HOUSEHOLD INCOME DISTRIBUTION

While the growth in average household income is a key measure of whether life in Australia is getting better, so too is change in the distribution (or equity) of income across the population. The ABS measures this in several different ways.

Percentile ratios are one measure of the spread of incomes across the population. For example, the P90/P10 ratio is the ratio of income at the 90th percentile (i.e. the income level dividing the bottom 90% of the population from the top 10%) to that at the 10th percentile. In 2007-08, this ratio was 4.30, meaning that the income of households at the 90th percentile was over four times as great as the income of households at the 10th percentile. This represented an increase of 14% from 1997-98 (3.77).

Ratios of incomes at the top of selected income percentiles(a)

			Year			Change from 1997-98 to 2007-08
	Unit		1997-98	2007-08		Absolute	%
P90/P10	Ratio		3.77	4.30		0.53	14.1
P80/P20	Ratio		2.56	2.63		0.07	2.7
P80/P50	Ratio		1.56	1.56		0.00	0.0
P20/P50	Ratio		0.61	0.59		-0.02	-3.3

(a) Equivalised disposable household income: reference year 2007-08.
Source: ABS Household Income and Income Distribution, Australia, 2007-08 (cat. no. 6523.0)

Another measure of income distribution is provided by the share of total income received by different income groups. In 2007-08, people in the high income group (the upper 20%) received 41% of the total share of income, compared with 10% for people in the low income group. A similar distribution pattern was evident in 1997-98 (38% compared with 11%).

A summary of income distribution is also given by the Gini coefficient, which provides a single statistical measure of the degree of income inequality. The Gini coefficient lies between 0 and 1, with perfect equality at zero and income inequality increasing as the Gini coefficient approaches 1. In 1997-98 the Gini coefficient was 0.303 compared with 0.331 in 2007-08, representing an increase of 9.2%.

Selected measures of equivalised disposable household income(a) and distribution

				Year			Change from 1997-98 to 2007-08
Indicator
		Unit		1997-98	2007-08		Absolute	%
Share of total income received by people with:
	Low incomes	%		10.8	10.1		-0.7	-6.5
	Middle incomes	%		17.7	17.0		-0.7	-4.0
	High incomes	%		37.9	40.5		2.6	6.9
Gini coefficient(b)		no.		0.303	0.331		0.028	9.2

(a) Equivalised disposable household income: reference year 2007-08.
(b) A summary measure of income distribution between 0 and 1. If the measure approaches the value of 1 income inequality is higher and vice versa.
Source: ABS Household Income and Income Distribution, Australia, 2007-08 (cat. no. 6523.0)