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6523.0 - Household Income and Income Distribution, Australia, 2003-04  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 04/08/2005   
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INTRODUCTION

1 This publication presents a summary of the findings from the 2003–04 Survey of Income and Housing (SIH). The survey collected detailed information about the income, assets, liabilities and household characteristics of persons aged 15 years and over resident in private dwellings throughout Australia.

2 The 2003–04 Household Expenditure Survey and Survey of Income and Housing, Australia: User Guide, expected to be released in October 2005, will assist users in evaluating and interpreting results from this survey.

3 The SIH was conducted continuously from 1994–95 to 1997–98, and then in 1999–2000, 2000–01, 2002–03 and 2003–04. The 2003–04 SIH included an expanded sample of approximately 11,000 households, which were enumerated from July 2003 to June 2004. In future, the SIH will be conducted with an 11,000 household sample, every two years.

4 Previous surveys of household 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 SIH. The SIH 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

5 A number of major changes designed to improve survey quality have been introduced in the 2003–04 SIH. In some cases the changes may impact on the comparability between the 2003–04 estimates and earlier data, but it is generally not possible to quantify the extent of any discontinuity. Changes expected to have improved the quality of the data include:

  • a larger sample of 11,361 households (comprising 22,315 persons aged 15 and over) for 2003–04 compared to 10,211 households (comprising 19,400 persons aged 15 and over) for 2002–03 (lower sample error)
  • previous SIH cycles had selected dwellings from those that had been respondents for eight months in the monthly population survey (MPS), whereas from 2003–04 the SIH sample is drawn from dwellings not recently included in an ABS household survey (possible change in response bias)
  • interviewer use of a laptop computer instead of a paper form to collect information from respondents (possible improvement in data capture)
  • an expanded range of questions to collect details about income - in particular, information was collected about expected income in the current financial year from own unincorporated business and investments, whereas previous "current period" estimates for these components of income were set based only on information about reported income for the previous financial year (a significant impact on the coverage of such income streams in current income measures)
  • a comprehensive range of questions to collect details about the assets and liabilities of the household, which may have improved the quality of reporting of associated income streams

6 The 2003–04 SIH has been integrated with the 2003–04 HES. This integration has been achieved by selecting a subsample of the households in the SIH survey and asking them the additional questions required for HES purposes. Respondent burden is lower than if the two surveys were not integrated. Also, the resultant dataset is richer because HES and SIH results are more comparable than previously. However, response rates for HES subsample are lower than achieved in the 2003–04 SIH-only sample component because of the reluctance of some respondents to provide the extra information required in the HES part of the survey. It is therefore possible that the differing reasons for non-response in the 2003–04 SIH result in different biases to those resulting from non-response when the SIH was conducted in conjunction with MPS.

7 In previous SIHs, the household reference person was chosen from an income unit within the household that had the highest tenure type. Tenure type has been collected for households but not for income units in the 2003–04 SIH. The tenure type of income units is therefore no longer used in determining which person in the household is to be designated as household reference person.

8 The methodology of the 2003–04 SIH, including the collection of household asset and liability information, is being retained for the 2005–06 SIH, except that there will be no HES subsample in 2005–06. The next HES subsample will be included in 2009–10.

9 Changes in the contents of this issue are:
  • the inclusion of household net worth data in many tables, and the introduction of a new table showing income and household characteristics by net worth quintile
  • the replacement of the data item "household composition" with the data item "family composition of household", which better meets user requirements for the treatment of households with dependent children.


CONCEPTS AND DEFINITIONS

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

Person and household data

11 A 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 main information 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 6 to 16 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 SIH and ASNA estimates was published as an appendix to the 1997–98 issue of this publication. Comparison of SIH data from 1994–95 to 2003–04 with ASNA data indicated that the relationship between the two estimates had not changed significantly over that period.

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 pensions and allowances
  • private cash transfers (e.g. superannuation, regular workers' compensation, income from annuities, child support, and other transfers from other households).

