Article: Poverty in Australia Since The Financial Crisis: The Role of Housing Costs, Income Growth and Unemployment

Journal of Poverty and Social Justice • vol 24 • no 2 • 97–112 • © Policy Press 2016 • #JPSJ
Print ISSN 1759 8273 • Online ISSN 1759 8281 • http://dx.doi.org/10.1332/175982716X14650295704614
article
Poverty in Australia since the financial crisis:
the role of housing costs, income growth and
unemployment
Peter Saunders, p.saunders@unsw.edu.au
Melissa Wong
Bruce Bradbury
University of New South Wales, Australia
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This paper examines recent trends in poverty in Australia and shows how sensitive the estimates
Delivered by Ingenta to: University of Sussex
are to the poverty line and the treatment of housing costs and recent data changes. Relative
poverty increased modestly between 2003–04 and 2011–12 both before and after housing costs,
although it has declined since the financial crisis and there has been a marked decline in absolute
Copyright The Policy Press
poverty. The simulated impact of a $50 a week increase in unemployment benefit on the poverty
rate is relatively small because the payment gap is now over $90 a week, although the impact on
the poverty gap is larger.
key words relative poverty • absolute poverty • housing costs • vulnerability
Introduction1
Despite the limitations of poverty line studies, estimated poverty rates provide valuable
information on which groups are at-risk of poverty, how things are changing and
the ability of social benefits to support an adequate standard of living. This paper
describes recent trends in income poverty in Australia and examines the impact
of alternative methodological and measurement choices. The results provide an
interesting comparison with recent trends in the UK, where the recent decline in
relative poverty reflects a fall in real median income and hence the poverty line
(Jenkins, 2015) – even though deprivation increased as living standards declined
(Fahmy, 2014). In Australia, real incomes grew strongly between 2003–04 and 2011–12
(the latest year for which the data examined here were available at the time of the
analysis), with mean and median income increasing by 29 per cent and 25 per cent,
respectively (ABS, 2013a, Table 1). Although this growth slowed considerably after
2007–08 it remained positive, a reflection of the timely and astute policy intervention
introduced in later 2008 and 2009 to avoid the worse effects of the crisis (Saunders
and Deeming, 2011).
Although the Australian labour market bounced back relatively quickly from the
shock associated with the global financial crisis (GFC), there are on-going concerns
about the economic and social consequences for those who remain jobless.2 Their
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Peter Saunders et al
problems have been compounded by the failure of successive governments to

increase the value of unemployment benefit (Newstart Allowance (NSA)) except
to compensate for increased consumer prices – raising concerns about the ability of
the unemployed to manage financially. Record low interest rates have contributed
to spiralling house prices that have made it harder for first home buyers (particularly
in the major capital cities) to break into the housing market, increased mortgage
levels and repayments for purchasers and pushed up rents. These two factors –
unemployment and housing costs – are important determinants of poverty and are
a focus of the analysis that follows. The last decade has also been characterised by a
series of measurement changes introduced by the ABS to improve the quality of the
income data but that have made it difficult to determine how poverty (and inequality)
have changed, as Wilkins (2014) has recently noted. These changes present a challenge
to poverty researchers, but require a response if the results are to accurately track
what has happened.
The paper is organised as follows: the second section provides a brief review of
recent studies of Australian poverty, while the third section describes our data sources
and methods. The fourth section presents the main findings on the overall poverty
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situation and examines the impact of key measurement choices, including the role
of housing costs. The penultimate section examines the vulnerability to poverty of
specific groups, recent changes in alternative poverty measures and the simulated
impact on poverty of an increase in the level of NSA. The final section summarises
the main conclusions.
Reviewing recent studies

