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6523.0 - Household Income and Income Distribution, Australia, 2000-01  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 23/07/2003   
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INTRODUCTION

1 This publication presents the income and characteristics of households and persons resident in private dwellings in Australia, compiled from the 2000-01 Survey of Income and Housing Costs (SIHC). The survey collected information on sources of income, amounts received and characteristics of persons aged 15 years and over resident in private dwellings throughout non-sparsely settled areas of Australia.

2 The SIHC was conducted continuously from 1994-95 to 1997-98, and then in 1999-2000, 2000-01 and 2002-03. The results from the 2002-03 SIHC which included an expanded sample of 11,000 households (up from about 7,000 households in earlier years), will be released in 2004. From 2003-04 the income component of the former Household Expenditure Survey (HES) has been expanded in the new, six-yearly Household Income and Expenditure Survey (HIES), an 11,000 household survey which also incorporates a number of other changes to improve income estimation and analysis. In between the six-yearly HIES cycles, there will be two cycles of an 11,000 household SIHC (to be conducted next in respect of each of 2005-06 and 2007-08), which together with the HIES provide an ongoing biennial household income survey.

3 Previous surveys of income were conducted by the Australian Bureau of Statistics (ABS) in 1979, 1982, 1986 and 1990. These surveys were generally conducted over a two-month period, compared to a twelve-month period for the SIHC. Compared with income surveys conducted previously, the SIHC also included improvements to the survey weighting and estimation procedures, changes to the population in scope and changes to interviewing methods.


CHANGES IN THIS ISSUE

4 This issue incorporates a range of methodological improvements in household income distribution measurement and presentation. These changes, explained in detail later in these Explanatory Notes and in Appendix 4, were first described in the Feature Article 'Revised Household Income Distribution Statistics', published in the June 2003 issue of Australian Economic Indicators (cat. no. 1350.0), which was released on 30 May 2003. That article also provided revised estimates of income distribution for 1994-95 to 1999-2000. The changes have been made in response to revised user requirements, developments in international theory and practice and to an observed increase in undercoverage of government cash transfers payments measured in the SIHC in recent years. The changes include:

  • revised demographic benchmarking
  • the use of household income instead of income unit income as the income variable most relevant to an individual's economic wellbeing
  • the use of persons instead of income units in compiling measures of income distribution to better reflect the economic wellbeing of individuals, including children
  • the introduction of benefit transfer benchmarking for 1999-2000 and 2000-01, based on the historical coverage rate achieved for benefit payments
  • the use of the term equivalised income instead of the term equivalent income
  • the use of equivalised disposable income instead of gross income for most analysis
  • the use of the 'modified OECD' equivalence scale instead of the 'original OECD' equivalence scale or the Henderson equivalence scale
  • the presentation of a wider range of income distribution measures, along with an increased emphasis on providing time series of the measures.

5 While income distribution is analysed in terms of persons rather than income units, persons are mainly described in terms of the characteristics of the households to which they belong and therefore the majority of the tables in this publication provide detail about households.

6 Discussion on units of analysis is provided in the following section on concepts and definitions. Appendix 1 describes the various income distribution measures used in this publication, and Appendix 2 describes equivalised disposable income, and presents the progression of statistics from a gross household income basis, through deductions for taxation to disposable household income, and compares the household weighted and person weighted equivalised measures.

7 The statistics presented in the main body of this publication relate to data compiled to represent 'current' income, which for wages and salaries and government transfers income will be the 'usual' cash income received in the most recent payment period at the time of interview. Appendix 5 presents and describes, for the first time in this publication, 'annual' income measures that reflect total incomes for the previous financial year. Appendix 5 explains how current income differs from annual income and notes some of the advantages and disadvantages of the two types of measure.