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 and employer contributions to pension and superannuation funds - however, income in-kind provided as part of a negotiated salary sacrifice arrangement can be regarded as cash or "near cash" income and included within the scope of income presented in this publication; it is estimated that about two thirds of salary sacrificed income is included in the 2003–04 SIH estimate of gross income
  • 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 Receipts of family tax benefit are treated as income, regardless of whether they are received fortnightly or as a lump sum. 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 paid in 2000–01 and the one-off payments to families and carers paid in 2003–04 are included as income as they were primarily a supplement to existing income support payments.

19 While income generally provides a useful indicator of economic wellbeing, there are some circumstances which present particular difficulties. Some households report extremely low and even negative income in the survey, 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 survey 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.

20 Studies of income and expenditure from the 1998–99 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 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 predominantly single person households, the average age of the reference person was 53 years, and their principal source of income was largely government pensions and allowances. However, 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.

21 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

22 Income is collected using a number of different reporting periods, such as the whole financial year for own unincorporated business and investment income, and the usual payment for a period close to the time of interview for wages and salaries, other sources of private income and government pensions and allowances. The income reported 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 period of the survey.

Equivalised disposable income

23 For most analyses 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. Firstly, 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 SIH. For details of this type of 'final' income analysis see Government Benefits, Taxes and Household Income, Australia, 1998–99 (cat. no. 6537.0).

24 Disposable income is also adjusted by the application of an equivalence scale to facilitate comparison of income levels between households of differing size and composition, 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 3.

Annual income

25 The tables in the main body of this publication refer to 'current' weekly income, that is, income being received at the time the data were collected from respondents. The survey also produces measures of 'annual' income that reflect total incomes for the previous financial year. Appendix 2 explains how current income differs from annual income, notes some of the advantages and disadvantages of the two types of measure and presents some 'annual' income estimates.

Net worth

26 Net worth, often referred to as wealth, is the value of a household's assets less the value of its liabilities. Assets can take many forms including:
  • produced tangible fixed assets that are used repeatedly and for more than one year, such as dwellings and their contents, vehicles, and machinery and equipment used in businesses owned by households
  • intangible fixed assets such as computer software and artistic originals
  • business inventories of goods
  • non-produced assets such as land
  • financial assets such as bank deposits, shares, superannuation account balances, and the outstanding value of loans made to other households or businesses.

27 Liabilities are primarily the value of loans outstanding including:
  • credit card debt
  • mortgages
  • investment loans
  • borrowings from other households
  • debt on other loans such as personal loans to purchase vehicles, and HECS.

28 In the 2003–04 SIH, some asset and liability data were collected on a net basis rather than collecting for each component listed above. For example, if a survey respondent owned or part owned a business, they were asked how much they would receive if they sold their share of the business and paid off any outstanding debts.

29 While this publication provides some household net worth statistics, principally to aid income analysis, a more comprehensive range of household asset and liability information will be released in December 2005 in a new publication Household Wealth and Wealth Distribution, 2003–04.


SURVEY METHODOLOGY

Scope

30 The survey collects information by personal interview from usual residents of private dwellings in urban and rural areas of Australia, covering about 98% of the people living in Australia. Private dwellings are houses, flats, home units, caravans, garages, tents and other structures that were 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.

31 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 collection districts in the Northern Territory defined as very remote or Indigenous Communities which account for about 23% of the territory's population.

Data collection

32 Information for each household was collected using:
  • a household level computer assisted interview questionnaire which collected information on household characteristics, assets and liabilities
  • an individual level computer assisted interview questionnaire which collected information on income and other personal characteristics from each usual resident aged 15 years and over.

33 Sample copies of the above documents are available upon request and will be included in the User Guide 2003–04 (cat. no. 6527.0) to be released in October 2005.

