1 This publication presents a summary of findings about household wealth and wealth distribution in Australia compiled from the 2005-06 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. In this publication, net worth is the main measure used to describe wealth.
2 This is the second issue of this publication. Detailed wealth data were collected for the first time in the previous SIH which was conducted in respect of 2003-04.
3 The statistics in this publication present a broad overview of household wealth data. Emphasis has been given to highlighting the differing household wealth compositions and distributions revealed when mean household wealth is cross-classified by various household characteristics, such as income levels and sources, family composition of the household, geographic location and reference person characteristics.
Survey of Income and Housing
4 The SIH was conducted continuously from 1994-95 to 1997-98, and then in 1999-2000, 2000-01, 2002-03, 2003-04 and 2005-06. The 2005-06 SIH collected information from a sample of approximately 10,000 households, over the period July 2005 to June 2006. Future cycles of the SIH will be conducted every two years.
5 The 2005-06 SIH was run as a stand alone survey, whereas the 2003-04 SIH was integrated with the Household Expenditure Survey (HES). This may have had an impact on response bias. The HES and SIH will be integrated each time the HES is run, with the next HES scheduled for 2009-10.
6 While net worth data were collected in respect of 2003-04 and 2005-06, they are not being collected in the 2007-08 survey. Comprehensive wealth data will only be collected in years when the HES is conducted.
7 The 2005-06 SIH survey content and methodology, including the collection of household asset and liability information, was largely a repeat of that used in the 2003-04 SIH.
8 The Survey of Income and Housing, Australia: User Guide, 2005-06 (cat. no. 6553.0) describes the definitions, concepts, methodology and estimation procedures used in the Survey of Income and Housing.
Changes in this issue
9 Changes in this issue are:
CONCEPTS AND DEFINITIONS
- the inclusion of all salary sacrificed amounts in income estimates for 2003-04 and 2005-06. In previous issues estimates have included only some salary sacrificed amounts. Some of the 2003-04 income estimates included in this issue have therefore been revised to include additional salary sacrificed amounts (in Table 1 and Summary of Findings). For more information see Appendix 4 of Household Income and Income Distribution, Australia, 2005-06 (cat. no. 6523.0).
- the use of more detailed age benchmarks when determining the weights to be allocated to each person and household in the 2005-06 estimates. For further information refer to paragraph 54 of the Explanatory Notes.
- expanded detail for age groups, splitting a category for those aged 65 years and over into two categories for 65-74 years and 75 years and over.
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.
11 The household is the basic unit of analysis in this publication. A household consists of one or more persons, at least one of whom is at least 15 years of age, usually resident in the same private dwelling. The persons in a household may or may not be related. They must live wholly within one dwelling.
12 The household is adopted as the basic unit of analysis because it is assumed that sharing of the use of goods and services occurs at this level. If smaller units, say persons, are adopted, then it is difficult to know how to attribute to individual household members the use of shared items such as food, accommodation and household goods. Intra-household transfers, however, are excluded. For example, if one member of the household were to pay board to another member of the same household then this is not considered as an increase in the amount of income or housing costs of the household. If such transfers were to be included there would be double counting.
13 Income refers to regular and recurring cash receipts from employment, investments and transfers from government, private institutions and other households.
14 Sources from which income may be received include:
- wages and salaries (whether from an employer or own incorporated business), including income provided as part of a salary sacrifice arrangement
- 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).
Receipts which are excluded from income because they are not regular or recurring cash payments include:
- income in kind including employee benefits such as the provision of a house or a car and employer contributions to pension and superannuation funds, except when provided as part of a salary sacrifice arrangement
- 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.
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, the one-off payment to families paid in 2003-04 and the one-off payments to carers paid in 2003-04, 2004-05 and 2005-06 are included as income as they were primarily a supplement to existing income support payments. The maternity payment introduced in July 2004 is also included as income.
17 Gross income is the sum of the income from all sources before income tax and the Medicare levy have been deducted. Prior to 2005-06, family tax benefit paid through the tax system or as a lump sum was excluded from gross income for practical reasons. In 2005-06 these payments have been included in gross income.
18 Disposable income better represents the economic resources available to meet the needs of households. It is derived by deducting estimates of personal income tax and the Medicare levy from gross income.
19 Income tax and Medicare levy payments are estimated for all households using taxation criteria for 2005-06 and the income and other characteristics of household members reported in the survey.
20 Prior to 2005-06 the derivation of disposable income also included the addition of family tax benefit paid through the tax system or as a lump sum by Centrelink since for practical reasons it was not included in the gross income estimates.