8 Paragraph 4 notes that the demographic benchmarks, used to expand survey data to population estimates, have also been revised. Historic data have been revised by calibrating estimates of the number of persons and households to the most up-to-date demographic data available. These benchmarks are described in more detail in paragraphs 35 to 41 below. Compared with earlier issues of this publication, the main changes to demographic benchmarks have been the inclusion of separate benchmarks, by state/territory, both for children under 5 years of age and for those from 5 years to under 15 years of age. Also, from 1999-2000, estimates of the value of government cash transfers have been calibrated to maintain consistency with aggregate social security payments made by the Department of Family and Community Services and the Department of Veterans' Affairs. Calibration to external benchmarks is discussed in paragraph 42 below, while information on the investigations which led to the calibration of government cash transfers to aggregate payments for 1999-2000 and 2000-01 is contained in Appendix 4.

9 The ABS would welcome feedback on these changes. Comments may be sent to the Director, Living Conditions Section, ABS, Locked Bag 10, BELCONNEN, ACT, 2616 or emailed to leon.pietsch@abs.gov.au.


CONCEPTS AND DEFINITIONS

10 The concepts and definitions relating to statistics of income are described in the following section. Other definitions are included in the Glossary.

Person and household data

11 The major determinant of economic wellbeing for most people is the level of income they and other family members in the same household receive.

12 While income is usually received by individuals, it is normally shared between partners in a couple relationship and with dependent children. To a lesser extent, it may be shared with other children, other relatives and possibly other people living in the same household, for example through the provision of free or cheap accommodation. This is particularly likely to be the case for children other than dependants and other relatives with low levels of income of their own. Even when there is no transfer of income between members of a household, nor provision of free or cheap accommodation, members are still likely to benefit from the economies of scale that arise from the sharing of dwellings.

13 Household characteristics, including household income, are therefore the information mainly required for analysing income distribution. However, it is the number of people who belong to households with particular characteristics, rather than the number of households with those characteristics, that is of primary interest in measuring income distribution and leads to the preference for the equal representation of those persons in such analysis. For example, if the person is used as the unit of analysis rather than the household, then the representation in the income distribution of each person in a household comprising four persons is the same as that for each person in a household comprising two persons. In contrast, if the household were to be used as the unit of analysis, each person in the four person household would only have half the representation of each person in the two person household.

14 In this publication, the income distribution measures are all calculated with respect to persons, including children. Such measures are sometimes known as person weighted estimates. They are described in more detail in Appendix 1. Nevertheless, as most of the relevant characteristics of persons relate to their household circumstances, tables 5 to 12 primarily describe the households to which people belong.

Income

15 Income refers to regular and recurring cash receipts from employment, investments and transfers from government, private institutions and other households. Gross income is the sum of the income from all these sources before income tax and the Medicare levy have been deducted. This differs from the household income definition used in the Australian System of National Accounts (ASNA). A detailed comparison of 1997-98 SIHC and ASNA estimates was published as an appendix to the 1997-98 issue of this publication. Comparison of 2000-01 SIHC and ASNA data indicates that the relationship between the two estimates has not changed significantly since 1997-98.

16 Sources from which income may be received include:
  • wages and salaries (whether from an employer or own corporate enterprise)
  • profit/loss from own unincorporated business (including partnerships)
  • investment income (interest, rent, dividends, royalties)
  • government cash transfers (pensions, allowances, benefits)
  • private cash transfers (e.g. superannuation, regular workers' compensation, income from annuities and child support).

17 Receipts which are excluded from income because they are not regular or recurring cash payments include the following:
  • income in kind including employee benefits such as the provision of a house or a car
  • employer contributions to pension and superannuation funds
  • capital transfers such as inheritances and legacies, maturity payments on life insurance policies, lump sum compensation for injuries or other damage
  • capital gains and losses.

18 The aged persons' savings bonus and self-funded retirees' supplementary bonus, paid as part of the introduction of The New Tax System in 2000-01, are regarded as capital transfers as they were designed to help retired people maintain the value of their savings and investments following the introduction of the GST. However, the one-off payment to seniors announced in the May 2001 Budget and paid in 2000-01 is included as income as it was primarily a supplement to existing income support payments.