The focus of most studies of Australian poverty has been on estimating the dimensions
and structure of the problem, generally using data from the biennial surveys of
income and housing conducted by the ABS (2013a).3 These studies provide important
information about the extent of poverty, but need to be accompanied by studies
that examine living standards more directly to see how deprivation is changing.This
approach has been applied in Australia by Saunders and Wong (2012) to examine
the impact of the GFC but as Fahmy (2014) has shown in the UK context, the two
approaches can produce diverging trends, particularly when short-run movements
in income do not adequately capture underlying movements in living standards.4
Nonetheless, the strongly established conventions of income-based poverty
measurement mean that it has an important role to play. Numerous academic studies
have used the ABS data to examine recent trends in poverty in Australia (Wilkins,
2007; Saunders and Hill, 2008; Phillips et al, 2013; Cassells et al, 2014; Redmond
et al, 2013). Results have also been produced by a number of government agencies,
including the Australian Institute of Health and Welfare (AIHW, 2013, Figure 11.23)
and the Productivity Commission (see McLachlan et al, 2013, Table 3.1), while
non-government agencies have used this material to highlight the inadequacies of
the social security system and pressure the government to respond (for example,
ACOSS, 2014a, Figure 8 and Table 10; 2014b, Table 1). The ABS data is also used
to compare Australian poverty rates internationally by the Organisation for Economic
Cooperation and Development (for example, OECD, 2008; 2014a) and by researchers
associated with the Luxembourg Income Study (for example, Gornick and Jäntti,
2013) and, more recently with the GINI project (Whiteford, 2014).
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Poverty in Australia since the financial crisis
Despite the widespread use of the ABS data in Australian poverty research, however,
concerns have been raised by the ABS itself about its accuracy for those reporting
low incomes. This has resulted in the ABS introducing a series of improvements
in its income measure that have made it difficult to estimate with confidence how
poverty has changed over time or how it compares with other countries. The ‘baseline’
approach used in this paper identifies poverty by comparing incomes with a poverty
line anchored to median income, as this is the approach used in the studies cited
above. A range of alternative sample exclusions, income metrics and operational
assumptions are introduced to examine the sensitivity of the estimates and highlight
the role of specific measurement issues and contributing factors.5
Although the available studies vary in the details used to derive the estimates,
the results suggest that, without taking account of housing costs, poverty increased
modestly through the 1980s, declined in the first half of the 1990s, then rose sharply
up until the early 2000s and continued to rise up until 2007–08, since when it has
declined.6 This picture is similar to that produced by the OECD in a number of recent
reports (OECD, 2008; 2011; 2014a), the latter estimates showing that the Australian
poverty rate of 13.8 per cent in 2011–12 was more than 2 percentage points above the
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OECD average of 11.5 per cent (in 2011) (OECD, 2014a, Annex Table), although
its child poverty rate of 13.0 per cent was slightly below the OECD average of 13.9
per cent. The Australian poverty rate in 2011 was ninth highest overall, similar to
that in Korea, above that in New Zealand and the UK (both around 11 per cent),
and exceeded only by the ‘over 15 per cent club’ that includes Chile, Greece, Israel,
Spain, Turkey, Mexico and the US. So Australia’s good performance in the wake of
the GFC is tempered by a longer-term picture that is less appealing.
Data sources and methodology

The ABS surveys are now conducted biennially, spread over the four quarters of each
financial year (July to June).The reported quarterly incomes in each survey have been
adjusted to allow for the rise in consumer prices that took place over the year by
expressing all incomes in the prices that prevailed mid-way through the year, that is,
at the end of December.The income measure includes income from all sources after
deducting income tax payments (and the Medicare levy and surcharge), and equivalent
income is derived using the modified OECD equivalence scale. The poverty line
is set at 50 per cent of median equivalised disposable income (common practice in
Australia), although the sensitivity of the basic estimates is examined by setting an
alternative poverty line at 60 per cent of the median. Poverty status is identified at
the household level, but poverty rates are derived by calculating the percentage of
people living in poor households.
In previous work (for example, Saunders and Hill, 2008), households that report
either zero or negative disposable income, or that contain an adult member who is
self-employed have been removed from the sample used to estimate poverty.7 This
is justified on the grounds that reported income may not be an appropriate basis
for establishing the poverty status of these households. The exclusion relating to
self-employment affects a substantial number of households but the two exclusions
together result in a small change in median income and hence in the poverty line.8
Following the work of the Henderson Poverty Commission in the 1970s, it has
been common in Australia to report poverty on both a before housing costs (BHC)
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and an after housing costs (AHC) basis (Commission of Inquiry into Poverty, 1975).
The rationale for the latter approach is that for many people housing costs are fixed
in the short-run, but often substantially reduce their ability to consume other goods.
The housing costs adjustment is particularly relevant when comparing poverty rates
for groups with very different levels of housing wealth (for example, older people
versus working-age families with children). This tradition is followed here, using an
AHC poverty line set at half the median of disposable income minus housing costs,
where housing costs include recurrent outlays on mortgage repayments (both interest
and principal repayments including those for any dwelling alterations or additions),
body corporate payments and general and water rates for owners, and rent payments
for renters (and rates and body corporate payments if they pay them).9, 10
In order to show the impact of these different methodological choices, results are
reported for the following four combinations of sample specification and income
metric:
1. Approach 1: The baseline definition that includes all observations (no exclusions)
and takes no account of housing costs
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2. Approach 2: As above, but excluding all households that either report having zero
or negative income or are self-employed
3. Approach 3: As 1 above, but deducting housing costs from income
4. Approach 4: As 2 above, but deducting housing costs from income.
As noted earlier, over the period considered here, the ABS has introduced a series of
measurement changes to improve the quality of its income data. The latest changes
were introduced in 2007–08 and are described in detail in ABS (2009, Appendix 4).
The ABS estimated at the time that this change affected 3.4 million (43 per cent)
households, resulted in an increase in mean weekly gross household income of $85
(5.2 per cent) and increased the Gini coefficient from 0.319 to 0.331 (3.8 per cent)
(see ABS, 2009, Appendix 4, and Kindermann and McColl, 2012).11 It was argued
that the latter effect arose because ‘most of the changes have been to the scope of
employment income and at the higher end of the income distribution i.e. fourth and
highest quintiles’ (ABS, 2009, 63)
It does not follow from this that the changes have not affected poverty rates, for
two reasons: first, because the changes may affect the incomes of some who would
otherwise fall below the poverty line; and second, because they may affect median
income and hence the poverty line itself. It is thus of interest to examine the impact
of the changes on estimated poverty rates, as is done here by comparing estimates
derived from the latest income measure (introduced in 2007–08) with those derived
from the previous measure (introduced in 2005–06).
Results: The overall pattern

