Expenditure of Low Economic Resource Households Dean Adams, Director Household Characteristics, Social Reporting and Living Conditions

Overview Economic wellbeing framework. Low resource vs low expenditure. An augmented resource-based measure (low income, expenditure and wealth). Implications for future measurement.

How do we consider economic wellbeing?

Low Economic Resource Households Equivalised disposable household income (including imputed rent)   Low economic resources (low income and low wealth) Low income only Low wealth only Income Wealth Equivalised net worth

Limitations of resource-based measures Link to living standards not always clear. Short-term fluctuations, particularly income. Measurement challenges (e.g. businesses). Possible under-reporting (e.g. interest).

A measure of consumption? Longer-term expectations e.g. future job Irregular expenditure e.g. bills, appliances, property

Low Expenditure households Household Expenditure Survey 2015-16: Low expenditure = bottom 20% of expenditures (including imputed rent). Questions: How do low expenditure measures differ to a resource-based measure like Low Economic Resources? Can we improve our understanding and measurement of disadvantaged groups?

Resource vs Consumption - How do they compare?   Low expenditure Low Economic Resources (LER) Total population Family composition of household 12% single parents 13% couple only 16% single parents 9% couple only 7% single parents 20% couple only Average Age (household reference person) 52.6 years 45.2 years 51.3 years Tenure Type 20% owners without a mortgage 45% renters 4% owners without a mortgage 65% renters 25% owners without a mortgage 30% renters Reporting more than four financial stress indicators 34% 40% 15% Main source of household income 43% government pension or allowance 37% government pension or allowance 18% government pension or allowance Equivalised disposable household income $595 $552 $1,009 Net worth (wealth) $333,400 $118,500 $892,000 Average Weekly Household Expenditure $623 $956 $1,422 Proportion of weekly expenditure towards ‘basics’ 72% 67% 59%

Resource vs Consumption - How do they compare?   Low expenditure Low Economic Resources (LER) Total population Family composition of household 12% single parents 13% couple only 16% single parents 9% couple only 7% single parents 20% couple only Average Age (household reference person) 52.6 years 45.2 years 51.3 years Tenure Type 20% owners without a mortgage 45% renters 4% owners without a mortgage 65% renters 25% owners without a mortgage 30% renters Reporting more than four financial stress indicators 34% 40% 15% Main source of household income 43% government pension or allowance 37% government pension or allowance 18% government pension or allowance Equivalised disposable household income $595 $552 $1,009 Net worth (wealth) $333,400 $118,500 $892,000 Average Weekly Household Expenditure $623 $956 $1,422 Proportion of weekly expenditure towards ‘basics’ 72% 67% 59%

Resource vs Consumption - How do they compare?   Low expenditure Low Economic Resources (LER) Total population Family composition of household 12% single parents 13% couple only 16% single parents 9% couple only 7% single parents 20% couple only Average Age (household reference person) 52.6 years 45.2 years 51.3 years Tenure Type 20% owners without a mortgage 45% renters 4% owners without a mortgage 65% renters 25% owners without a mortgage 30% renters Reporting more than four financial stress indicators 34% 40% 15% Main source of household income 43% government pension or allowance 37% government pension or allowance 18% government pension or allowance Equivalised disposable household income $595 $552 $1,009 Net worth (wealth) $333,400 $118,500 $892,000 Average Weekly Household Expenditure $623 $956 $1,422 Proportion of weekly expenditure towards ‘basics’ 72% 67% 59% H

A combined resource and expenditure measure   Lower expenditure Higher expenditure Low Economic Resources (LER) LER - lower expenditure (19% of persons) Likely to be experiencing financial hardship LER - higher expenditure (5% persons) May expect future resources Income/wealth limitations Not LER Higher resources, lower expenditure (27% of persons) Potentially saving or accumulating wealth Higher resources, Higher expenditure (55% of persons) Expenditure consistent with resources

Household characteristics

Tenure type and housing

Expenditure 100.0 $803 $1,486 LER Low Expenditure   LER Low Expenditure LER Higher Expenditure PROPORTION OF TOTAL GOODS AND SERVICES EXPENDITURE (%) BASIC EXPENDITURES 69.8 60.7 Current housing costs (selected dwelling) 32.7 23.2 Food and non-alcoholic beverages 4.7 2.6 Domestic fuel and power (selected dwelling) 18.8 16.0 Medical care and health 3.6 Transport 10.2 15.4 DISCRETIONARY EXPENDITURES 29.8 40.6 Clothing and footwear 1.7 1.9 Household furnishings and equipment 1.4 Household services and operation 2.5 3.4 Communication 4.5 Education 2.8 3.2 Recreation 3.3 Personal care 6.6 9.8 Alcoholic beverages 1.8 Tobacco products 1.6 Miscellaneous goods and services 4.0 6.1 Total goods and services expenditure 100.0 Total goods and services expenditure ($) $803 $1,486

Expenditure 100.0 $803 $1,486 LER Low Expenditure   LER Low Expenditure LER Higher Expenditure PROPORTION OF TOTAL GOODS AND SERVICES EXPENDITURE (%) BASIC EXPENDITURES 69.8 60.7 Current housing costs (selected dwelling) 32.7 23.2 Food and non-alcoholic beverages 4.7 2.6 Domestic fuel and power (selected dwelling) 18.8 16.0 Medical care and health 3.6 Transport 10.2 15.4 DISCRETIONARY EXPENDITURES 29.8 40.6 Clothing and footwear 1.7 1.9 Household furnishings and equipment 1.4 Household services and operation 2.5 3.4 Communication 4.5 Education 2.8 3.2 Recreation 3.3 Personal care 6.6 9.8 Alcoholic beverages 1.8 Tobacco products 1.6 Miscellaneous goods and services 4.0 6.1 Total goods and services expenditure 100.0 Total goods and services expenditure ($) $803 $1,486

LER Higher Expenditure Labour Force Status Household contains: LER Low Expenditure % LER Higher Expenditure 2 or more employed persons 32.6 38.1 1 employed person 37.9 50.0 No employed person but at least 1 unemployed person 5.5 *2.3 No persons in the labour force 23.7 9.8 Total 100.0

Income

Household Wealth

Financial Stress

In Summary Low Economic Resources, Low Expenditure Low Economic Resources, Higher Expenditure Average Age (household reference person) 46.6 years 40.7 years Average number of people per household 2.9 persons 2.6 persons Tenure Type – State and territory housing 10% 5% Current housing costs  $263 $344  No persons in the labour force 24% Reporting more than four financial stress indicators  44% Main source of income is government pension or allowance 41% 20% Proportion of expenditure on ‘basics’ 70% ~ $560 per week 61% ~ $902 per week Has debt 59% ~ average $58,000 owing 76% ~ average $98,000 owing Has debt more than 3 times annual income 17% 27% Has superannuation  62% 79%

Conclusions Findings indicate two types of Low Economic Resource households. Both are vulnerable, but in different ways. HES is conducted every six years. Financial stress*, housing costs and debt may be useful to differentiate and further understand vulnerable households when HES isn’t available (biennial SIH) Child care, Social transfers in kind and additional housing cost and income analysis in late 2017. Fiscal Incidence Study early 2018. * Not currently collected in biennial SIH.