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DEFINING LOW, MIDDLE AND HIGH INCOME

Households with middle and high incomes tend to have a corresponding level of economic resources and wellbeing. Low income households, however, do not always have a lower level of economic well-being, because low income households may have stores of wealth which help to support their living standards.

In this section, the characteristics of households with different income and wealth levels are compared. For this comparison:

• High income households refers to the 20% of households in the highest equivalised disposable household income quintile;
• Middle income households refers to the 20% of households in the third equivalised disposable household income quintile; and
• Low income households refers to the 18% of households in the lowest equivalised disposable household income quintile, adjusted to exclude the first and second percentiles.

This low income definition was introduced in SIH 2013-14. This definition better captures households that have low economic resources by excluding those with nil or negative income, or income significantly below government pension rates. Such households often are either experiencing a temporary economic setback or have stores of wealth to support their living costs.

Equivalised disposable household income (EDHI) estimates are adjusted by equivalence factors to standardise them for variations in household size and composition, while taking into account the economies of scale that arise from the sharing of dwellings. When discussing income in this chapter, we are referring to EDHI.

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CHANGES IN INCOME OVER TIME


Change in the distribution of income and wealth over time are a key area of interest for social and economic policy analysts and researchers. Distribution analysis can indicate whether the material living standards of the community are improving evenly across the population.

As shown in Graph 1, between 1994–95 and 2015–16, the mean income of low income households increased by $151 per week in real terms to reach $421 per week in 2015–16. Middle income households increased by $309 per week over the same time period to reach $856 per week in 2015-16. In comparison, high income households increased by $841 per week to reach $2,009 per week.


Graph 1 - REAL(a) MEAN WEEKLY EDHI(b), by income group, 1994-95 to 2015-16(c)

Footnote(s): (a) In 2015-16 dollars, adjusted using changes in the Consumer Price Index (b) Equivalised Disposable Household Income (c) Survey of Income and Housing data was collected in labelled years (d) In 2007-08 there was a change in income standards, see Explanatory Notes for more information
Source(s): ABS Survey of Income and Housing, various years


All income groups have experienced a real increase in their income since the mid-1990s. Some of the growth in middle and high income groups was due to a broadening of the Survey of Income and Housing (SIH) income measure from 2003–04, with further improvements in 2007–08. However, there were also real increases in average incomes during this period.