Table 1 presents estimated aggregate poverty rates for 2011–12, showing in each case
the value of the median income to which the poverty line is fixed under each approach.
The removal of those reporting zero or negative income and the self-employed has
a small impact on median income, whereas the new income measure causes median
income to rise by between 4 and 6 per cent, with the impact larger after deducting
housing costs.The fact that median income increases under all four approaches when
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Table 1: Aggregate poverty rates in 2011–12: Benchmark estimates and sensitivity

analysis
Before housing costs After housing costs (AHC):
(BHC):
Definition 1 Definition 2 Definition 3 Definition 4
Current (2007–08) ABS income definition:
Median income ($/week) 792.3 800.5 637.4 648.7
Poverty rates (50 % of median):
Adults 12.3 12.2 13.5 13.0
Children 11.5 10.6 18.4 17.7
Persons 12.1 11.9 14.4 13.9
Adults 20.1 20.0 20.9 21.1
Children 20.7 19.6 26.1 25.5
Persons 20.2 19.9 21.8 22.0
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Previous (2005–06) ABS income definition:

Median income ($/week) 757.0 761.3 603.2 608.2

Adults 10.3 9.7 12.9 11.9

Children 10.8 9.5 17.8 16.9
Persons 10.4 9.6 13.8 12.8
Adults 18.7 18.5 19.6 19.2
Children 19.1 18.1 27.1 26.2
Persons 18.8 18.4 21.0 20.5
Source: ABS (2013b)
the new income definition is applied means that not all of the extra income that is
picked up in the survey was received by those already above the median.
The new income measure results in a higher poverty rate in all cases except for the
AHC child poverty rate using the higher poverty line. In general, the impact of the
new measure is larger under approaches 2 or 4 than under approaches 1 or 3, and
(in absolute terms, but only on a BHC basis) when the poverty line is set at 50 per
cent of the median than when it is set at 60 per cent. The results are consistent with
those produced by Wilkins (2014, Table 4) which indicate (using a similar approach
to that used here) that under the new income measure the poverty rate increases by
around one percentage point in both 2007–08 and 2009–10. Overall,Table 1 illustrates
how data changes can affect estimated poverty rates even when the aim is to capture
more of the income of those at the top of the income distribution.The difference in
2011–12, for example, increases the number of persons in poverty under approach 2
by more than 427,000, or by over 24 per cent.
The other striking feature of Table 1 is the substantial role that housing costs play in
affecting people’s exposure to poverty. Approaches 2 and 4 show that taking account
of housing costs increases the poverty rate by 2 percentage points whichever poverty
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line is used. This difference is around one-quarter of that produced when the poverty
line is shifted from 50 per cent to 60 per cent of median income. The increase for
children is substantial, at around 7 percentage points – a reflection of the fact that most
homeowners who are still paying off a mortgage (and those in the private rental sector)
fall in the age ranges where children are present in the household. Taking account of
housing costs causes the ratio of adult to child poverty rates to change from 1.151 on
a BHC basis to 0.734 on an AHC basis when approaches 2 and 4 are compared, thus
affecting at what point in the life cycle households face the greatest risk of poverty.
Because housing costs are an important determinant of the living standards of many
Australians, the focus henceforth is on the AHC measure (approach 4).
Disaggregated results
Vulnerabilities
Poverty vulnerability is defined to cover those groups with a baseline BHC poverty
rate that is at least twice the overall national rate (that is, is above 23.8 per cent – see
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Table 1).The threshold is applied to approach 2 (based on the BHC income measure)
in order to avoid identifying those who are most vulnerable as being those facing
the highest housing costs. It is also important to bear in mind that this analysis can
only be applied to those groups that can be identified using the available data: this
means, for example, that it cannot cover Indigenous Australians or those affected by
a disability because this information was not collected in the 2011–12 survey.
The results in Table 2 indicate that the age profile of poverty rates follows a U-shaped
pattern, declining from 10.6 per cent for those aged under-15 (see Table 1) to 6.3
per cent for those aged 25–34, before more than doubling to 15.5 per cent in the
55–64 age range and almost doubling again to 29.2 per cent for those aged 75 and
over. However, the impact of home ownership on housing costs plays an important
role in protecting many older households from poverty by allowing their modest
(often primarily pension) incomes to cover their non-housing needs (see Yates and
Bradbury, 2010).
A second important factor highlighted in Table 2 is family type, the results showing
that younger families with children, single people of all ages and older people are
most vulnerable to poverty before taking account of housing costs. It is also clear
that those who are either unemployed or not in the labour force are far more likely
to experience poverty than those in employment. Finally, the estimates highlight
the failure of the social security system to provide an adequate level of support for
those in receipt of most payment types. For pensioners, payment rates were only just
below the BHC poverty line used here, but for Allowance recipients, they were well
below. This reflects the indexation of Pensions to wage increases and Allowances to
price increases since the mid-1990s (reinforced by the substantial one-off increase
in the single rate of pension in 2009).
Recent trends
The income measurement changes discussed earlier make it difficult to establish with
certainty the extent of recent changes in poverty. In seeking to address this issue,
poverty has been estimated for each year in which the Survey of Income and Housing
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(SIH) was conducted, using each of the available income definitions for that year, on
both a BHC and AHC basis (approaches 2 and 4). The availability of the different
income measures is summarised in Table 3, which indicates that the latest measure only
allows poverty to be estimated on a consistent basis back to 2007–08. The previous
(2005–06) measure extends back to 2005–06, and the 2003–04 measure covers the
period between then and 2007–08 (but also extends back to 1994–95).
Table 2: Groups with poverty rates more than twice the average in 2011–12, before and
after housing costs
Socio-demographic Characteristics of Household Poverty rate (percentage):
Reference Person (HRP) Approach 2 (BHC) Approach 4 (AHC)
Age: 65–74 25.1 (15.5)
Age: 75+ 29.2 (14.0)
Family type: Single person 32.5 (27.7)
Family type: Lone parent, HRF 15–24 35.2* 63.0*
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Family type: Couple with children, HRP 15–24 25.1 (27.2)

