16 December 2013

WHAT INCREASES IN ENERGY PRICES REALLY MEAN FOR HOUSEHOLDS?

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While households have noticed increases in electricity and gas prices over the last few years, most haven’t looked at the profound impacts these increases can have on their lives and budget. The impacts can be both varied and profound. The three that cause the most stress are detailed below.

Creation of a middle-class Squeeze

The term “the middle-class squeeze” relates to middle class wage increases not keeping up with inflation and the cost of living.

For residents in the middle class, the price increase of electricity and gas has far outweighed any increase in income. In fact the income for many households has gone backwards while energy has increased by over 50 percent in the last 5 years. Not a good scenario and adds significant stress to already tight budgets.

Mortgage stress

Property in Australia is at an all-time high – In Sydney the Median house price is a whopping $718,122!

In the past people used around 25 percent of their income for their mortgage. Now there are many cases where the mortgage repayments are significantly high than 50 percent.

Mortgage stress is defined as allocating over 35 percent of your income to mortgage payments.

Currently two thirds of Australian home owners allocate over 40 percent of their income to their mortgage. You can see the potential for problems in a lot of households.

As energy prices increase, the already small disposable household income is reduced even more. This places added pressure on the household. While increases in utility prices are not the only reason for mortgage stress, they are a still a major factor because of their high price.

Buying essential items

More and more Australians are struggling to buy essential items for their household and their families.

While this can be attributed to a range of cost of living increases, increases in energy bills list high on the agenda.

School fees, luxury items and even essential such as nappies are all been cut back on. In fact consumer spending and confidence hit a low in July of 2013. While this is slightly improving towards the end of the year households are still feeling a squeeze.

In short, energy price increases are felt by homeowners all over Australia. With no relief in sight for a reduction in price, many homeowners are turning towards solar power as a way to reduce their overall utility costs. With the decrease in the price of solar panels, it’s definitely a worthwhile investment.

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