Centrelink benefits are going up for more than a million Australians on January 1 – from students and carers to injured war veterans.
Welfare payments are designed to keep up with cost of living pressures but for many, the extra cash will be of little benefit because it is indexed to out-of-date inflation figures.
The nation’s apprentices, students and carers will receive an increase in their Centrelink benefits on New Year’s Day.
Badly-injured war veterans from January 1 will also see a $1,000 boost in their annual pension.
Home borrowers will also get a break from rising interest rates, with the Reserve Bank not meeting until February.
The RBA is tipped to continue raising rates until at least mid-year.
Australia’s big banks are expecting house prices to continue falling in 2023, as the majority of ultra-low fixed rate loans expire.
This would also leave 700,000 borrowers with a financial ticking time bomb, as their monthly repayments conservatively surge by 46 per cent.
Centrelink benefits are going up for more than one million Australians on January 1 – from students (University of Sydney undergraduates pictured) and carers to war veterans
Australians who are studying are receiving a boost to their Youth Allowance and Austudy while the Carers Allowance is increasing to help welfare recipients deal with the cost of living crisis.
Welfare payments increasing on January 1
YOUTH ALLOWANCE (living at home): Up $19.10 a fortnight to $332.90 from $313.80
YOUTH ALLOWANCE (living away from home): Up $32.40 a fortnight to $562.80 from $530.40
YOUTH ALLOWANCE (single with children): Up $41.40 a fortnight to $720.40 from $679
AUSTUDY (single with no children): Up $32.40 a fortnight to $562.80 from $530.40
AUSTUDY (single with children): Up $41.40 a fortnight to $720.40 from $679
ABSTUDY: Up $22.40 a fortnight to $389.40 from $367 for Aboriginal and Torres Strait Islander students and apprentices aged 18 to 21
CARERS ALLOWANCE: Up $8.30 a fortnight to $144.80 from $136.50
SPECIAL RATE PAYMENT FOR TOTALLY AND PERMANENTLY INCAPITATED VETERANS: Up $38.46 a fortnight to $1,617.16 from $1,587.70
The Youth Allowance is increasing by $19.10 to $41.40 a fortnight depending on whether a recipient is living at home or has dependent children.
Social Services Minister Amanda Rishworth hailed the Youth Allowance increase as the most generous indexation since the welfare measure debuted in 1998.
‘With the cost of living increasing, we need to ensure students and young people can cover basic costs while focusing on their studies and career aspirations,’ she said.
Youth Allowance recipients, who are single students or apprentices aged 24 or younger, will see their fortnightly payments rise by $19.10 to $332.90.
Single parents receiving Youth Allowance are getting a $41.40 fortnightly boost, taking the payment to $720.40.
Austudy, for single students with no children, is rising by $32.40 a fortnight to $562.80.
The Austudy payment for single students with children is rising by $41.40 a fortnight to $720.40.
Abstudy, for Aboriginal and Torres Strait Islander students and apprentices, is increasing by $22.40 a fortnight to $389.40.
The Carer’s Allowance is increasing by $8.30 a fortnight to $144.80.
The 6.1 per cent increase in those benefits is well below the September quarter’s 7.3 per cent annual inflation pace – the worst in 32 years.
That’s because those welfare payment rises will be tied to the June quarter’s 6.1 per cent headline inflation rise.
Under the Social Security Act 1991, student payment increases that come into effect on New Year’s Day are linked to headline inflation during the previous financial year.
‘Indexation factors are determined by comparing consumer price index figures at certain points,’ a Department of Social Services spokesman told Daily Mail Australia.
In previous years, there wasn’t an issue with welfare increases being tied to a six-month old consumer price index, from the year to June 30, because inflation hardly moved.
But in early 2023, welfare recipients will effectively be suffering a real cut to their benefits after inflation.
Australians who are studying are receiving a boost to their Youth Allowance and Austudy while the Carers Allowance is increasing to help welfare recipients deal with the cost of living crisis (pictured are students at Monash University in Melbourne)
Australia’s 27,000 totally and permanently-incapacitated war veterans will also receive a $1,000 boost to their annual pension from January 1, or $38.46 more a fortnight.
