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Peoples' income provides one indicator of their standard of living. However, it does not always accurately indicate command over goods and services, particularly when income is variable or expenditure can be financed through running down assets or acquiring debts. In these cases, the levels and patterns of household expenditure can provide an alternative indicator of living standards.
The latest household expenditure information available is from the 1998-99 Household Expenditure Survey. This was the sixth major survey of its kind undertaken by the ABS. It collected detailed information on the expenditure, income and characteristics of households in Australia.
The household is the usual unit of analysis for expenditure because it is assumed that sharing of the use of goods and services occurs at this level. If smaller units are adopted, for example person or income unit, then it is difficult to attribute the use of both shared items such as accommodation and household goods, and of expenditure on items consumed by others, such as food.
In 1998-99, Australian households spent an average of $699 per week on goods and services (table 7.10). The level and pattern of expenditure differs between households, reflecting characteristics such as income, household composition, household size and location.
Predictably the level of household expenditure differs between households with differing income levels. In 1998-99, households in the lowest income quintile (i.e. the 20% of households with the lowest incomes) spent $344 per week on goods and services, compared with $1,171 spent by households in the highest income quintile. Households in these quintiles had average (mean) gross weekly incomes of $156 and $1,109 respectively. Since the Household Expenditure Survey does not collect information on all forms of income and expenditure, and since there are significant timing differences between the different components of income and expenditure collected, caution should be exercised in comparing the income and expenditure data. Nevertheless, for both the lowest quintile and the second quintile, average weekly household income as measured in the survey is less than average weekly household expenditure. This does not necessarily mean that these households are spending beyond their means. Some of the households in these quintiles will have had higher income in the past and so can finance their expenditure by drawing on past savings. This is especially so for retired people. Other households may take out loans in the expectation of higher incomes at a later time. The lowest quintile also includes households who reported zero or negative income. These households' losses from their unincorporated businesses or investments equalled or were greater than their income from any other sources. In general this group can draw on economic resources other than income to maintain their standard of living, at least in the short term.
The composition of a household's weekly expenditure is also affected by the level of household income. For example, food and non-alcoholic drinks accounted for 19.4% of the expenditure on goods and services of households in the lowest income quintile, compared with 16.6% for households in the highest income quintile. In general, the proportion spent on housing, household services, domestic fuel and power and tobacco products also declined as household income rose, while the proportion spent on transport, recreation, clothing and footwear, and alcohol increased.