Family type: Single person, HRP 25–64 24.1 29.1

Family type: Single person, HRP 65+ 45.3 (25.2)
Family type: Couple without children, HRP 65+ 25.3 (12.7)

Labour force status (LFS): Unemployed 52.6 61.2
LFS: Not in the labour force, HRF <65 42.6 48.4
LFS: Not in the labour force, HRF 65+ 28.8 (16.0)
Number of earners in household: zero 42.9 38.2
Main Income source: government pension or allowance 44.3 40.1
Payment type: Newstart Allowance 47.7 55.1
Payment type: Youth Allowance 31.0* 50.6*
Payment type: Parenting Payment 30.0 47.2
Payment type: Carer Payment 30.9 (24.8)
Payment type: Disability Support Pension 43.1 48.0
Payment type: Age Pension 29.6 15.7
Notes: Estimates shown in brackets are those where the poverty rate is less than double the overall
rate. An asterisk (*) indicates that the relative standard error (RSE) exceeds 25 per cent – these
estimates should be treated with caution.
Source: See Table 1.
In order to produce a single series that covers the period since 2003–04, the estimates
based on the different income measures applying in different years have been spliced
together. Table 3 indicates that there is a large gap between the AHC estimates (the
picture is similar for the BHC measure) based on the 2007–08 and 2005–06 measures
in the overlap year (2007–08), although this is not the case when the 2005–06 and
2003–04 measures are compared in overlap year, 2005–06.The most consistent series
(shown in bold in Table 3) is thus produced by splicing together the 2003–04 income
measure estimates for that year with the 2005–06 income measure estimates thereafter.
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When estimated on this basis, poverty increased sharply between 2003–04 and 2007–
08 both BHC and AHC, but then declined between 2009–10 and 2011–12. Table 3
also indicates that, as in the UK, following the GFC, relative poverty declined between
2007–08 and 2009–10 (whichever income measures is used), particularly among adults.
However, unlike in the UK where the decline reflects a fall in the poverty line, in
the Australian case it reflects changes in policy, including the one-off social security
measures that were introduced in the wake of the crisis to offset its economic impact,
combined with the increase in the single age pension in September 2009.
The poverty trends shown in Table 3 are measured using a relative poverty line,
anchored to median income. As the UK patterns illustrate, this approach can produce
strange results in periods of economic boom or bust when large swings in median
income can produce higher poverty rates when real incomes are rising and declining
poverty rates when real incomes are falling. To counter these effects, it is now common
(for example, Wilkins, 2007, Figures 1 and 2; Rodgers et al, 2009, Figure 3; Jenkins,
2015, Figure 7.7) to supplement relative poverty rates with absolute rates derived
using a poverty line that is adjusted in line with movements in consumer prices.
The estimates in Table 4 use two alternative absolute poverty line anchors, set
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equal to the level of median income in the two years that span the period.12 The first
four rows show movements in median income (BHC and AHC), the CPI and the
CPI after the housing component has been removed. Two features stand out: first,
as noted earlier, the period was one of strong growth in real incomes, with median
(equivalised, disposable) income growing in real terms by 25.2 per cent; second,
although the growth in AHC income was slightly less than BHC income, the housing
component of the CPI also grew less than other CPI components so that real median
AHC income grew by more than real median BHC income.
Table 3: Estimated poverty rates before and (in brackets) after housing costs (based on 50
per cent of median income poverty line)
Poverty rate (%):
2003–04 2005–06 2007–08 2009–10 2011–12
Persons
2003–04 income measure 9.1 (11.8) 10.6 (12.6) 12.2 (14.3)
2005–06 income measure 10.7 (12.7) 12.3 (14.4) 10.2 (12.5) 9.6 (12.8)
2007–08 income measure 13.2 (15.3) 11.6 (13.0) 11.9 (13.9)
Adults
2003–04 income measure 9.5 (11.1) 10.8 (11.6) 12.6 (13.4)
2005–06 income measure 10.9 (11.8) 12.8 (13.5) 10.2 (11.3) 9.7 (11.9)
2007–08 income measure 13.6 (14.5) 11.6 (11.9) 12.2 (13.0)
Children
2003–04 income measure 7.4 (14.8) 9.7 (16.6) 10.3 (18.0)
2005–06 income measure 9.7 (16.5) 10.4 (18.2) 10.1 (17.4) 9.5 (16.9)
2007–08 income measure 11.4 (18.8) 11.5 (17.6) 10.6 (17.7)
Source: See Table 1 (and earlier surveys).
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Table 4: Recent changes in relative and absolute (CPI-anchored) poverty rates before and
after housing costs (a) (b)
Change
over
2003–04 2005–06 2007–08 2009–10 2011–12 period
(%)
Median income (BHC) 55.3
490.2 557.8 668.2 695.8 761.3
($)
Median income (AHC) 52.9
397.8 445.2 539.8 562.3 608.2
($)
CPI (2011–12 = 100) 79.9 84.4 89.8 94.8 100.0 25.2
CPI excluding Housing 20.9
82.7 87.0 92.0 95.6 100.0
(2011–12 = 100)
PERSONS Poverty rate (%):
Before Housing Costs:
Relative poverty measure 9.1 10.7 12.3 10.2 9.6 +5.5
Absolute poverty
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measured (base year = 9.1 7.4 5.0 4.0 3.9 -57.1

2003–04)
Absolute poverty
2011–12)
After Housing Costs:
Absolute poverty
2003–04)
Absolute poverty
2011–12)
CHILDREN
Before Housing Costs:
Absolute poverty
2003–04)
Absolute poverty
2011–12)
After Housing Costs:
Absolute poverty
2003–04)
Absolute poverty
2011–12)
Notes: (a) The relative poverty lines are set equal to 50 per cent of median income in each year. The absolute poverty
lines are set at 50 per cent of median income in the base year and indexed to movements in the CPI in other years;
(b) The After Housing Costs poverty line is indexed to movements in the CPI after removing the housing component.
Source: See Table 1 (and earlier surveys).
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The remainder of Table 4 shows movements in the overall and child BHC and AHC
poverty rates (based on the spliced series shown in Table 3) – measured using a relative
(median-anchored) and the two versions of an absolute (CPI-anchored) poverty line.
These comparisons reveal how large a difference it makes when an absolute poverty
line is used to monitor change in a period when real incomes are growing strongly.
Whether the poverty line is anchored at the beginning or end of the period obviously
makes a big difference to the level of poverty, but in both instances the pattern of
change in absolute poverty is similar – varying in proportionate terms from a decline
of almost 40 per cent to almost 60 per cent, depending on the measure used and
group considered. In most cases, the decline is larger under the BHC measure than
when the AHC measure is used – in contrast to the relative poverty rates where the
AHC increase exceeds the BHC increase.
Unemployment and poverty: estimating the impact of an increase in Newstart

