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DEFINING LOW, MIDDLE AND HIGH INCOME AND WEALTH HOUSEHOLDS

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 adjusted low income measure captures genuinely low income households by excluding those with nil or negative income, or income significantly below government pension rates. Such households may be 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.

To compare different wealth levels:

• High wealth households refers to the 20% of households in the highest net worth quintile;
• Middle wealth households refers to the 20% of households in the third net worth quintile; and
• Low wealth households refers to the 20% of households in the lowest net worth quintile.

For more information see the User Guide (cat. no. 6503.0) which will be released later in 2017.

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CHARACTERISTICS OF LOW, MIDDLE AND HIGH INCOME HOUSEHOLDS


Around 35% of low wealth households also have relatively low incomes, while around 8% of low wealth households are in the top income quintile. This pattern is reversed for high wealth households, with 42% also having relatively high incomes and about 5% having high wealth but relatively low incomes as shown in Graph 1.


Graph 1 - COMPARISON OF INCOME(a), by wealth group(b), 2015-16

Footnote(s): (a) Based on net worth of the household (b) Based on Equivalised Disposable Household Income (c) Excludes the first and second percentiles
Source(s): ABS Survey of Income and Housing, 2015-16


Low income households are most likely to rely on government pensions and allowances as their main source of income, whereas employee income is the main income source for middle and high income households, as shown in Graph 2.


Graph 2 - MAIN SOURCE OF INCOME, by income group(a), 2015-16

Footnote(s): (a) Based on equivalised disposable household income (b) Excludes the first and second percentiles (c) Includes zero or negative income, own un-incorporated business income and other income
Source(s): ABS Survey of Income and Housing, 2015–16


Some household types are more common in the low income group, as shown in Graph 3. Lone person households are more likely to be in the low income group, while couple only households are more likely to be in the high income group. 


Graph 3 - SELECTED HOUSEHOLD TYPES, by income group(a), 2015-16

Footnote(s): (a) Based on equivalised disposable household income (b) Excludes the first and second percentiles
Source(s): ABS Survey of Income and Housing, 2015-16


For the analysis below a retiree household is defined as a household where the reference person in the household was 65 years or older and not in the labour force.

As can be seen in Graph 4 below, high income retiree households were more likely (76%) to draw their income from other income (including superannuation) than any other income source. For middle income retiree households, own other income was also the most common source of household income (53%). Low income retiree households were more like to draw their income from government pensions and allowances (92%).


Graph 4 - PROPORTION OF RETIREE(a) HOUSEHOLDS, by main source of household income, by income group 2015–16

Footnote(s):(a) Households where reference person was 65 years or older and they were not in the labour force (b) Excludes the first and second percentiles (c) Own unincorporated business income for low income households has an RSE 25%-50% and should be used with caution (d) Own unincorporated business income and government pensions and allowances for middle income households has an RSE greater than 50% and is considered too unreliable for general use (e) Government pensions and allowances for high income households has an RSE of 25%-50% and should be used with caution
Source(s): ABS Survey of Income and Housing, 2015–16