Rachel Siewert (WA, Australian Greens) Share this | Hansard source

I rise today to make a contribution to this debate about the Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015. This is an incredibly important issue and I welcome the opportunity to have this debate in the chamber. I think that many people were incredibly surprised and dismayed to learn that Radio Rentals derives close to half of its revenue via automatic deduction payments channelled through Centrepay. This is an extraordinary niche market that does not really reflect the policy intent behind Centrepay, which is to help those on government payments manage their cash flow by putting aside money for quarterly, annual or big bills. The effective interest rate on these goods is as high as 70 per cent a year, and that is almost four times that of an ordinary credit card.

I do agree with the broad intent of this bill to take steps to address predatory loans. However, before we start looking at controlling how people spend their money and looking at this particular issue, I want to look at the important issue that this brings up, which is both the cause and the effect of debt on those who are on Centrelink payments. I have been looking very closely at New Zealand social services and their approach. Given the other debates we are having in this chamber about the changes the government wishes to make to many social services and social security payments, I took the opportunity to have a look at what is happening there. Aside from the fact that I think that although the government is trying to take some of the approaches from New Zealand and implement them here they are misquoting what is happening in New Zealand, there are many things that we can learn from what is happening in New Zealand. But I will save some of the more in-depth comments on some of those approaches till we get back to debating the Social Services Legislation Amendment (Youth Employment and Other Measures) Bill 2015 that is currently before this place.

As part of looking at what is happening in New Zealand, I came across some excellent research in New Zealand and a particular project called the Family 100 project and a report called Speaking for ourselves. The goal of this project was to understand what factors are keeping some families in poverty while other families are able to move forward and live more secure lives. It was a joint initiative between the Auckland City Mission and three New Zealand universities that aimed to document and explore the everyday experiences of people in poverty over the course of a year by actually talking to the people that are living in poverty. The project involved fortnightly interviews with 100 families that resulted in 339 hours of transcribed interviews. Once the project was finished the report showed that debt was No. 1 of eight clearly defined drivers of poverty in New Zealand. Debt, justice, housing, employment, health, food insecurity, services and education were clearly identified as those eight drivers of poverty, and of those debt was No. 1.

I have not seen a project of similar nature or scope undertaken in Australia, although there are many that have looked at poverty. Dropping off the edge 2015 from the Jesuit Social Services by Tony Vinson was the latest one. However, these two reports do reflect the types of findings that we see through reports that have been carried out in Australia by ACOSS, Uniting Care, Salvation Army, Anglicare and a huge number of other social service providers who are working in this place.

I want to share some of the findings from the Family 100 report because I think it is very relevant to the matter that we are discussing here. One of the key conclusions that we can draw from the analysis of debt is that low-income families are paying a poverty premium. They can only source expensive credit, and this is keeping them in poverty. In other words, those that can least afford it are paying the highest interest rates and they are forced into going to what some would say are the more dodgy credit extenders because they cannot get loans from banks. In the words of one participant:

Debt causes debt. The worst thing about having debt is when you really need something you have to use the most expensive options…

The report shows really clearly that people do understand how to budget effectively but that they have no option but to incur increasing levels of personal debt to cover their day-to-day expenses because they simply do not have enough money. I think this is reflected in the Australian experience. We saw it in the debate around income management where people said that they knew how to manage their money; they just did not have enough of it.

What the Radio Rentals story highlighted is that this cycle is exacerbated by not being able to access major financial institutions and having to take highly inflated interest rates. We saw this clearly in the analysis of the Radio Rentals loans. The individuals who took up these offers to lease goods through them ended up paying up to seven times what they would have paid if they had bought the items outright. It is worth thinking about how the inadequacy of social security payments themselves is an underlying cause of this issue. The Credit Suisse report notes that the biggest proportion of Centrepay users are on the disability pension, 30 per cent, Newstart allowance, 20 per cent, and parenting payments, 14 per cent. These groups are clearly overrepresented as Centrepay users compared with their proportion of Centrelink payments. It is probably also worth noting that Centrepay has identified that disability support pensioners were disproportionately represented in payday lending, Centrelink advance payments and urgent payments. The adequacy of the payments has been considered in this chamber. In fact I chaired a Centrelink inquiry, and the government senators who were on that inquiry—they were not in government at the time—agreed with the weight of the evidence. The committee questioned 'whether Newstart allowance provides recipients a standard of living that is acceptable in the Australian context for anything but the shortest period of time'. So even those senators who are now on the government benches acknowledged at the time that Newstart payments were inadequate. When you are starting with a completely inadequate payment, what hope do you really have of being able to stay out of debt?