This will take their Special Rate for serving or former Australian Defence Force soldiers to $1,617.16 a fortnight, including the energy supplement.
Veterans Affairs Minister Matt Keogh said the increase was designed ‘to ensure veterans and their families are better supported financially, helping keep up with cost-of-living pressures’.
The Senate in November passed the $97.9million welfare package that was part of the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2022.
Home borrowers will also get a break from rising interest rates, with the Reserve Bank not meeting until February for its next meeting. The RBA is tipped to continue raising rates until at least mid-year, with big banks expecting house prices to continue falling in 2023 (pictured is a house in Melbourne)
The Reserve Bank’s eight rate rises in 2022 are widely expected to be followed up with another increase in February.
The major banks agree the RBA cash rate will go up after the Australian Bureau of Statistics releases inflation data for the December quarter on January 25.
Covid PCR test rebate to end
From New Year’s Day, PCR tests for Covid will no longer be free.
Australians wanting a free PCR test to detect if they have the virus will have to get a referral from their doctor or a nurse.
A year after the tests sold out at chemists, the Department of Health said there was no longer a need for everyone to get a free test.
From New Year’s Day, PCR tests for Covid will no longer be free (pictured is a Sydney nurse swabbing a flight passenger’s nose at an airport clinic)
‘There is no public health requirement or recommendation for low-risk individuals to seek PCR testing,’ it said.
With Australians no longer needing to self isolate if they test positive to Covid, testing in 2023 will be designed to match people with the right medicines.
‘Testing for Covid-19 will no longer be a surveillance tool but will be more targeted and used to ensure quick access to antiviral treatments,’ the department said.
Concession card holders will still be able to get free rapid antigen tests, which tell someone if they have an active virus in their body.
But from January 1, aged care homes will get a set allocation of RAT tests instead of weekly deliveries.
The Reserve Bank is expecting the consumer price index, or headline inflation, to hit a new 32-year high of eight per cent by the end of 2022.
This is more than double the RBA’s two to three per cent target.
January will be the first month since April when there will be no monthly RBA rate rise, only because the board doesn’t meet in the middle of summer except in extraordinary circumstances.
The big banks are all expecting an increase of 0.25 percentage points in February, that would take the cash rate to a new 10-year high of 3.35 per cent, up from 3.1 per cent.
The Commonwealth Bank is expecting the February increase will be the last during this tightening cycle.
But ANZ and Westpac are both expecting further interest rate rises in February, March and May that would take the cash rate to an 11-year high of 3.85 per cent.
Westpac is expecting Sydney home prices to plunge by another 8 per cent in 2023 as Melbourne property values fall by another 10 per cent.
The banks are required to assess a potential borrower’s ability to cope with a three percentage point increase in variable mortgage rates.
This reduction in lending capacity has caused a drop in house prices since different housing markets across Australia peaked at various months in 2022.
The 300 basis points of rate rises since May, when the cash rate was still at a record-low of 0.1 per cent, have marked the most severe pace of monetary policy tightening since the Reserve Bank published a target cash rate in January 1990.
The Reserve Bank also estimates that 60 per cent of ultra-low fixed rate loans will expire in 2023, leaving close to 700,000 borrowers facing an abrupt surge in monthly mortgage repayments.
Borrowers who fixed their loan at 1.95 per cent in mid-2021 will be going straight on to a variable rate of at least 5 per cent, before further rate rises are even factored in.
Someone with an average mortgage of $600,000 would conservatively see their monthly repayments soar by 46.3 per cent to $3,225, up $1,022 from $2,203.
In Sydney, where CoreLogic has the median house price at $1,243,126, a working couple with a 20 per cent deposit and a mortgage of almost $1million would see their repayments surge by $1,693 a month to $5,345, up from $3,652.
A series of interest rates rises are also expected to hit consumer activity in 2023, with Commonwealth Bank credit card data pointing to a decline in spending growth.
CommSec, the Commonwealth Bank’s online broking group, is expecting retailers in February to report weaker earnings forecasts, which could lead to share price falls.