The impact of the global financial crisis on social services in Australia

<strong>The</strong> <strong>impact</strong> <strong>of</strong> <strong>the</strong> <strong>global</strong> <strong>financial</strong> <strong>crisis</strong> on social services
EXECUTIVE SUMMARY
<strong>The</strong> current <strong>global</strong> <strong>financial</strong> <strong>crisis</strong> and its likely <strong>impact</strong> on <strong>the</strong> Australian economy will have an
acute <strong>impact</strong> on <strong>the</strong> most disadvantaged members <strong>of</strong> society, as well as pushing increased
numbers <strong>of</strong> low and middle income earners to seek <strong>the</strong> services <strong>of</strong> welfare agencies. Even
during <strong>the</strong> recent period <strong>of</strong> buoyant economic conditions, agencies were reporting growing
demand, and <strong>the</strong> emergence <strong>of</strong> a new clientele <strong>of</strong> ‘mid—stream’ wage earners facing severe
<strong>financial</strong> stress. This has been mirrored by academic research into new indicators <strong>of</strong>
disadvantage. Instability in <strong>the</strong> <strong>financial</strong> sector and its flow—on effects to <strong>the</strong> rest <strong>of</strong> <strong>the</strong>
economy, can only exacerbate <strong>the</strong>se problems, putting an even greater strain on what are
already overstretched social services.
<strong>The</strong> years immediately before <strong>the</strong> <strong>crisis</strong> were characterised by a combination <strong>of</strong> easy credit
conditions, low risk premiums, aggressive lending practices and less disciplined risk
management and underwriting standards. <strong>The</strong> collapse <strong>of</strong> <strong>the</strong> sub—prime housing market in
<strong>the</strong> United States has been followed by a <strong>global</strong> credit crunch, and falling asset prices, with
serious implications for <strong>the</strong> real economy. <strong>The</strong>re is reduced household wealth, Australia’s
terms <strong>of</strong> trade have decreased, and business and consumer confidence has been eroded.
Economic growth will inevitably slow, <strong>the</strong> extent to which is uncertain. Unemployment will
rise, if not perhaps to <strong>the</strong> levels <strong>of</strong> previous recessions. Despite declining interest rates, it is
likely that housing costs will remain high, particularly for those in rental accommodation. <strong>The</strong>
<strong>impact</strong> will vary across different segments <strong>of</strong> society, with <strong>the</strong> unemployed and o<strong>the</strong>r
vulnerable groups particularly hard it.
<strong>The</strong> demand for social services is already rising and will rise substantially in <strong>the</strong> short-term.
In many areas — examples include residential aged care, housing, homelessness and family
relationship services — demand already outstrips <strong>the</strong> capacity <strong>of</strong> agencies to <strong>of</strong>fer
assistance. <strong>The</strong> services most immediately affected by deteriorating economic conditions are
in employment, housing, <strong>financial</strong> and general counselling and emergency relief.
In addition to being <strong>the</strong> response <strong>of</strong> a genuinely civil society, high quality, social services are
an integral part <strong>of</strong> a productive economy. Investment in such services is a benefit not just to
those in such desperate need <strong>of</strong> services, but also reduces long term social costs and
enhances <strong>the</strong> overall productivity <strong>of</strong> <strong>the</strong> economy. Investment in social services and social
infrastructure should <strong>the</strong>refore be considered as an essential part <strong>of</strong> fur<strong>the</strong>r fiscal stimulus
measures.
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