Allowance (NSA)
One of the notable features of Table 2 is the high poverty rates faced by the
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unemployed and those living in jobless households. This is a direct consequence of

two factors – the relatively high incidence of unemployment among some groups and
the low level of unemployment benefit (NSA).13 Since NSA has been indexed only
to movements in the CPI since 1994, its value has fallen relative to other payment
levels, as well as to general living standards and to the (relative) poverty line.14 This has
led to a chorus of calls from academics (Whiteford, 2010), industry groups (Business
Council of Australia, 2012) and international agencies (OECD, 2010) for an increase
in the level of NSA to restore its adequacy. One of the bodies that has been most
vocal in calling for an increase has been ACOSS, who have called for an increase of
$50 a week in the base rate of single payment and improved indexation arrangements
(see ACOSS, 2012).15
The following simulation estimates the impact on poverty of a $50 a week increase
in the single rate of NSA paid in July 2011 and maintained throughout 2011–12. This
involves establishing the household living arrangements of those individuals who are
receiving single rate NSA because their poverty status (and, in some instances, the
level of payment received) depends on the circumstances of other members of their
household. Because the pre-increase level of NSA is well below the poverty line
(see footnote 14) examining the impact of a $50 a week increase on the numbers
in poverty and the poverty rate alone provides only a rudimentary estimate of the
impact of the change. For this reason, we also examine how the change would affect
the poverty gap, which captures the improved incomes of those who remain below
the poverty line.
As the last entry in the first column of Table 5 indicates, less than two-thirds (63.9
per cent) of NSA recipients are single and are thus affected by the change.16 These
households are distinguished by their circumstances (which affect the poverty line that
applies to them) and poverty rates and gaps are estimated first using income reported
in the survey, and again after reported NSA income has been increased by $50.17
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Table 5: Estimated poverty impact of a $50 a week increase in the single rate of NSA
Household status of NSA Approach 2 (BHC): Approach 4 (AHC):

recipients (percentage of all
Before increase: After increase: Before increase: After increase:
NSA recipient households)
Poverty Numbers Poverty Numbers Poverty Numbers Poverty Numbers
rate (%) in poverty Poverty rate (%) in poverty Poverty rate (%) in poverty Poverty rate (%) in poverty Poverty
(‘000) gap ($) (‘000) gap ($) (‘000) gap ($) (‘000) gap ($)
Single , no children, living 73.9 50.7 87.8 67.0 45.9 52.2 87.0 59.7 142.1 79.4 54.5 100.8
alone (6.9)
Single , no children, living with 19.5 28.0 31.7 9.3 13.4 21.2 25.3 36.4 50.5 18.5 26.5 37.4
at least one other adult (46.9)
107
Single , with at least one child, 41.2 11.4 61.8 36.4 10.1 42.3 60.9 16.9 132.6 57.3 15.9 103.8
living with no other adults
(7.0)
Single , with at least one child, 55.6 3.9 65.8 55.6 3.9 38.4 25.1 1.8 54.1 25.1 1.8 41.6
living with at least one other
adult (3.1)
All single NSA recipients 38.1 94.0 51.6 29.7 73.3 32.6 46.4 114.7 85.3 39.9 98.6 62.6
(63.9)
Source: See Table 1 and main text.

