Centrelink New Year cash boost: Youth Allowance, Austudy, Caregivers, Abstudy changes

In the new year, benefits will rise for many – but interest rates will rise… though not immediately.

Australia’s one million pupils, students and carers will receive a boost to Centrelink benefits on New Year’s Day.

However, they won’t be enough to keep up with the rising cost of living because the cash boosts are indexed to outdated inflation rates.

January will also be the first month since April in which the Reserve Bank of Australia will not raise interest rates – just because it is the only month where the board does not meet.

The RBA is tipped to keep raising rates until at least mid-year, with major banks expecting home prices to continue falling into 2023.

Welfare Payments

Australians who study get a boost to their Youth benefit and Austudy While the Surcharge for informal carers is increasing to help benefit recipients cope with the cost of living crisis.

Child benefit increases by $19.10 to $41.40 every two weeks, depending on whether a recipient lives at home or has dependent children.

Social Affairs Minister Amanda Rishworth hailed the increase in youth benefits as the most generous indexation since the social measure was launched in 1998.

“With the cost of living rising, we need to ensure that students and young people can cover basic costs while they focus on their studies and career aspirations,” she said.

Youth benefit recipients, who are single students or apprentices age 24 or younger, will see their biweekly payments increase by $19.10 to $332.90.

Single parents receiving child support receive a $41.40 biweekly boost, bringing the payment to $720.40.

Austudyfor single students without children, increases by $32.40 every two weeks to $562.80.

The Austudy payment for single students with children increases by $41.40 every two weeks to $720.40.

Abstudyfor Aboriginal and Torres Strait Islander students and apprentices, increases by $22.40 every two weeks to $389.40.

The Allowance for caregiver increases by $8.30 every two weeks to $144.80.

The 6.1 percent increase in those benefits is well below the annual inflation rate of 7.3 percent in the September quarter — the worst in 32 years.

That’s because those increases in Social Security benefits will be tied to the headline inflation rate of 6.1 percent in the June quarter.

Under the Social Security Act 1991, student payment increases that take effect on New Year’s Day are tied to the headline inflation of the previous fiscal year.

“Indexation factors are determined by comparing consumer price indices across specific points,” a spokesman for the Department of Social Services told Daily Mail Australia.

In previous years, it was no problem for welfare gains to be linked to a six-month old consumer price index, from the year to June 30, because inflation barely moved.

But at the beginning of 2023, after inflation, welfare recipients will actually receive a substantial discount on their benefits.

Interest rates

The Reserve Bank’s eight rate hikes in 2022 are expected to be followed by another hike in February.

The Big Four banks agree that the RBA money rate will rise after the Australian Bureau of Statistics released January 25 inflation data for the December quarter.

The Reserve Bank expects the consumer price index, or headline inflation, to hit a new 32-year high of eight percent.

This is more than double the RBA’s target of two to three percent.

January is the first month since April where there won’t be a monthly RBA rate hike, just because the board doesn’t meet in the middle of summer except in extraordinary circumstances.

The major banks all expect an increase of 0.25 percentage point in February, which would take cash rates to a new 10-year high of 3.35 percent, instead of 3.1 percent.

The Commonwealth Bank expects the February hike to be the last of this tightening cycle.

But ANZ and Westpac both expect further rate hikes in February, March and May, which would push cash rates to an 11-year high of 3.85 percent.

Westpac expects house prices in Sydney to fall by a further 8 per cent in 2023, while property values ​​in Melbourne will fall by a further 10 per cent.

The banks are required to assess whether a potential borrower is able to cope with a three percentage point increase in the variable mortgage rate.

This reduction in borrowing capacity has led to a fall in house prices as several housing markets across Australia peaked for several months in 2022.

The 300 basis point rate hikes since May, when cash rates were still at a record low of 0.1 percent, marked the most severe pace of monetary policy tightening since the Reserve Bank issued a target cash rate in January 1990.

But SQM Research director Louis Christopher predicts big increases in home prices if the RBA cuts rates again in late 2023 and inflation peaks at eight percent.

He predicts an 8 to 12 per cent rise in property prices in Sydney, a smaller rise of 2 to 6 per cent in Melbourne, a moderate rise of 3 to 7 per cent in Brisbane and a whopping 9 to 13 per cent in Perth. .

This recovery in Sydney will be driven by the increase in underlying demand for housing due to the increase in arrivals from abroad, the return to office, the existing shortage of rental housing, the new stamp duty/land tax changes and the expected continued strength from Sydney’s economy,” he said.