19 While income is generally a good indicator of economic wellbeing, there are some circumstances which present particular difficulties. Some households report extremely low and even negative income in the SIHC, which places them well below the safety net of income support provided by social security pensions and allowances. Households may underreport their incomes in the SIHC at all income levels, including low income households. However, households can correctly report low levels of income if they incur losses in their unincorporated business or have negative returns from their other investments. Studies of income and expenditure reported in the 1998-99 ABS Household Expenditure Survey (HES) have shown that such households in the bottom income decile and with negative gross incomes tend to have expenditure levels that are comparable to those of households with higher income levels (and slightly above the average expenditures recorded for the fifth decile), indicating that these households have access to economic resources, such as wealth, which are not measured in the SIHC, or that the instance of low or negative income is temporary, perhaps reflecting business or investment start up. Other households in the bottom income decile in the 1998-99 HES had average incomes at about the level of the single pension rate, were predominately single person households, the average age of the reference person was 53 years, and their principal source of income was largely government cash benefits. But on average, these households also had expenditures above the average of the households in the second decile, which is not inconsistent with the use of assets to maintain a higher standard of living than implied by their incomes alone. Therefore it can be reasonably concluded that most are unlikely to be suffering extremely low levels of economic wellbeing, and income distribution analysis may lead to inappropriate conclusions if such households are included. For this reason, tables showing statistics classified by income quintile include a supplementary category comprising the second and third deciles, which can be used as an alternative to the lowest income quintile. (For an explanation of quintiles and deciles, see Appendix 1.)

Weekly income

20 Income is collected using a number of different reporting periods, such as the last financial year for own business and property income, and the usual payment for a period close to time of interview for wages and salaries, other sources of private income and government cash transfers. The income is divided by the number of weeks in the reporting period. Estimates of weekly income in this publication therefore do not refer to a given week within the reference year of the survey.

Equivalised disposable income

21 For most analysis in this publication, gross income (as described in the previous paragraphs) is adjusted in two ways to facilitate the comparison of economic wellbeing between households. First, disposable income is derived by deducting estimates of personal income tax and the Medicare levy from gross income. Disposable income better represents the economic resources available to meet the needs of households. A more detailed analysis of 'final' income which looks at the impact of indirect government benefits (i.e. non-cash benefits) and indirect taxes requires detailed information on expenditure patterns which is not available in the SIHC. For details of this type of 'final' income analysis see Government Benefits, Taxes and Household Income, Australia, 1998-99 (cat. no. 6537.0).

22 Disposable income is adjusted by the application of an equivalence scale to facilitate comparison of income levels between households of differing compositions, reflecting the requirement of a larger household to have a higher level of income to achieve the same standard of living as a smaller household. Where disposable income is negative, it is set to zero equivalised disposable income. For more information on equivalised income see Appendix 2.


SURVEY METHODOLOGY

Scope and coverage

23 The survey collects information by personal interview from usual residents of private dwellings in urban and rural areas of Australia, covering about 98 per cent of the people living in Australia. Private dwellings are houses, flats, home units, caravans, garages, tents and other structures that are used as places of residence at the time of interview. Long-stay caravan parks are also included. These are distinct from non-private dwellings which include hotels, boarding schools, boarding houses and institutions. Residents of non-private dwellings are excluded.

24 The survey also excludes:
  • households which contain members of non-Australian defence forces stationed in Australia
  • households which contain diplomatic personnel of overseas governments
  • households in remote and sparsely settled areas of the Northern Territory, accounting for about 20% of the population in the Northern Territory.

Sample design

25 The sample for the income survey is a sub-sample of private dwellings included in the ABS Monthly Population Survey (MPS). The MPS sample is a multistage selection of private dwellings and a list sample of other dwellings.

26 The sample is suitable for producing reliable estimates at the Australian level for income of residents in private dwellings, classified by different population groups based on household composition (such as couples with children), income levels or income sources. Estimates at the state and territory level for broad aggregates are generally reliable although some estimates for Tasmania, the Northern Territory and the Australian Capital Territory should be used with caution (see Appendix 3).

27 In each month in 2000-01 a sample of approximately 650 dwellings was selected for the SIHC from the responding households in the MPS. Over the year, this resulted in approximately 15,500 persons over the age of 15 being included in the sample and, of these, about 85% responded.