The BHC poverty rate among single NSA recipients of 38.1 per cent exceeds the
vulnerability threshold used earlier, but both the BHC and AHC poverty rates are
below those shown earlier for all households defined as unemployed or with NSA
as their main source of income (see Table 2). This is because almost half of NSA
recipients live with other adults (for example, with parents or in group households)
and the incomes of the other members are included in the poverty calculation.18
In overall terms, the estimated impact of the payment increase reduces the poverty
rate among single NSA recipients by over 8 percentage points on a BHC basis and
by slightly less AHC.The changes differ for different groups of NSA recipients, with
the biggest effect occurring for those receiving NSA who do not have children and
are living with at least one other adult. In total, the increase is estimated to move
around 21,000 NSA recipients out of poverty (BHC) or around 16,000 (AHC).These
estimates correspond to proportionate reductions in the poverty rates of 22 per cent
(BHC) and 14 per cent (AHC), respectively.
While these impacts might seem relatively modest, they reflect the large gap that
has opened up between the level of payment and the poverty line which was greater
than $50 (see footnote 14). This implies that only those with income from other
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sources (or who were living with others and thus faced a different poverty line)
would be moved above the line by the change. For this reason, the impacts of the
change on the poverty gap provides a more comprehensive estimate and as Table 5
indicates, these are considerably larger. Thus, the average poverty gap declines from
$51.6 to $32.6 (BHC) and from $85.3 to $62.6 (AHC) – equivalent to proportionate
reductions of 37 per cent and 27 per cent, respectively and considerably larger than
the corresponding reductions in the relevant poverty rates. It is, however, important
to bear in mind that, despite the modest impact on poverty numbers and rates, the
incomes of all single NSA recipients would be increased by the change, improving
the living standards of one of the most vulnerable groups.
Conclusions
This paper has presented a picture of poverty in Australia in 2011–12, four years
after the onset of the global financial crisis and in the midst of a period of sustained
economic growth that delivered rising real incomes to most Australians.The focus has
been on describing the latest situation and examining recent trends using a variety of
measures that illustrate the impact of applying different approaches and measurement
choices. Of greater relevance for policy purposes, attention has also focused on the
role of two specific factors that contribute to the risk of poverty and are thus central
targets of any poverty alleviation strategy: unemployment and housing costs.
The main finding is that the poverty rate, measured using a poverty line set at one-
half of median income and the latest ABS income definition, was 11.9 per cent in
2011–12 BHC and 13.9 per cent AHC. Child poverty was slightly lower at 10.6 per
cent BHC, but much higher at 17.7 per cent AHC. The differences highlight the role
that housing costs play in contributing to poverty for many Australians, particularly
families with children. These estimates change somewhat if a different ABS income
measures is used, but the difference does not affect the overall extent of the problem.
The groups that are most vulnerable to poverty – defined as experiencing a poverty
rate at least twice the national rate – include those aged over 65 (particularly single
people and those ‘older–old’ aged over 75), working-age single people, younger
108
sole parents, households with no earners and those reliant on government social
security payments as their main source of income. These findings highlight the role
of unemployment and lack of access to a market income in contributing to poverty
and point to the inadequacy of many social benefits.
In relative terms, the poverty rate fluctuated between 9 per cent and 13 per cent
(BHC) and between 10 per cent and 13 per cent (AHC) between 2003–04 and
2011–12. On the AHC measure, the poverty rate in 2011–12 of 12.8 per cent was
lower than at its peak of 14.4 per cent in 2007–08 but above its lowest level of 11.8
per cent in 2003–04. Poverty declined in the years following the GFC whichever
measure is used and whether or not account is taken of housing costs. While this