Equivalised disposable income
21 In most tables in this publication, gross household income (as described in the previous paragraphs) is presented along with estimates of net worth. However, when using income as an approximate means of ranking households according to their relative standards of living (as in tables 1, 8 and 9), it is more appropriate to use equivalised disposable income.
22 Equivalised disposable income is calculated by adjusting disposable income by the application of an equivalence scale. This adjustment reflects the requirement for 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.
23 When household income is adjusted according to an equivalence scale, the equivalised income can be viewed as an indicator of the economic resources available to a standardised household. For a lone person household, it is equal to income received. For a household comprising more than one person, equivalised income is an indicator of the household income that would be required by a lone person household in order to enjoy the same level of economic wellbeing as the household in question.
24 For more information on the use of equivalence scales, readers are referred to Appendix 3 in Household Income and Income Distribution, Australia, 2005-06 (cat. no. 6523.0).
Lowest income decile
25 While equivalised 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.
26 Studies of income and expenditure reported in HES surveys 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 income decile). This suggests 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 lowest income decile in past surveys had average incomes at about the level of the single pension rate, were predominantly single person households, 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 income decile, which is not inconsistent with the use of assets to maintain a higher standard of living than implied by their incomes alone.
27 It can therefore be reasonably concluded that many of the households included in the lowest income decile are unlikely to be suffering extremely low levels of economic wellbeing. Income distribution analysis may lead to inappropriate conclusions if such households are used as the basis for assessing low levels of economic wellbeing. For this reason, tables showing statistics classified by equivalised income quintile include a supplementary category comprising the second and third income deciles, which can be used as an alternative to the lowest income quintile. (For an explanation of quintiles and deciles, see Appendix 1.)
28 With the 2003-04 HES, analysis of households in the lowest income decile was improved through direct observation of the expenditure and net worth of these households. An examination of these low income households was presented in Appendix 4 of Household Wealth and Wealth Distribution, Australia 2003-04 (cat. no. 6554.0).
29 Net worth 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.
Liabilities are primarily the value of loans outstanding including:
- study loans
- investment loans
- credit card debts
- debt on other loans such as personal loans to purchase vehicles.
In SIH, some asset and liability data is 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 are asked how much they would receive if they sold their share of the business and paid off any outstanding debts.
32 Outstanding loans reflect the amount owing for an asset. The equity held in an asset may increase over time as an outstanding loan amount is reduced (e.g. the value of a dwelling with relation to the loan amount outstanding on that dwelling). Where only the proportion of a loan is used for a purpose, only the proportion outstanding for this purpose is included. The proportioning of loans applies to all of the examples mentioned in this publication, particularly in the paragraphs below.
33 Value of property estimates include the value of any associated land which would be included in the sale of the dwelling if it were sold (for separate houses it includes value of land, for caravans it includes value of site if owned by the household, for farm dwellings it includes home paddock). The estimated value is reported by the household respondent.
Relationship between net worth and income
34 This publication provides information about the net worth and income of households, but it would be misleading to assume that household net worth and household income necessarily have a positive relationship. Higher income households may have higher wealth as wealthier households have more assets to earn income and higher income households also have a higher propensity to save.
35 However, household net worth is also dependent on other characteristics such as life cycle effects, family composition etc. The differences in the distribution of wealth and income partly reflect the common pattern of wealth being accumulated during a person's working life, and then being utilised during retirement. Some households with relatively low wealth have relatively high income, especially if they are younger households. Conversely older households may have accumulated relatively high net worth over their lifetimes, but have relatively low income in their retirement.
Relationship between net worth from SIH and from the Australian System of National Accounts
36 This publication contains estimates of the wealth of Australian households compiled from data collected in the SIH. The Australian System of National Accounts (ASNA) also provide estimates of the net worth of Australian households. Appendix 3 compares wealth data from the two data sets and describes and quantifies some of the major scope, definitional and methodological differences between the two.
Scope and coverage
37 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.
38 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 defined as very remote - this has only a minor impact on aggregate estimates except in the Northern Territory where such households account for about 24% of the population.
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.
Sample copies of the above documents are included in the Survey of Income and Housing, Australia: User Guide 2005-06
(cat. no. 6553.0).
41 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 2).
42 For the 2005-06 SIH, dwellings were selected through a stratified, multistage cluster design. Selections were distributed across a twelve month enumeration period so that the survey results would be representative of income patterns across the year. In the final quarter of enumeration, 25% of the selected dwellings were deselected from the sample. This reduced the overall number of dwellings selected to participate in the survey. This outcome will increase the standard error in the final quarter estimates and hence the standard error in the annualised estimates. This increase in standard error is included in the error estimation. The relative change in sample size across the enumeration quarters may also introduce some bias to the annualised estimates but this is expected to be much less than the standard error.
