In this recent article, Mark McCrindle gives insight into how Aussie households are travelling financially. We thought we'd unpack this a bit further in this blog post. Stay posted for an upcoming social analysis report on all this and more!
Worsening income and wealth equality
The Gini Coefficient which measures the distribution of income (where 0 = perfect equality, everyone earning the same amount, and 1 = total inequality, with one person earning all) has been steadily getting worse over the past decade. It has significantly increased since 1995 when it was 0.296 compared to 0.328 currently. This is higher than the EU average of 0.30 but far better than the US (0.45).
Income by household type
When looking at household type, a lone-person aged over 65 has the smallest household disposable annual income of $24,596, followed by a one-parent family with dependent children at $28,444.
The households with the highest annual disposable incomes are the couple-only household ($60,424) the couple with non-dependent (older) children ($51,740) and the couple with children spanning the dependent and non-dependent age groups ($46,592). Couples with young families (dependent children aged under 5) have a household income of $42,744 – which is below the national average- and this coming at the life stage where expenses are growing!
The poverty line in 2012
The Henderson Poverty Line was calculated in 1973 as $62.70 and defined as the weekly household disposable income required to meet the basic needs of the average family (two adults and two dependent children). The Melbourne Institute have adjusted this for inflation and calculated it to be $500 in today’s terms.
Based on the latest ABS Household Disposable Income data, there are 5,913,400 Australians living in households with a weekly disposable income below $500 which is more than 1 in 4 Australians. However, not all of these are family households. The lowest quintile of Australian households (1.7 million) have an average weekly household disposable income of $314 – well below the 2012 Henderson Poverty Line figure ($500). Of these, 53.6% are family households with dependent children and so the total number of Australians living in families with dependent children in this lowest income quintile is 1,906,159.
Ongoing impacts of the downturn
Stage 1: Shopping Change
What we buy: shift to private labels, brand substituting, downgrading to lower specifications, cutting back on some luxuries.
Where we buy: growth in online purchasing, shift to cheaper retailers, bulk purchasing, price comparing, seeking out specials
When we buy: delaying purchasing, shopping on sales, making goods last longer, coupon and voucher use.
Stage 2: Lifestyle change
Cancelling outsourced services. Trading back time for money- home cleaning, lawn maintenance, car washing- back to DIY.
Behavioural shifts: byo lunch to work, cancelling memberships (e.g. gym, self storage, subscriptions, children’s extra-curricular activities, clubs)
Delaying or substituting purchases: cutting back or changing holiday destinations, delaying major spending like renovations, car upgrade, replacing whitegoods etc.
Stage 3: Structural change
Significant lifestyle changes, downsizing home, selling second car, getting second job, moving to two-income household, moving children from private schooling, altering retirement destination and timing.
Stage 4: Financial survival mode
The ABS data shows that the number of households defined by being in financial stress has been increasing over the past decade. Currently 1 in 7 households are unable to raise $2000 within a week if something critical emerged. 1 in 8 households have been financially unable to pay a gas/electricity/phone bill on time in the last year- this is more than 1.1 million households.
20% of low economic resource households have sought to borrow money from family or friends in the past year, 1 in 13 households nationally also fall in to this category- more than 711,000 households. 1 in 10 low resource households have gone without meals for financial reasons in the last year ( 3% of all households have done this), and 1 in 10 have sought assistance from welfare organisations (2.8% of all households).