The other thing that the Family 100 report found was that living with debt leads to social exclusion and self-imposed isolation. This in turn leads to a range of other problems such as physical and mental illness. This prevents people from moving forward with their life. It is incredibly hard to go out and compete for a job interview when you are so isolated and under such stress. It is hard to make good long-term decisions when there is a day-to-day struggle to keep your head above water. Debt is a psychological burden, particularly when it seems inescapable and unmanageable without incurring yet more debt. The report also touches on the interconnection between debt and health. Families talked about taking on debt for health reasons such as dental work, glasses or to pay for unexpected illnesses, doctor visits and medicine. This is a reality for many Australian families too. ACOSS has reported in its 2014 poverty report that, despite seeing good health as an essential, families will neglect their health rather than incur yet another debt. I think these effects are really important to understand because we also need to understand why people sign up for unfair loan arrangements.

It is also worth noting that education was another driver of poverty identified in the Family 100 report. Without a high level of financial literacy and the ability to fully understand the contracts, it is easy to see how people sign up to unfair contracts and fall into debt traps that they cannot find their way out of. Debt is clearly a wicked problem that leads to a lifetime of disadvantage. It is well worth our time to think about how we can reduce its impacts on low-income families. It is absolutely essential that we address its impact. But as we consider legislating against lend-lease programs for Centrelink recipients, we also need to consider other alternative credit options. We do need to address the debt issue. Addressing consumer lend-lease programs is absolutely essential. We do need to do that, but we also need to be addressing the wider issues of debt for those on low incomes and particularly those on currently inadequate income security payments.

While I support the intent of this bill in drawing attention to the predatory nature of consumer leases, I want to highlight that we cannot simply deal with one issue without dealing with these other issues. This is one step that we need to be taking, and it will not solve the overall problem. I acknowledge that, but we do need to start somewhere. I know that a number of community workers and those working in the community services space have concerns that if we pass legislation in a vacuum without broader reforms we are missing an opportunity. For those who are working with clients in the community who are under incredible stress and at risk of slipping further into poverty it is often the case that imperfect access to lend-lease credit to purchase whitegoods is better than no access at all. So we need to realise that and we need to be making sure that we replace people's ability to access high-interest credit with a much fairer process. I agree with this perspective. We need to be looking at how we can help low-income households replace broken whitegoods and meet the debts that they inevitably need to face because they are on such a low income. And how do we help them obtain a standard of living that those around people living in poverty take for granted? The impact of not being able to access a replacement is also a contributor to debt. Just think about it: if you do not have a washing machine you have to go to a laundromat and pay to use those machines. If you do not have a fridge, you end up eating more pre-prepared food.

I want to take a moment to reflect my serious concerns about income management. I have expressed those concerns in this place many times. Income management does not produce the results the government claims that it does or that the supporters of income management claim that it does. It is a paternalistic approach that is punitive and unfair and it takes control of people's personal decision making and takes their dignity away from them. I had a number of emails about that around the healthy welfare card, and that legislation will be dealt with in this place at another time.

We do support the use of Centrepay because it is optional. People can choose their level of participation rather than having it dictated to them like income management does. I have got to say it does make me uncomfortable that we are talking about shutting down people's options when it comes to the use of Centrepay. However, having said that, the government is not taking enough action to address the issues around debt or to address these absolutely outrageous levels of interest that those on low incomes are paying. They are paying, as the New Zealand report said, 'premium interest rates'. They are paying the most expensive interest rates.

