ECONOMIC HARDSHIP

People in the low income group (Endnote 1) experienced a trend of rising real incomes between 1994-95 and 2005-06. The average real equivalised disposable household income of the low income group is estimated to have risen by 31% over the period, although part of the increase may reflect improvements to the way income was collected in the survey from 2003-04. The same individuals were not necessarily in this income grouping for the entire period. But for those people who were, rising incomes on average would have provided a capacity to improve their standard of living.

While some would interpret this increase in the real income of the low income group as progress, others would consider that it also needs to be weighed against changes in community standards. Although there is no direct measure of these, one approach is to compare changes with those of 'middle' Australians and so changes in the real income of people in the middle income group are also shown. The average real equivalised disposable household income of the middle income group was estimated to have risen by 32% between 1994-95 and 2005-06.

ABOUT THIS INDICATOR

Society generally accepts that people have a right to enjoy some minimum material standard of living, that is, to consume a minimum standard of goods and services. Household income is the major source of economic resources for most households and therefore a key determinant of economic wellbeing. The headline indicator shows the growth in average real equivalised disposable household income of people in the low income group (Endnote 1). Although it provides no information about the number of people who might have an unacceptable standard of living, it does indicate how the average income of people in the low income group is changing.

The headline indicator considers low income which is commonly associated with economic hardship. However, some people have access to forms of wealth which can be used to support their standard of living (e.g. bank deposits). Furthermore, economic hardship is a multidimensional issue that is often associated with problems such as lack of participation in work, substance abuse, poor health, low levels of education, inadequate housing, crime, social exclusion and a lack of opportunity for children.

SEE ALSO

State and territory spreadsheets
Economic hardship - Measures of Australia's Progress, 2006
Themes - Personal, Family and Household Finances

ENDNOTES

1. No surveys were conducted in 1998-99, 2001-02 or 2004-05. The respective data for these three years shown in the graph for economic hardship are the midpoint values between the survey values of the previous year and the following year. The base of each index is at 1994-95 and equals 100.

Disposable (after income tax) income amounts are equivalised to take account of the different needs of households of different size and composition, as there are economic advantages associated with living with others, because household resources, especially housing, can be shared. The equivalised income amounts are also adjusted for changes in living costs as measured by the Consumer Price Index.

The low income group comprises people in the 2nd and 3rd income deciles from the bottom of the distribution after being ranked, from lowest to highest, by their equivalised disposable household income. The middle income group comprises people in the middle income quintile (5th and 6th deciles) when all people are ranked, from lowest to highest, by their equivalised disposable household income. People falling into the lowest decile are excluded from the low income group because, for many of them, the value of their income does not appear to be an appropriate indicator of the economic resources available to them. Their income tends to be significantly lower than would be available to them if they were reliant on the safety net of income support provided by social security pensions and allowances. At the same time, their expenditure levels tend to be higher than those of people in the second decile, indicating that they have access to economic resources other than income, such as wealth, to finance their expenditure.

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