picture is similar to that reported for the UK by Jenkins (2015), in Australia it reflects
increased household incomes and a rising poverty line, while in the UK it reflects
the opposite. The fact that real incomes grew strongly in Australia is reflected in a
sharp decline in absolute poverty, from 21 per cent in 2003–04 in 2003–04 to 9.6
per cent in 2011–12 if the latter year is used as the base year.
Finally, the estimated impact of a $50 a week increase in the level of NSA paid to
the single unemployed was examined. The results indicate that the impact on the
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numbers in poverty and the poverty rate is modest, though not unimportant – a
reflection of the fact that many years of policy neglect have left the payment well
below the poverty line by the end of 2011. The estimated impacts on the poverty
gap are considerably larger both BHC and AHC and this measure provides a better
benchmark for assessing the impact of such a change. Despite this, it is important to
recognise that any increase in the level of payment would raise the incomes of many
of the most disadvantaged Australians. Although the simulation results are intended to
be illustrative, they point to one area where current anti-poverty policy in Australia
is in urgent need of improvement.
Notes
1 The authors acknowledge the helpful comments provided by two anonymous referees
but accept responsibility for any remaining errors.

2 Martorano (2015) has recently examined the impact of the 2009 Household Stimulus
Package on Australian poverty, showing that the bonus payments ‘reduced the risk
of poverty and stimulated consumption, especially for low-middle income families’
(Martorano, 2015, 320).
3 Poverty rates since 2001 can also be estimated using data from the Household, Income and
Labour Dynamics in Australia (HILDA) survey and results are published regularly by the
Melbourne Institute in its annual report on the survey – see Wilkins (2013).The HILDA
data can also be used to examine the dynamics of poverty (see Buddelmeyer and Verick,
2008; Rodgers and Rodgers, 2009) although this issue is not addressed here.
4 Beginning with wave 14 (conducted in 2014) the household questionnaire component
of the HILDA survey will include a suite of deprivation questions based on the work
conducted by Saunders, Naidoo and Griffiths (2008).
5 Note that if it is only those with low incomes that under-report their income (which
seems unlikely), this will not affect the median and hence the poverty line, even though
it may lead to an over-estimate of the poverty rate.
6 The trend is quite different if an ‘absolute’ poverty line is used that is anchored at its
value in a base year, since average community incomes grew strongly in real terms over
109
the period, as Whiteford (2014, Figure 3.3) and Rodgers et al (2009, Figures 1b and 2b)
demonstrate. See also Figures 1 and 2 in Wilkins (2007).
7 Self-employed households are defined as those containing at least one member who
either reports their current labour force status as self-employed, or has some income
from their own business.
8 The zero/negative income exclusion is applied to disposable income so it is possible
that income from some specific income sources will remain zero or negative. Application
of this exclusion results in the removal from the actual (unweighted) 2011–12 sample of
93 households, while the self-employed exclusion affects 2,064 households, resulting in
a combined total of 2,108 excluded households. The decision to exclude self-employed
households is not intended to reflect a lack of concern about poverty among this group but
acknowledges the problems involved in deriving an accurate measure of income that can
be used to produce reliable estimates of poverty. A strong case can be made for examining
the circumstances of this group using alternative approaches (for example, those based
on deprivation) or a combination of these alternatives with a standard income approach.
9 The same equivalence adjustment is applied to both income measures, although it can
be argued that since most of the economies of scale relate to housing costs, an equivalence
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adjustment that is closer to a per capita adjustment could be applied to the AHC measure.
10 An alternative treatment of the role of housing costs involves including the estimated
value of imputed rent in the measure of income (see Rodgers, 2012).