Sample design

34 The sample was designed to produce reliable estimates for broad aggregates for households resident in private dwellings aggregated for Australia, for each state and for the capital cities in each state and territory. More detailed estimates should be used with caution, especially for Tasmania, the Northern Territory and the Australian Capital Territory (see Appendix 4).

35 The SIH sample was designed in conjunction with the HES. In the combined sample, some dwellings were selected to complete both the SIH questionnaire and the HES questionnaire, while other dwellings were selected to complete the SIH questionnaire only. Dwellings were selected through a stratified, multistage cluster design. Selected clusters were split such that approximately one third of households in the cluster received only the SIH questionnaire and two thirds of households in the cluster received both the SIH and HES questionnaires. Selections were distributed randomly across a twelve month enumeration period so that the survey results are representative of income and expenditure patterns across the year. Over the year, about 80% of persons over the age of 15 in this sample responded.

Non-responding households

36 Of the 14,545 households selected in the sample, 3,184 did not respond at all to the questionnaire, or did not respond adequately. Such households included:
  • households affected by death or illness of a household member
  • households in which the significant person(s) in the household did not respond because they could not be contacted, had language problems or refused to participate
  • households in which the significant person(s) did not respond to key questions.

Partial response and imputation

37 Some other households did not supply all the required information but supplied sufficient information to be retained in the sample. Such partial response occurs when:
  • income or other data in a questionnaire are missing from one or more non-significant person's records because they are unable or unwilling to provide the data
  • all key questions are answered by the significant person(s) but other data are missing
  • not every person aged 15 or over residing in the household responds but the significant person(s) provide(s) answers to all key questions.

38 In the first and second cases 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).

39 For the third 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).

40 Donor records are selected by finding fully responding persons with matching information on various characteristics, such as state, sex, age, labour force status, income and expenditure, as 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 randomly chosen from the pool of individual records with complete information for the block of questions where the missing information occurs.

Final sample

41 The final sample on which estimates were based, 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 households. Of the selected dwellings, there were 14,545 in the scope of the survey, of which 11,361 (78%) were included as part of the final estimates. The final sample consists of those 11,361 households, comprising 22,315 persons aged 15 years old and over. The final sample includes 2,812 households which had at least one imputed value in either income or assets and liabilities. Nearly 70% of these households had only a single value missing, and most of these were for superannuation assets or a minor source of income for the household.
SIH FINAL SAMPLE: NUMBER OF HOUSEHOLDS, 2003–04

CAPITAL CITY
BALANCE OF STATE
TOTAL
Households
Persons(a)
Households
Persons(a)
Households
Persons(a)

no.
no.
no.
no.
no.
no.

NSW
1537
3131
1093
2117
2630
5248
Vic.
1690
3474
696
1338
2386
4812
Qld
845
1607
1151
2236
1996
3843
SA
890
1713
367
701
1257
2414
WA
950
1909
490
929
1440
2838
Tas.
423
811
400
739
823
1550
NT
335
666
87
161
422
827
ACT
407
783
407
783
Aust.
7077
14094
4284
8221
11361
22315

— nil or rounded to zero (including null cells)
(a) Numbers of persons aged 15 years and over

Weighting

42 Weighting is the process of adjusting results from a sample survey to infer results for the total in scope population whether that be persons or households. To do this, a 'weight' is allocated to each sample unit e.g. a person or a household. The weight is a value which indicates how many population units are represented by the sample unit. The first step in calculating weights for each unit is to assign an initial weight, which is the inverse of the probability of being selected in the survey. For example, if the probability of a household being selected in the survey was 1 in 600, then the household would have an initial weight of 600 (that is, it represents 600 households).

43 The initial weights are then calibrated to align with independent estimates of the population of interest, referred to as 'benchmarks'. Weights calibrated against population benchmarks ensure that the survey estimates conform to the independently estimated distribution of the population rather than to the distribution within the sample itself.

44 The SIH survey was benchmarked to the in scope estimated resident population (ERP) and the estimated number of households in the population.

45 Three 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.

46 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.

47 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.