We need to be looking at this in the context of a range of other actions that need to be taken. Affordable credit should be provided, whether it is through government-sponsored microcredit schemes or, importantly, capping interest rates that are charged by lenders such as this. We also need to be looking at a very strong suggestion that was made in New Zealand: that there is a role for helping consolidate debts and ensuring that there is a lower interest rate for those consolidated debts. What we see from this report and what I have heard from talking to people is that people borrow money to pay back money. Because they are trying to get out of one debt, they will borrow more. So it is a constant round of borrowing money, which only leads to more debt—lifelong debt. People, as I said, talked about the crippling nature of the burden and the psychological impact of that debt.

We need to see some leadership from government to demonstrate not just stopgap measures but long-term measures to assist low-income families. Obviously, one of those measures for those who are living on income support payments is to increase income support. I will note: while we are busy copying New Zealand, we seem to be only taking some of the bad bits, not the good bits, and one of those is, surprise, surprise, that they actually increased income support payments as part of this package. I have not heard that from the government yet. Maybe we should be looking at that before we put in place health and welfare cards.

So far the government has been primarily focused on making life harder for those on low incomes, and particularly those on income support. We have seen attempts to reduce payments by freezing indexation; attempts to deny those under 30 income support for six months at a time; lifting the age of eligibility for Newstart to 25; and now attempts to force people to wait for income support for four weeks—in fact, it is five weeks when you add the week of waiting.

We have also seen big cuts to important programs that actually help low-income households. Millions have been pulled out of the discretionary grant program in the Department of Social Services, and that has seriously affected Australia's ability to address the causes of poverty. We have seen millions—half a billion—pulled out of programs for Aboriginal and Torres Strait Islander peoples. A number of programs have been shutting their doors over the past six weeks. They were the so-called lucky services that had their funding extended for six to 12 months; however, they are closing now. In my home state of Western Australia we have seen the rolling back of financial assistance support.

We are not just losing services; we are also losing an incredible amount of knowledge about how individual communities are coping with the pressures of living with debt. We are losing institutional knowledge about what has been tried and what has worked. We see pilot programs constantly started and then not continued. We are also losing passionate and committed people who are motivated to find solutions that will work at an individual level and who can provide advice and support, and create the change that is needed at local levels.

We need to think very carefully about a holistic approach to how to improve the situation, how we tighten the rules but also how we work with financial institutions to make sure that those on the lowest incomes are not paying the premium interest rates. How can we let this occur in a society where those who are the most vulnerable are the ones who cannot access cheaper credit, who are paying the highest interest rates which leads to an increasing spiral of debt that keeps people in debt and makes it harder to find work? Living in poverty, we know from the evidence, is yet another barrier to employment. Debt is part of that. We should not be standing back and letting Centrepay pay the loans at some of the highest interest rates in this country. We need to address this particular issue.

As I said, we need a more holistic approach to this problem. The NILS program is fantastic, but we need more programs like that. We need to enable people to consolidate their debts and get their head above water. If we can do this, we know that—and, as I said, the evidence shows—people are actually very good at being able to manage their money. They just do not have enough of it. So if we enable people to consolidate their debts and manage their finance without having to be constantly chasing new loans to pay back the other loans, we know that they will get their head above water and deal with one of the barriers to employment.

I urge everybody in this place to look at the excellent research about poverty and not just the examples that I am quoting from New Zealand—the family 100 report—but also the excellent work that has been done here. We know that poverty is a huge issue for low-income families, particularly those living on income support. We need to acknowledge that. We need to look at the work that has just been completed, the latest Dropping off the edgereport. When you look at the priority areas, you know what? They are not that much different from seven years ago. Unfortunately, they are not that much different from the programs that we are addressing—even though we have learnt so much we are still not addressing those fundamental drivers.

It makes my blood boil when, instead of dealing with these issues, we see some of the state governments and the Commonwealth government withdrawing more services—withdrawing more funding and financial advice services is not the way to go. Please read the report. Please look at this debt issue. It is absolutely critical that we address it.