11 The definitional changes introduced in 2007–08 (and in earlier years in the 2000s) are
described in detail by Wilkins (2014), who also examines their impact on the level and
recent changes in income inequality.
12 A similar approach is used by Rodgers et al (2009) and Jenkins (2015).
13 In June 2011 three-quarters (75.3 per cent) of all NSA recipients were single, separated,
divorced or widowed, almost one-third (28.8 per cent) were aged between 21 and 29
years (there is a separate Youth Allowance for those aged under 21) and more than one-
third (37.3 per cent) were in receipt of payment for less than one year (Department of
Family, Community Services and Indigenous Affairs, 2012, Table 32).
14 Table 1 indicates that median (equivalised) income in December 2011 was $792 a week,
which implies that the single-person poverty line was $396. At that time, the maximum
level of NSA was $303 (including rent assistance) – $93 a week (23.5 per cent) below
the poverty line.
15 The increase was limited to single beneficiaries as a way of addressing a perceived
inequity in the single/married payment relativity that led to the one-off increase in the
single rate of pension in 2009. Note that the proposed increase corresponds to a 16.5 per
cent rise in the single rate of payment of $303 that existed in December 2011 (see note 14).
16 The categories shown in the first column of Table 5 are based on the number of income
units in the household. Thus, for example, the first category covers those households
that contain only one person in the income unit reporting income from NSA and one
income unit in total, the second category covers households containing one person in
the income unit reporting income from NSA and more than one income unit in total,
and so on. Some households may contain more than one single NSA recipient because
other income units in that household may also contain someone receiving the payment.
17 Note that this approach differs from that used earlier (for example, in Table 2), where
the labour force or transfer payment status of the unemployed or NSA recipients reflected
the circumstances of the Household Reference Person (HRP). In contrast,Table 5 focuses
110
on the status of individuals in receipt of NSA and equates their poverty status with that
of the household in which they are living.
18 It is likely that this high rate of cohabitation in part reflects the difficulty of managing
on the low level of benefit, particularly for those living in the major capital cities where
housing costs are so high.
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Journal of Poverty and Social Justice • vol 24 • no 2 • 97–112 • © Policy Press 2016 • #JPSJ

Print ISSN 1759 8273 • Online ISSN 1759 8281 • http://dx.doi.org/10.1332/175982716X14650295704614

key words relative poverty • absolute poverty • housing costs • vulnerability

problems have been compounded by the failure of successive governments to

Reviewing recent studies

Data sources and methodology

4. Approach 4: As 2 above, but deducting housing costs from income.

Results: The overall pattern

Table 1: Aggregate poverty rates in 2011–12: Benchmark estimates and sensitivity

Previous (2005–06) ABS income definition:

Median income ($/week) 757.0 761.3 603.2 608.2

Adults 10.3 9.7 12.9 11.9

Source: ABS (2013b)

Family type: Couple with children, HRP 15–24 25.1 (27.2)

Family type: Single person, HRP 25–64 24.1 29.1

Family type: Couple without children, HRP 65+ 25.3 (12.7)

Source: See Table 1 (and earlier surveys).

measured (base year = 9.1 7.4 5.0 4.0 3.9 -57.1

Unemployment and poverty: estimating the impact of an increase in Newstart

unemployed and those living in jobless households. This is a direct consequence of

Household status of NSA Approach 2 (BHC): Approach 4 (AHC):

Source: See Table 1 and main text.

but accept responsibility for any remaining errors.

value of imputed rent in the measure of income (see Rodgers, 2012).

ACOSS (Australian Council of Social Services), 2014b, Submission to review of Australia’s

Rodgers, JR, Rodgers, JL, 2009, Contributions of longitudinal data to poverty

era, Australian Economic Review 42, 3, 300–20

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