Electricity cost spike hits hard and sparks new warning for consumers

Painful electricity price rises from July 1 are just one of several cost increases that will strike consumers soon.

Householders who were hoping that lower inflation would ease their financial pressures are in for a nasty surprise in the coming weeks as big bill increases loom for many.

This week’s announcement by energy regulators that electricity bills would surge by up to 25 per cent from July 1 is just one of the pain points for consumers already battling high mortgage, rent, fuel and grocery costs.

Gas price rises from early 2023 will hit hard as winter heating gets turned up, millions of people will pay more for health insurance from June 1, other insurance companies are slapping customers with hefty premium increases, and council rates are climbing.

The bill spikes are expected to lead to more debt defaults, particularly among households that are already turning to high-interest credit cards to pay expenses.

Canstar’s Effie Zahos says stay in contact with bill providers. Picture: Tim Hunter.

Official Consumer Price Index figures show inflation rose 7 per cent for the year to March 31, down from its December peak of 7.8 per cent, but most households will not feel any relief as multiple bills climb at once.

Research group Canstar‘s money commentator, Effie Zahos, said there was “a lot of pent-up pressure” and more people were entering repayment plans with utility providers to manage their debt.

“This inflation is sticky – it’s still there and we are seeing prices jump up,” she said.

“Insurance and financial services saw its strongest quarterly rise. Natural gas prices are expected to stay high and potentially rise further this year.”

Most major health insurance companies delayed their traditional April 1 price rises this year as part of their pandemic response, but those increases will flow through soon – starting on June 1 for more than four million Medibank and AHM customers.

“We may see another interest rate hike – it’s quite possible,” Ms Zahos said.

“We have a mortgage affordability crisis and we also have a rent crisis.”

Credit agency Equifax released data this month showing that repayment arrears were up “as more consumers feel the strain of compounding economic pressures”.

It said arrears for mortgages and car loans were rising, and demand for credit cards, personal loans and buy now pay later increased strongly.

Equifax general manager advisory and solutions Kevin James said mortgage demand had dropped while mortgage arrears were at their highest level in two years, “with substantial growth in arrears of less than 90 days past due”.

Some consumers are repaying their debts using borrowed money. Picture: iStock

“This is a clear sign that the cost of living and interest rate rises are impacting consumers, and growth in the earlier delinquency categories indicate arrears are expected to rise further in the coming months,” Mr James said.

Ms Zahos said it was important for consumers to stay in contact with bill providers.

“Consumers can go online and extend energy payments without having to talk to somebody,” she said.

“Don’t go to a lender of last resort – you don’t need a payday loan for this. Getting credit to pay credit never works out well.”

People should instead examine every bill and ensure they received all the concessions and rebates available to them, Ms Zahos said.

Some health insurers were still offering cashbacks, childcare subsidies were rising on July 1, and pension income and assets test thresholds were climbing then too, she said.

“If you are on the borderline, you may be entitled to a pension, or get more pension.”

Originally published as Electricity cost spike hits hard and sparks new warning for consumers