Non-response and imputation

28 Fully non-responding households are those selected for the survey but from which no information is included in the survey results. They include:
  • those affected by death or illness of a household member
  • those in which more than half of the persons over 15 in the household did not respond because they could not be contacted, had language problems or refused to participate.

29 Partial response occurs when:
  • some items of data in a schedule are missing because a person is unable or unwilling to provide the data
  • for a household, not every person over 15 residing in the household responds but at least half of these persons provide data.
30 In the first case of partial response above, the data provided are retained and the missing data are imputed by replacing each missing value with a value reported by another person (referred to as the donor).

31 For the second type of partial response, the data for the persons who did respond are retained, and data for each missing person are provided by imputing data values equivalent to those of a fully responding person (donor). Imputation using donor records is also applied for fully non-responding households that comprise one person or a sole parent whose children are all under the age of 15. Information about the household composition is obtained from the MPS.

32 Donor records are selected by matching information on sex, age and labour force characteristics of the person with missing information. As far as possible, the imputed information is an appropriate proxy for the information that is missing. Depending on which values are to be imputed, donors are chosen from the pool of individual records with complete information for the block of questions where the missing information occurs.

Final sample

33 The sample on which estimates are based, or the final sample, is composed of persons for which all necessary information is available. The information may have been wholly provided at the interview (fully-responding) or may have been completed through imputation for partially responding or non-responding. The final sample consists of 6,786 households, comprising 13,193 persons 15 years old and over. All income information was imputed for 243 households comprising one adult or one adult with children under 15 years old, and was imputed for one or more persons in 201 partially responding multi-person households.


NUMBER OF RESPONDING HOUSEHOLDS
Capital city Balance of State Total



Households
Persons (a)
Households
Persons (a)
Households
Persons (a)

NSW
930
1927
599
1097
1529
3024
Vic.
978
1932
422
813
1400
2745
Qld
577
1137
641
1202
1218
2339
SA
673
1275
217
409
890
1684
WA
668
1347
217
414
885
1761
Tas.
189
342
293
547
482
889
NT
101
183
-
-
101
183
ACT
281
568
-
-
281
568
Aust.
4397
8711
2389
4482
6786
13193

- nil or rounded to zero (including null cells)
(a) Number of persons aged 15 years and over.


Imputation of one-off payment to seniors

34 Certain cash receipts that should be regarded as income are not reported in SIHC due to their irregular or one-off nature. For example, annual wage or salary bonuses will not be reported by householders as part of their 'usual' cash income. While these types of income are routinely excluded from SIHC income measures, their exclusion is unlikely to affect comparisons over time unless the scale and distribution of such payments to householders changes. However, as noted in paragraph 18 above, in 2000-01 about $600m was paid in government cash transfers as part of the one-off payment to seniors to supplement the age pension or Department of Veterans' Affairs service pension and therefore should be treated as income. The payment to eligible individuals was $300 each, representing 3% of a single person's full age pension in 2000-01, and this amount has been added to the income of all respondents who were of age pension age and who reported receiving any government income support payment.

Weighting

35 Expansion factors, or weights, are values by which information for the sample is multiplied to produce estimates for the whole population. From this survey, estimates are produced referring to persons, to income units (although these are not included in this publication) and to households, and the weights are calculated so that each person in an income unit or household has the same weight and that weight is also used for the income unit and household.

36 Final weights are calculated through an iterative procedure in which initial weights are adjusted by a calibration process to ensure that survey estimates conform to independently estimated benchmarks. The initial weights are equal to the inverse of the probability of selection in the survey, with initial person weights being equal to initial household weights.

37 Four types of benchmarks are used in the calibration of the final weights:
  • numbers of persons aged 15 and over
  • numbers of children under age 15
  • numbers of households
  • for 1999-2000 and 2000-01 estimates, the value of government benefit cash transfers.

38 Person benchmarks for persons aged 15 and over are estimates of the number of people in each state and territory by age and sex, the number of people in each state and the ACT by labour force status and the number of people in each state living in the capital city or the balance of the state.