48 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).

49 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.

Estimation

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

51 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 couple households 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 3 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.

52 Income tax payments were estimated for all households using taxation criteria for 2003–04 and the income and other characteristics of household members reported in the survey.

Reliability of estimates

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

Non-sampling error

54 Non-sampling error can occur in any collection, whether the estimates are derived from a sample or from a complete collection such as a census. Sources of non-sampling error include non-response, errors in reporting by respondents or recording of answers by interviewers and errors in coding and processing the data.

55 Non-sampling errors are difficult to quantify in any collection. However, every effort is made to reduce non-sampling error to a minimum by careful design and testing of the questionnaire, training of interviewers and data entry staff and extensive editing and quality control procedures at all stages of data processing.

56 One of the main sources of non-sampling error is non-response by persons selected in the survey. Non-response occurs when people cannot or will not cooperate or cannot be contacted. Non-response can affect the reliability of results and can introduce a bias. The magnitude of any bias depends upon the level of non-response and the extent of the difference between the characteristics of those people who responded to the survey and those who did not.

57 The following methods were adopted to reduce the level and impact of non-response:
  • face-to-face interviews with respondents
  • the use of interviewers who could speak languages other than English, where necessary
  • follow-up of respondents if there was initially no response
  • imputation of missing values
  • ensuring that the weighted data is representative of the population (in terms of demographic characteristics) by aligning the estimates with population benchmarks.

Sampling error

58 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 4.


ACKNOWLEDGMENT

59 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

60 This publication provides a summary of the income related data available from the SIH. Additional tables (product number 6523.0.55.001) have been released on the ABS web site concurrently with this publication, 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.


SPECIAL DATA SERVICES

61 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 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

62 It is expected that a confidentialised unit record file (CURF) from the 2003–04 SIH will be released on CD-ROM in October 2005. It is also expected that a more detailed SIH CURF will be available through the ABS Remote Access Data Laboratory. 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 Services We Provide, Confidentialised Unit Record Files (CURFs)). Inquiries to the ABS CURF Management Unit should email: curf.management@abs.gov.au, or telephone (02) 6252 5853.


RELATED PUBLICATIONS

63 Users may wish to refer to the following ABS products which relate to income:
Household Income and Income Distribution, Australia, Detailed Tables, cat. no. 6523.0.55.001
Government Benefits, Taxes and Household Income, Australia, 1998–99, cat. no. 6537.0
Household Expenditure Survey, Australia: Summary of Results, 2003–04, cat. no. 6530.0, to be released 11 August 2005.
Household Expenditure Survey, Detailed Expenditure Items, 2003–04, cat. no. 6535.0.55.001, to be released 11 August 2005.
Housing Occupancy and Costs, Australia, cat. no. 4130.0.55.001
Labour Force, Australia, cat. no. 6202.0—issued monthly
Survey of Income and Housing Costs and Amenities: Income Units, Australia, 1990, cat. no. 6523.0
Average Weekly Earnings, Australia, cat. no. 6302.0
Measuring Wellbeing: Frameworks for Australian Social Statistics, 2001, cat. no. 4160.0
Measures of Australia's Progress, 2004, cat. no.1370.0
Information Paper: Experimental Estimates of Personal Income for Small Areas, Taxation and Income Support Data, 1995–96 to 2000–01, cat. no. 6524.0
Household Wealth and Wealth Distribution, Australia, 2003–04, a new publication to be released in December 2005.

64 The HES and SIH User Guide is expected to be released in October 2005.

65 Users may also wish to refer to the following non-ABS products which relate to income:
Taxation Statistics 2002–03, A summary of taxation, superannuation and industry benchmark statistics (Australian Taxation Office)
Occasional Paper No. 7: Income support customers: A statistical overview 2001. (Department of Family and Community Services)
Household, Income and Labour Dynamics in Australia (HILDA) Survey, Annual Report 2004 (Melbourne Institute of Applied Economic and Social Research)



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