economy will be better off but it also means that inflation is probably likely to continue to rise, that interest rates may well rise further from here and I would say that pressure on food and energy prices is only going to get worse, rather than better, so sure.
JENNY BROCKIE: So what would you like Chris Bowen to take back to Canberra as a result of this discussion that would help low-paid workers? What do you think he could be doing?
CHRIS RICHARDSON: I know it's an area that the Government's looking at and will try to do something over time. But we definitely could do better there, and other countries do.
JENNY BROCKIE: Chris Bowen, your government was elected promising a better deal for working families. We hear that phrase again and again from people in your government. What are you going to deliver them apart from the things we already know about, like the tax cuts?
CHRIS BOWEN: Well, I think Chris is right. There are things that can be done better. We do have a program of reform. We do have, as I say, the increase in childcare rebate, the increase in the low-income tax offset. Can we buck international trends? No, we can't but we can make differences and help people in that process but what people can be assured of is we know the issues.
JENNY BROCKIE: I wonder how people feel, having heard everything here tonight. Marie, we started with you. What do you think about what you've heard?
MARIE ANGRILLI: I think we've just gone around in a circle. It's always, you know, low-paid workers, their wages increase inflation and unemployment and all that but what about other people's work, other people's wages? How come only low-paid workers' wages always affect the economy? What about people on high incomes? How come their wages don't affect the economy?
JENNY BROCKIE: Gavin, what do you think about what you've heard tonight?
GAVIN RIDDELL: I think if something positive does come out of it, it will be a wonderful thing but I don't see it happening. As you said, things just seem to go round and round. One person says this, one person says that, they try and even each other out and think, well, at the end of the day that will do.
JENNY BROCKIE: And in the meantime, Garry, are we going to see a fierce push back from the employers at that minimum wage case?
GARRY BRACK: Well, there's obviously an argument to be had about how far you go and a realisation, as with every other economic cycle, that the more you push the minimum wages up, the more there's going to be a reversal down the track but what we have seen in a whole range of industries for people with skills is that their wages have grown faster than the rate of inflation and what we've got now is perhaps some of the negative effects of large wage growth. If that wage growth outstrips productivity, then you start to get inflationary impact and then we start to get interest rate rises and it's the cost of debt which is killing a lot of businesses, not just, not just, a question of the wage payments. If you don't get the productivity and the productivity comes really from the higher levels of skill that you have to invest in a developed economy, you can't get productivity out of the lower levels of skill, the economy just doesn't allow you to do that, because those jobs by and large are in Asia and Africa and a variety of other places with whom we can't afford to compete.
JENNY BROCKIE: Quick final word, John, and then we have to wrap it up.
JOHN BUCHANAN: One of the greatest boosts in productivity you can have is strong labour standards. You stop subsidising marginal employers and you force employers to think creatively about how to boost output per labour per hour.
JENNY BROCKIE: We are going around in a circle and the circle is now about to end because we've run out of time. Thank you all very much for joining Insight tonight. It's been great to have you here.