39 A separate set of benchmarks is used for children under 15, since there are not individual person records for them in the survey. Information about children is recorded on household records, however, and benchmarks for the number of children aged 0-4 and aged 5-14 are used for each state and territory.

40 Numbers of households are calibrated to benchmarks for total Australia with respect to household composition (based on the number of adults (1, 2 or 3) and whether or not the household contains children).

41 The person and household benchmarks are based on estimates of numbers of persons and households in Australia. The benchmarks are adjusted to include persons and households residing in private dwellings only and therefore do not, and are not intended to, match estimates of the Australian resident population published in other ABS publications.

42 The fourth type of benchmark relates to income from social security transfers, and is only used for 1999-2000 and 2000-01. The benchmark was introduced for those years because, without it, the survey estimates of income from government benefit cash transfers account for a declining proportion of aggregate social security payments reported by the Department of Family and Community Services and the Department of Veterans' Affairs. Extensive investigations could not identify any specific reasons for the decline, indicating that it is likely to be associated with differences between the characteristics of people who respond to the survey and the characteristics of those who do not respond. This type of problem is sometimes called non-response bias, and introducing additional benchmarks is a means of addressing it. The benchmark introduced in this case ensured that the survey estimate of government benefit cash transfers is maintained at a proportion of aggregate benefit cash transfers that is consistent with the proportion achieved between 1994-95 and 1997-98. More detail of the investigations that led to the introduction of this benchmark is provided in Appendix 4.

Estimation

43 Estimates produced from the survey are usually in the form of averages (e.g. mean weekly income of couples with dependent children), or counts (e.g. total number of households which own their dwelling or total number of persons living in households that own their own dwelling). For counts of households, the estimate is obtained by summing the weights of all households in the required group (e.g. those owning their own dwelling). For counts of persons, the household weights are multiplied by the number of persons in the household before summing. The SIHC collects data on the number of people, including children, in each household but separate records with income and other detailed data are only collected for people 15 years and older. Therefore, counts of persons cannot be obtained by summing the weights of all persons.

44 Average income values are obtained in two different ways, depending on whether mean gross household income or mean equivalised disposable household income is being derived. Estimates of mean gross household income are obtained by multiplying the gross income of each household by the weight of the household, summing across all households, and then dividing by the estimated number of households. For example, the mean gross household income of couples with dependent children is the weighted sum of the gross income of each such household divided by the estimated number of those households. Estimates of mean equivalised disposable household income are obtained by multiplying the equivalised disposable income of each household by the number of people in the household (including children) and by the weight of the household, summing across all households, and then dividing by the estimated number of people in the population group. Appendix 2 illustrates the differences between mean gross household income calculated on a household weighted basis and mean equivalised disposable household income calculated on a person weighted basis.

Reliability of estimates

45 The estimates provided in this publication are subject to two types of error, non-sampling and sampling error.

Non-sampling error

46 Non-sampling error can occur whether the estimates are derived from a sample or from a complete collection. Major sources of non-sampling error include the following.

47 Non-sample error can arise through the inability to obtain data from all households included in the sample. Although adjustments are made for non-response bias, some bias may remain because of differences which exist between the characteristics of respondents and non-respondents.

48 There can also be errors in reporting on the part of both respondents and interviewers. Reporting errors may arise through inappropriate wording of questions, misunderstanding of what data are required, inability or unwillingness to provide accurate information, or mistakes in answers to questions.

49 Errors may also arise during processing of the survey data through mistakes in coding and data recording.

50 Non-sampling errors are difficult to measure in any collection. However, every effort is made to minimise these errors. In particular, the effect of the reporting and processing errors described above is minimised by careful questionnaire design, intensive training and supervision of interviewers, asking respondents to refer to records whenever possible and by extensive editing and quality control checking at all stages of data processing.

51 The error due to incomplete response is minimised by
  • call-backs to all initially non-responding households in order to explain the importance of their cooperation to the survey
  • adjustment to the weights allocated to the respondent households in order to allow for households with similar characteristics from which comprehensive data are not obtained.

