Inflation hitting community organisations hard

April 2024

Inflation and the effects of Covid are hitting community organisations and charities hard, according to research by SociaLink, the umbrella organisation for the Western Bay’s social agencies.

SociaLink surveyed organisations about the impact of increasing inflation on community organisations and communities to better understand pressure points and provide insight to funders. It collated relevant research and surveyed local not-for-profits to see the impact of inflation locally.

The survey asked about the implications of the pandemic and inflation, including organisational costs, income and demand for services. It also developed suggestions for the sector to address inflation, and recommendations for funders, general manager Liz Davies said.

Annual inflation has hit a three-decade high at 5.9 percent from the December 2020 quarter to the December 2021 quarter, the biggest movement since a 7.6 percent annual increase in the year to the June 1990 quarter.

“The main drivers are housing and household utilities, transport, with increased prices for petrol and second-hand cars, and petrol prices which increased 30 percent in the year to December 2021 quarter.

“Unemployment has fallen to a record low of 3.2 percent while wage inflation has risen to its highest level in a decade,” she said.

“The Covid 19 pandemic has already had a significant impact on community and social sector groups, as well as the communities they serve, and inflation is compounding this.

“Lockdowns and alert levels have shut down all or part of social sector activities. Hospices have had no trading revenue from their shops – a significant source of income.

“Most charities do not have significant resources to fall back on and rely on ongoing revenue streams. They rely on donations, grants and other fundraising, fees and subscriptions, trading revenue, interest and dividends.”

She said gaming trust proceeds have diminished as pubs and bars have closed or operating under restrictions. Philanthropic organisations have reduced revenues with less to pass on to charities, people have tightened their belts and donations are likely to reduce.

Many fundraising events can’t happen, op shops and cultural and artistic events have been closed down or operating under restrictions.

Returns on investment have taken a hit, which may be temporary, and other equity-type investments have been rocked with volatile share market fluctuations.

“Organisations are operating on tight margins, which leaves little room to improve overall resilience and explore innovation.”

The hardest hit, with 50 percent loss of revenue were event-heavy sectors like sport and recreation and arts, culture and heritage, as well as social services working with the most vulnerable.
Government wage subsidies helped some, but not uniformly.

“As a whole, the sector is ‘doing even more for less’, with already thin operating margins and only modest reserves to draw on to meet any covid-triggered operating deficits.”

Other effects from Covid include exhaustion and burnout in some sectors, including child welfare, mental health and other direct services where demand has soared, straining already stretched staff.

The most deprived households’ budgets, already under severe stress, will be most affected by inflation and drive high demand for services provided by charities.

She said for the average renting family the cost of living went up by around $50 a week over the last year, while income went up by about $25 a week. With stretched income going towards rent or mortgage repayments there is little flexibility to cut costs.

“Price increases for food, transport and housing are particularly harmful for low-income households, resulting in an increase in need for foodbanks.”
This week’s benefit rise is likely to be absorbed by increased prices and may mean a fall in the real value of benefits. This will drive more people into deeper poverty and is likely to drive up demand for services, she said.

“This will also affect community groups in the arts and performance sector as inflation means less disposable income to purchase tickets or spend on entertainment and leisure experiences.”

Suggestions from a collective of charity, non-profit and community groups to Government about how it could assist include an emergency stabilisation fund, special low interest loans and tax relief to incentivise donations.

The Institute of Directors suggested applying for the wage subsidy scheme, considering options to use emergency funds and virtual fundraising using an online fundraising plan.

The SociaLink survey found staff salaries/wages and travel/vehicle costs are where rising costs are expected to hit hardest.

For some, salary costs are a key expense and they struggle to increase wages, and even cut hours because of reduced revenue. Rising costs have had a high impact on financial stress in communities and to a lesser extent on food and housing demand.

Mental health stress and anxiety are a key impact for individuals and families as they deal with ongoing Covid issues, rising costs and reduced health care access due to Covid.

Suggestions for funders included review agreements on multi year grants to ensure they accurately reflect inflation, particularly in staff and transport costs and ask applicants if they are projecting an increase in demand for their services due to inflation increases.

Download and read the full report here.