What cost of living crisis?

Energy costs are a significant concern for all Australians, impacting inflation and the cost of everyday goods and services.

The announcement this week that the Federal Government will not extend energy rebates could be a bitter pill for many in the electorate.

As summer hurtles towards us, energy demand skyrockets, and the roll-out of smart meters opens the risk of household bill shock, the timing couldn’t be worse.

Anyone without solar or batteries will be terrified at the prospect of getting their summer electricity bill.

Surveys conducted by National Seniors Australia (NSA), consistently show the cost of energy as a key concern for seniors. These pressures are felt acutely by those with limited means who struggle most when energy costs and use rise.

While the Federal Government has signalled it is killing off the energy rebate due to budget pressures, could it have been more targeted in the delivery of bill relief to ensure they continue?

Targeted energy bill relief

When announced, energy rebates were touted as a cost-of-living measure and a tool to fight inflation.

According to some economists, energy rebates did have a positive impact, helping to reduce headline inflation.

But there were criticisms that the rebate was not adequately targeted and went to households who didn’t need help. It was said that it was impractical to target the payment – because it was not possible to share information about the financial circumstances of households with energy companies.

Rather than linking energy bills to government payments, it could have used a proxy to target a future energy rebate and/or use the existing Energy Supplement to deliver targeted energy bill relief.

Here’s how it would work

The government could restrict the rebate via energy companies by excluding households with solar panels – information that energy companies likely already have.

While there may be low-income households with solar, in the main those with solar benefit from lower energy bills. Some lucky individuals even have negative bills.

Australian Bureau of Statistics (ABS) data shows that solar panel installation is much more likely among households with higher net worth and solar is more likely on separate houses.

Solar installation has also been heavily subsidised, so it could be argued that restricting the energy rebate to households without solar is fair on equity grounds.

The other possible way to target energy relief is through the existing Energy Supplement.

The Energy Supplement is a payment provided to income support recipients, including pensioners, carers, job seekers etc, to help them meet energy costs. The amount of supplement varies across payment types. A single pensioner receives $14.10 and a couple $10.60 per person per fortnight.

Unfortunately, indexation of the Energy Supplement ceased in September 2014. As such, its value relative to rising energy prices has declined year-on-year.

The Energy Supplement could be a simple way to deliver targeted energy bill relief to those who need it.

How could it work?

The Federal Government could deliver another energy rebate of $150 to all Australian households directly via electricity bills, excluding households with solar to ensure it is provided to those most in need.

A one-off increase to the Energy Supplement could also be considered for income support payment recipients to bring the supplement to parity with past energy inflation (since September 2014) and indexation should be reinstated moving forward.

For an Age Pension recipient, this would be an annual increase of about $90 (single) and $135.20 (couple) based on the energy component of CPI.

The budget impact of the targeted $150 energy rebate would be $992 million. The cost of indexing the Energy Supplement would be a minimum of $141 million per year.

If you like this idea and want action on energy bills, join our Essential Services campaign today to show your support and get regular updates.