Sampling error

52 The estimates are based on a sample of possible observations and are subject to sampling variability. The estimates may therefore differ from the figures that would have been produced if information had been collected for all households. A measure of the sampling error for a given estimate is provided by the standard error, which may be expressed as a percentage of the estimate (relative standard error). Further information on sampling error is given in Appendix 3.


ACKNOWLEDGMENT

53 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.


STANDARD PRODUCTS

54 This publication, also available as a pdf file from the ABS web site (for a fee), provides a summary of the income related data available from the Survey of Income and Housing Costs. In addition to selected text and tabular information provided as main features on the ABS web site <http://www.abs.gov.au> free of charge, a range of additional products and services are also available. All of the tables in the main body of this publication are available, for a fee, as spreadsheets from the ABS web site (from the homepage see Statistical Products and Services, Data Cubes, Consumer income and expenditure, 6523.0). The data cubes under 6523.0 also include tables of RSEs provided (free of charge) for each publication table. Additional tables will be loaded to the website, including tables of counts relating to publication tables of proportions, as well as more detailed dissections, such as by age of persons in the household, and additional classifications. The additional tables will be released as product number 6532.0.55.001 and noted under Information on Releases on the website.


SPECIAL DATA SERVICES

55 The ABS offers specialist consultancy services to assist clients with more complex statistical information needs. Clients may wish to have the unit record data analysed according to their own needs, or require tailored tables produced incorporating data items and populations as requested by them. Tables and other analytic outputs can be made available electronically or in printed form. However, as the level of detail or disaggregation increases with detailed requests, the number of contributors to data cells decreases. This may result in some requested information not being able to be released due to confidentiality or sampling variability constraints. All specialist consultancy services attract a service charge, and clients will be provided with a quote before information is supplied. For further information, contact ABS information consultants on 1300 135 070.


UNIT RECORD FILE

56 It is expected that a confidentialised unit record file (CURF) from the 2000-01 SIHC will be released on CD-ROM early in August 2003. It is also expected that a more detailed SIHC CURF will be available through the ABS Remote Access Data Laboratory later in 2003. CURFs on CD-ROM for 1994-95 to 1999-2000, incorporating the revised demographic benchmarking and new household level items will be released in August 2003. A full range of up-to-date information about the availability of ABS CURFs and about applying for access to CURFs is available via the ABS web site <http://www.abs.gov.au> (see Products and Services, Access to ABS CURFs). Inquiries to the ABS CURF Management Unit should email: intermediary.management@abs.gov.au, or telephone (02) 6252 5731.


RELATED PUBLICATIONS

57 Users may wish to refer to the following ABS products which relate to income:
Government Benefits, Taxes and Household Income, Australia, 1998-99, cat. no. 6537.0
Household Expenditure Survey, Australia: User Guide, 1998-99, cat. no. 6527.0, available free of charge from the ABS web site
Household Expenditure Survey, Australia: Summary of Results, 1998-99, cat. no. 6530.0
Household Expenditure Survey, Australia: Detailed Expenditure Items, 1998-99, cat. no. 6535.0
Housing Occupancy and Costs, Australia, 1997-98, cat. no. 4130.0
Labour Force, Australia, cat. no. 6203.0-issued monthly
Survey of Income and Housing Costs and Amenities: Income Units, Australia, 1990, cat. no. 6523.0
Survey of Income and Housing Costs, Australia: User Guide, 1997, cat. no. 6553.0
Average Weekly Earnings, Australia-Preliminary, cat. no. 6301.0-issued quarterly
Measuring Wellbeing: Frameworks for Australian Social Statistics, 2001, cat. no. 4160.0
Measuring Australia's Progress, 2002, cat. no. 1370.0

58 Users may also wish to refer to the following non-ABS products which relate to income:
Taxation Statistics 2000-01, A summary of taxation, superannuation and child support statistics (Australian Taxation Office)
Occasional Paper No. 1: Income support and related statistics: a 10-year compendium, 1989-1999 (Department of Family and Community Services)


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