Poverty in Australia 2018: Methods, Findings and Implications Peter Saunders Social Policy Research Centre University of New South Wales Presented to the 2018 ACOSS Rise to the Challenge National Conference Sydney, 30 October
Overview of Presentation Three key issues will be explored: 1. The importance of poverty research 2. Methods and findings from the latest ACOSS/UNSW Poverty in Australia, 2018 report and some reasons for caution 3. Some key findings from the latest report, relating to: Child poverty Poverty and disability State variations in poverty
The Growing Importance of Poverty Research Poverty research will become of increasingly important over the next decade for three reasons: 1. Important research advances are being made in how poverty is conceptualised, identified and measured - multidimensional (non-monetary)measures; child-centric studies; poverty and well- being; understanding social policy impacts and failings 2. Economic developments will place poverty at the centre of the policy debate - robotics; AI; inequality; wages growth; housing costs; energy costs (climate change) 3. (Most importantly) reflecting the new global policy agenda, being driven by the Sustainable Development Goals (SDGs) - Goal 1 ( No Poverty )
The SDG Poverty Reduction Targets Goal 1.1 By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day. Goal 1.2 By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions.
How Are We Doing? The translation of the SDGs into specific Australian targets and monitoring of progress towards their achievement is being led by the Department of Foreign Affairs and Trade Two reports have recently been released DFAT s analysis of Australia s poverty performance begins as follows: There is no official measure used in Australia and no single, agreed objective indicator of poverty or financial stress. The most common poverty measures, including that used by the OECD, focus on income alone. Australia has one of the highest median equivalized household disposable incomes in the world, which means that the Australian relative income poverty line is set at a higher level of income relative to most other countries The report draws on HILDA data that shows a decline in relative (and absolute) poverty rates It makes no reference to the ACOSS/UNSW poverty reports (or to the ABS data)
Progress on SDG Goal 1.1 The extreme poverty measure referred to in SDG Poverty Goal 1.1 is based on the dollar a day poverty line developed by the World Bank Following the World Bank methodology, the dollar a day figure was revised by the World Bank to US$1.90 in 2015 That amount translates (using PPPs) into AUS$2.79 a day in Australia, or just under $20 a week This is equivalent to 2.3% of median income in 2015-16. The extreme poverty rate in Australia is estimated to be 0.6%, which means that 141,000 Australians were living in extreme poverty in 2015-16 This falls if those with zero or negative income and the self-employed are removed, but still leaves 49,000 Australians living below the dollar a day line Australia cannot be complacent, even about SDG Goal 1.1!
Progress on SDG Goal 1.2 I draw on the latest ACOSS/UNSW Poverty Reports to assess what progress has been achieved over the last 15 years, to see what this implies about our prospect of reaching the targets over the next 15 years (i.e. by 2030) Australia has no national definition of poverty but the international poverty line (set at 50% of median income) is widely used by researchers (SPRC; The Melbourne Institute) and government agencies (The Productivity Commission) NOTE: This approach identifies how many men, women and children are living in poor households, not how many men, women and children are themselves poor The ABS data, standardised as far as possible to abstract from measurement changes, indicates that poverty rates in 1999-2000 were: 11.1% (men), 12.3% (women) and 18.6% (children) The ACOSS/UNSW Poverty in Australia report just released indicates that by 2015-16 they were 11.3%(men), 12.2% (women) and 17.2% (children) Some (slight) progress, but nowhere near enough to suggest that current policies will get us anywhere near the 2030 SDG poverty targets of 5.7% men, 6.1% (women) and 8.6% (children) This means that policy settings will need to change markedly if Australia is to achieve SDG Goal 1.1 by 2030
Measuring Poverty Using Median Income Australian poverty researchers have moved away from the Henderson poverty line (HPL) to a line set at 50% of median income the international poverty line This approach also has its limitations relying on the median can produce unexpected results Example 1: Our poverty estimates remove from the sample all households who report zero or negative incomes in the ABS survey. In 2015-16, this results in the removal of around 76,000 individuals (0.33%) One might expect the numbers in poverty to decline by this amount, but in fact poverty falls by only 60,000; why is this? It is because when these households are removed, median income rises slightly (by around $2 a week) and more of the remaining households are now defined as poor 16,000 more, in fact Example 2: Imagine that everyone s housing costs fell. Because we measure after housing poverty (AHC) this income measure will increase for everyone However, the median will also increase and this will raise the AHC poverty line could result in a higher poverty rate even though everyone is better off
Australian Incomes are Bunched Around the Poverty Line How big these effects are depends upon how closely bunched incomes are around the median (and hence the poverty line) There is in fact a tight bunching of incomes around half of the median - reflecting our heavily targeted income support system In 2015-16: 1.2 million individuals (5.1%) had incomes below 40% of the median 2.1 million (9.1%) had incomes below 50% of the median 4.3 million (18.8%) had incomes below 60% of the median This means that 3.1 million Australian (around one in seven, or 13.7% of the population) were living within 20% of the poverty line Small changes in median income/the poverty line can have very big effects on poverty as large numbers are shifted from one side of the poverty line to the other The poverty gap is not so sensitive which is why we use it in the report NOTE: In 2015-16 the age pension is very close to the poverty line so that poverty for the 65+ group is sensitive to small shifts in the poverty line
Poverty Line Variations (Single Adult) $600 $500 $400 $300 $200 $100 $0 Full SIH sample Excluding low Ys Excluding low Ys and SE 60% of median income Excluding low Ys and SE 60% of median income Before Housing Costs (BHC) After Housing Costs (AHC) Poverty Lines ($ 2015-16)
Poverty by Family Type and Number of Children 70 60 Before housing costs (BHC) After housing costs (AHC) 50 40 30 20 10 0 1 Child 2 Children 3+ Children 1 Child 2 Children 3+ Children Couple Households Sole Parent Households
Comparing Child Poverty in 1982, 1990 and 2016 80 70 60 1981-82 (BHC; HPL) 1989-90 (BHC; HPL) 2015-16 (BHC) 2015-16 (AHC) 50 40 30 20 10 0 1 Child 2 Children 3+ Children 1 Child 2 Children 3+ Children Couple Households Sole Parent Households
Poverty rate (%) Poverty and Disability 35 30 Before housing costs (BHC) After housing costs (AHC) 25 20 15 10 5 0 No disability or LTHC Disability or LTHC PL = 50% of median income Employment restriction Disability Status No disability or LTHC Disability or LTHC PL = 60% of median income Employment restriction
Poverty rate (%) State Variations in Poverty Rates 16 14 Before housing costs (BHC) After housing costs (AHC) 12 10 8 6 4 2 0 ACT NSW VIC SA WA TAS NT AUS State / Territory
Concluding Reflections Poverty is an issue of community concern and its importance will increase over the coming decade The SDG agenda will focus global attention on poverty trends within and between countries between now and 2030: Australia take heed the evidence suggests that we are not on track to meet the targets! The ACOSS/UNSW Poverty Reports provide an authoritative account of the level, structure and profile of Australian poverty, how it is changing and how it compares internationally A degree of caution is required when interpreting the estimates because the poverty line is tied to median income Sensitivity testing is important because Australia s highly targeted system leaves many households close to the poverty line The estimates of poverty rates among households with children and with people with a disability reveal that further policy action is needed in both areas The after housing cost (AHC) poverty measure is a lasting legacy to the work of Ronald Henderson - housing costs are an important contributor to Australian poverty