'Those with less are not likely to bounce back' after COVID crisis

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A new report has assessed the impact of COVID-19 on low-income earners in Australia, with findings illustrating harm caused by the early release of super program.

The Brotherhood of St Lawrence Shocks and Safety Nets report found that financial wellbeing decreased for low-income earners during the pandemic.

Many people aged over 45, disability pension recipients, women on low incomes and single parents reported being left with dwindling financial buffers after accessing savings and superannuation, and increasing debt during the pandemic, the study found.

low income earners suffered more during covid

"Opportunities to recoup these losses are likely to be limited, with the recent Federal Budget predicting continued low wage growth and a continued shift to part-time work," the report's author Emily Porter, who is a fellow with the Brotherhood of St Lawrence, said.

"The impacts of the crisis were uneven. This is just one of the many crises that we'll face and the most disadvantaged will be hard hit. Put simply, those with less are not likely to bounce back."

Measures like the Coronavirus Supplement moderated the impact of the crisis for those who were eligible, but many low-income earners were not eligible for payments and had to draw on their own savings in super.

The authors of the report looked at Roy Morgan data and ANZ's Financial Wellbeing Indicator.

It found that low-income workers showed a 21% decline in their ability to meet financial commitments from the pre-pandemic period to the September 2020 quarter.

And Brotherhood of St Lawrence found evidence that many of the most vulnerable wiped out their super altogether.

The proportion of low-income women with superannuation declined by 6%. Single parents not in employment showed an even larger 10% decline; now just 45% of single parents have any super at all.

Disability support pensioners with super accounts fell by 7%.

"As savings and superannuation have been depleted over the past year, many people have been left more exposed to labour market risks, with a limited capacity to absorb future shocks," the report warned.

Overall, the research found that harmful economic impacts were less severe when people had access to government support - not just to their superannuation.

The increased JobSeeker payments that were part of the COVID-19 stimulus did help, with unemployed people reporting a 10% improvement in their ability to meet commitments.

Now that measure has been reversed though, the positive impact is also likely to be lost.

This article first appeared on Financial Standard

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Elizabeth McArthur is a senior journalist at Financial Standard covering wealth management including financial advice. She has a bachelor's degree in journalism from UTS and a master's in creative writing from Melbourne University.