43 Of the selected dwellings there were 12,311 in the scope of the survey. Of these, 2,350 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
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.
In these cases, 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).
46 Donor records are selected by finding fully responding persons with matching information on various characteristics (such as state, sex, age, labour force status and income) 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.
47 In previous SIH surveys, responses were also imputed when not every person aged 15 or over residing in the household responded, but the significant person(s) provided answers to all key questions. In 2005-06 these households were regarded as non-responding.
48 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 12,311 in the scope of the survey, of which 9,961 (80.9%) were included as part of the final estimates. The final sample consists of those 9,961 households, comprising 19,212 persons aged 15 years old and over. The final sample includes 2,441 households which had at least one imputed value in either income or assets and liabilities. For 57% of these households only a single value was missing, and most of these were for superannuation assets or a minor source of income for the household.
SIH FINAL SAMPLE: NUMBER OF HOUSEHOLDS, 2005-06
Balance of State
|- nil or rounded to zero (including null cells) |
|(a) Number of persons aged 15 years and over |
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).
50 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.
51 The SIH survey was benchmarked to the in scope estimated resident population (ERP) and the estimated number of households in the population.
52 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.
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.
54 The benchmark variables used are the same as those used in the 2003-04 SIH. The only change has been in the age groups which now consist of mainly 5 year groups instead of 10 year groups, and extending the benchmarking for older ages by splitting a broad category for those aged 65 years and over into three categories for 65-69 years, 70-74 years and 75 years and over. The expanded detail for age groups in SIH 2005-06 aims to improve estimates across all ages, but particularly for older people. The impact of this change on all other estimates not involving age is expected to be minimal.
55 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.
56 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).
57 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.
58 Estimates produced from the survey are usually in the form of averages (e.g. mean household net worth of couple households with dependent children), or counts (e.g. total number of households that own their 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.
59 Estimates of mean net worth are obtained by multiplying the net worth of each household by the weight of the household, summing across all households and then dividing by the estimated number of households.
60 Mean 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.
61 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. For more information on differences between mean gross household income calculated on a household weighted basis and mean equivalised disposable household income calculated on a person weighted basis, readers are referred to Appendix 3 in Household Income and Income Distribution, Australia, 2005-06 (cat. no. 6523.0).
RELIABILITY OF ESTIMATES
62 The estimates provided in this publication are subject to two types of error, non-sampling and sampling error.
63 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.
64 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 extensive editing and quality control procedures at all stages of data processing.
65 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.
66 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.
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 2
in this publication.
Comparison with other data sources
68 Appendix 3 provides a comparison of the wealth data presented in this publication with the wealth data presented in the ASNA, describing some of the major scope, definitional and methodological differences between the two.
69 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.
SPECIAL DATA SERVICES
70 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
71 A basic confidentialised unit record file (CURF) from the 2005-06 SIH is available on CD Rom. A more detailed expanded SIH CURF is also 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 Microdata Access Strategies Section should be emailed to: firstname.lastname@example.org, or telephone (02) 6252 7714.
72 Users may wish to refer to the following related ABS products:
- Household Income and Income Distribution, Australia, 2005-06, (cat. no. 6523.0)
- Household Income and Income Distribution, Australia, Detailed Tables, 2005-06, (cat. no. 6523.0.55.001)
- Survey of Income and Housing, Australia: User Guide, 2005-06, (cat. no. 6553.0)
- Household Expenditure Survey, Australia: Summary of Results, 2003-04, (cat. no. 6530.0)
- Household Expenditure Survey, Detailed Expenditure Items, 2003-04, (cat. no. 6535.0.55.001)
- Government Benefits, Taxes and Household Income, Australia, 2003-04, (cat. no. 6537.0)
- Working Paper in Econometrics and Applied Statistics: Experimental Estimates of the Distribution of Household Wealth, 1994-2000. Working Paper 2002/1 September 2002, (cat. no. 1351.0)
- Household Expenditure Survey and Survey of Income and Housing, Australia: User Guide, 2003-04, (cat. no. 6503.0)
- Housing Occupancy and Costs, Australia, 2005-06, (cat. no. 4130.0.55.001)
- Measuring Wellbeing: Frameworks for Australian Social Statistics, 2001, (cat. no. 4160.0)
- Measures of Australia's Progress, 2006, (cat. no. 1370.0)