HOUSEHOLD INCOME

As household income is an important component of household economic resources, average real equivalised disposable household weekly income has been chosen as the headline indicator.

Analysis of income and expenditure data indicates that some households in the bottom decile of the income distribution tend to have higher levels of consumption (expenditure) than households with slightly higher levels of income, implying that they have greater access to other economic resources. This conclusion is supported by analysis of the wealth of these households. More than half of the people in the bottom income quintile are in higher wealth quintiles, and a third are in the top three wealth quintiles. Therefore the headline indicator includes a focus only on those households in the second and third lowest income deciles of the income distribution. This income group, on average, best represents the characteristics of the people most likely to have low living standards.

The headline indicator shows a rise in the real income of low income households between 1997-98 and 2007-08, with their average real equivalised disposable household weekly income increasing by 41% over this period. However, part of this increase reflects improvements to the way income was measured from 2003-04 onwards (Endnote 1).

It should be noted that the same individuals were not necessarily in the low income group for this entire period. For example, some of the households that had relatively low income in 1997-98 might, through changed circumstances, have moved up the income distribution by 2007-08. Others may have slipped into this group, perhaps by retiring and moving to an age pension, by losing their job, or because the death of a partner has reduced total household income. However, for those who did remain in the low income group, their rising income would, on average, have provided a capacity to increase their standard of living.

While the rise in the indicator may represent progress in an absolute sense, a relative view is also needed to consider changes in community standards which, over time, may raise the expected minimum level of living standards. Although there is no direct measure of this, one approach is to compare changes in the low income group with that of the middle income group (those in the fifth and sixth income deciles). The headline indicator shows that the middle income group had a slightly greater gain in real income between 1997-98 and 2007-08 than the low income group (46% compared with 41%).