CHOICE says 1 July 2012 signals a number of changes and financial reforms that will significantly affect consumers.
The changes include better information and fairer terms for credit cards, a simpler process for switching transaction (everyday) bank accounts and more transparency in financial advice.
CHOICE says that 1 July will also see challenges for households, with higher prices for electricity, the introduction of the federal government’s carbon price and changes to the private health insurance rebate.
“While 1 July will see some prices increase, there will also be changes that bring real benefits for consumers, and with the carbon price, reasonable levels of compensation,” says CHOICE spokesperson Ingrid Just.
“Roadblocks that previously existed to switching transaction accounts will be removed, and fairer rules on credit cards will be introduced, that’s a great outcome for consumers.”
CHOICE says that analysis shows that rising electricity prices are only partly due to the new carbon price, with significant increases due to more being spent on poles and wires.
“People need to be alert to scammers who increase prices, placing the blame on the carbon price. If you are suspicious about price rises that are supposedly due to the carbon price, contact the ACCC,” says Ms Just.
Financial changes effecting consumers from July 1, 2012:
The carbon price:
- An added $9.10 on average weekly expenditure in 2012/13, including $3.30 per week on electricity, $1.50 on gas and $1.20 on food. This is balanced against average household assistance of $10.10 per week.¹
- The government assistance is designed to be permanent and will rise over time based on CPI, which will reflect increases in the carbon price.
Private Health Insurance:
- Singles earning more than $84,000 a year and couples or families earning more than $168,000 a year will pay more for hospital and extras cover because their current rebate will be reduced. At the same time, the Medicare Levy Surcharge (MLS) will be increased for higher income earners who don’t have hospital insurance.
- CHOICE research has found that most people, including higher income earners, will save money if they keep their hospital cover because the alternative means paying 1% -1.5% of their income on the higher MLS.
Single form transaction account switching:
- If transferring an account to a new bank, the new institution is responsible for obtaining a list of your automatic payments over the past 13 months. You then decide which ones you want to switch.
- Signing the single form provided by the new bank authorises transfer of your automatic payments and withdrawals.
Credit card reforms:
For all credit cards, your provider must:
- Refrain from offering you limit increases on your card, unless you agree to receive them.
- Provide monthly statements that show how long it will take to repay the entire balance if you only make minimum repayments.
- Provide clearer details on the ins and outs of interest-free periods.
All new credit cards must include:
- Standardised key fact sheets to make it much easier to compare offers.
- The capacity for consumers to nominate the credit limit.
- A ban on over-limit fees, unless you have agreed that your lender can charge you such fees.
- Notifications if you exceed your credit limit.
- Repayments to the most costly aspect of your credit card debt first (such as cash advances) to reduce your debt faster.
Financial advice reforms:
The Future of Financial Advice (FoFA) reforms begin with a voluntary phase-in from 1 July, with compliance becoming mandatory from 1 July 2013:
- Advisors will need to act in the best interests of their clients, subject to a ‘reasonable steps’ qualification.
- Introduction of ‘advisor charging’ that aligns the interests of the financial adviser and the client.
- Expand availability of low-cost ‘simple advice’ so more people can access affordable financial advice.
- Consumers will have more protection with the strengthening of ASIC’s powers to act against unscrupulous operators.
Electricity price increases:
Price increase will affect Australians living in all states and territories:
- NSW prices will increase by an average of 18%
- ACT prices will increase by an average of 17.74%
- NT prices will increase by 9.6%
- SA prices will increase by an average of 18%
- TAS prices will increase by 10.56%
- VIC prices will increase by up to 15% in some areas
- WA’s largest electricity retailer, Synergy, expects its customers will pay an extra 12.63%
- Research by Queensland University shows that QLD’s most widely used residential tariff will increase by 10.4%2
¹ http://www.choice.com.au/green-home/saving-energy/carbon-climate-change/bringing-home-the-cost-of-carbon.aspx
² Qld figure based on expected impact that carbon price will have on tariff 11 – the most widely used residential tariff in Qld.