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By David Stanford.
Published on the VCOSS Voice on 5 August 2013.
Income inequality in Australia has improved if we look with a narrow focus on the latest data released last week – but there remains a significant and disadvantaged section of the community for whom the gap continues to grow as the ABS analysis of ‘low economic resource’ households reveals.
With the federal election campaign underway, the release last week of the Australian Bureau of Statistics (ABS) data on Household Income and Income Distribution 2011-12 provides some timely and detailed data on inequality in Australia. The publication, based on a survey of 14,569 households across the country, provides an indication of the level and distribution of disposable household income. It also estimates the widely used measure of income inequality known as the Gini Coefficient for Australia.
The importance of this biennial publication lies not just in the fact that it allows us to track what is happening with incomes in Australia but also that it allows us to see how Australians on lower incomes are faring compared to middle and high income households. The regular collection of this data enables us to track any trends in income inequality and whether it is increasing or decreasing over time.
The headline numbers
Interestingly, compared to the previous data set in 2009-10, income inequality in Australia has decreased. This is a positive trend that VCOSS hopes can be maintained in coming years. However, this finding is tempered by the experience of what the ABS calls low economic resource households over the same period. Let’s have a look at the findings to get a greater sense of what is happening with income inequality in Australia.
Findings on income
Findings on wealth
I dream of Gini
The Gini Coefficient provides a measure of inequality amongst a set of values and is the most widely used statistic to measure income inequality. The Gini Coefficient is a number between 0 and 1. In the case of income, if 14,000 houses were surveyed and only one household received all the income, its value would be 1 demonstrating extreme inequality. Its values would be 0 if all surveyed households received identical incomes. The Gini Coefficient declined in 2011-12 compared to the previous measure in 2009-10 from 0.329 to 0.320. This indicates the level of income equality improved in Australia between 2009-10 and 2011-12.
The experience of low economic resource households
Interestingly, low income households in the study had the highest incidence of full ownership of their home. This reflects the fact that many of the low income households surveyed are composed of older people who have worked and paid off their home but are now living on a significantly reduced income from superannuation or pensions.
This is likely among the reasons why the ABS decided to undertake some further analysis of what it terms low economic resource households. These households are in the low income sample but also have (if you can forgive the use of the unfortunate statistical term) ‘low net worth.’ Specifically, the low economic resource measure includes households in the bottom 40 per cent in relation to disposal income and well as household net worth. It therefore excludes households with either high incomes or high net worth.
This approach can provide a clearer picture of the number of households that are likely to have the greatest challenges maintaining a decent standard of living given the significant restriction on the resources available for their consumption expenditure.
According to the data around 5 million Australians fall into this category and live in low economic resource households. Some of the common characteristics of these households include:
An analysis of these households brings us to one of the biggest findings of concern in the release:
“The mean income and wealth measures for all persons between 2003-04 and 2011-12 grew more than for people in low economic resource households, resulting in a widening gap between the low economic resource group and the population average.”
This demonstrates that while a narrow focus on income indicates income inequality has improved, there remains a significant and disadvantaged section of the community for whom the gap continues to grow.
The improvements in income equality can be attributed to a number of elements. One likely contributing factor is the substantial increase to government pensions implemented by the Commonwealth Government since 2009. This demonstrates the importance of fair rates of government benefits to address income inequality in the Australian community.
However, it also highlights the ongoing failure of government to address the insufficient levels of the unemployment benefit or Newstart allowance. It would be interesting to analyse the extent to which increasing levels of inequality between low economic resource households and the broader population can be attributed to this failure.
 Australian Bureau of Statistics (2013) Household Income and Income Distribution 2011-12, 6523.0, p. 5
 Australian Bureau of Statistics Op. Cit. p. 19
 Australian Bureau of Statistics Op. Cit. p. 14
 Australian Bureau of Statistics Op. Cit. p. 19
 Australian Bureau of Statistics Op. Cit. p. 22
Service Sector Reform project manager at VCOSS