Welfare payments will increase for many people in the next year, but interest rates will also rise, although gradually.
On January 1st, Australia’s one million apprentices, students, and caregivers are expected to see an increase in their Centerlink payments.
The fact that the cash increases are geared to outdated inflation rates means that they won’t be sufficient to keep up with the rising cost of living.
Because January is the only month that the board doesn’t meet, it will also be the first month since April that the Reserve Bank of Australia doesn’t raise interest rates.
Given that large banks anticipate that home prices will continue to fall in 2023, the RBA is widely expected to keep hiking rates until at least mid-year.
Depending on whether a beneficiary lives at home or has dependent children, the Youth Allowance increases by $19.10 to $41.40 every two weeks.
The Youth Allowance rise was praised by Minister of Social Services Amanda Rishworth as the most substantial indexation since the welfare measure’s introduction in 1998.
Because living expenses are rising, she added, “we need to make sure that students and young people can meet basic bills while concentrating on their education and job goals.”
Young single students or apprentices receiving Youth Allowance will experience an increase in their biweekly stipend of $19.10 to $332.90.
Youth Allowance payments to single parents will increase by $41.40 every two weeks, bringing the total to $720.40.
For single students without dependents, Austudy is increasing by $32.40 every two weeks to $562.80.
The Austudy allowance for lone students with kids will increase by $41.40 every two weeks to $720.40.
Abstudy, for students and apprentices who are Aboriginal and Torres Strait Islander, is rising by $22.40 per two weeks to $389.40.
The Carer’s Allowance will rise by $8.30 every two weeks to $144.80.
The 6.1 percent rise in those benefits is far less than the 3.3% annual inflation rate for the third quarter, which was the worst in 32 years.
This is so because the increases in welfare payments will be based on the 6.1% increase in headline inflation during the second quarter.
According to the Social Security Act of 1991, increases in student payments that take effect on January 1 are correlated with overall inflation during the prior fiscal year.
An official from the Department of Social Services informed Daily Mail Australia that “indexation criteria are derived by comparing consumer price index statistics at key times.”
Welfare hikes being based on a six-month-old consumer price index, from the year to June 30, in past years didn’t present a problem since inflation didn’t change much.
However, in the first quarter of 2023, those on assistance will actually see a reduction in their payments due to inflation.
The Reserve Bank anticipates that the consumer price index, or headline inflation, will reach an all-time high of 8%.
The RBA’s aim of two to three percent is more than doubled by this.
Because the board doesn’t convene in the midst of the summer unless there are exceptional circumstances, January will be the first month since April without an RBA rate increase.
All of the major banks anticipate that the cash rate would rise by 0.25 percentage points in February, reaching a new record high of 3.35 percent, up from 3.1%.
The Commonwealth Bank anticipates that the hike in February will be the last one before this tightening cycle is through.
But in February, March, and May, ANZ and Westpac anticipate more interest rate increases that will push the cash rate to an 11-year high of 3.85 percent.
In 2023, Westpac anticipates a further 8% decline in Sydney house prices and a further 10% decline in Melbourne property values.
The capacity of a prospective borrower to handle a three percentage point rise in variable mortgage rates must be evaluated by the banks.
Since several property markets in Australia reached their peaks at various times in 2022, this reduction in lending capacity has resulted in a decline in home prices.
The pace of monetary policy tightening since the Reserve Bank set a target cash rate in January 1990 has been most severely accelerated by the 300 basis points of rate increases since May, while the cash rate was still at a record-low of 0.1%.
However, Louis Christopher, managing director of SQM Research, forecasts significant gains in housing values should the RBA slash rates again in late 2023, when inflation peaks at 8%.
He anticipates an increase in Sydney home prices of between 8 and 12 percent, a lower increase in Melbourne home prices between 2 and 6 percent, a moderate increase in Brisbane home prices between 3 and 7 percent, and a huge increase in Perth home prices between 9 and 13 percent.
According to him, “this recovery in Sydney will be driven by the surge in underlying demand for residential property as a result of the rise in overseas arrivals, the return to work, the current lack of rental housing, the new stamp duty/land tax changes, and the expected continued strength of the Sydney economy.”
»Youth Allowance, Austudy, Carers, Abstudy cash boosts«