---

DEFINING LOW, MIDDLE AND HIGH INCOME AND WEALTH

Households with middle and high incomes tend to have a corresponding level of economic resources and wellbeing. Low income households, however, do not always have a lower level of economic well-being, because low income households may have stores of wealth which help to support their living standards.

In this section, the characteristics of households with different income and wealth levels are compared. For this comparison:

• High income households refers to the 20% of households in the highest equivalised disposable household income quintile;
• Middle income households refers to the 20% of households in the third equivalised disposable household income quintile; and
• Low income households refers to the 18% of households in the lowest equivalised disposable household income quintile, adjusted to exclude the first and second percentiles.

This low income definition was introduced in SIH 2013-14. This definition better captures households that have low economic resources by excluding those with nil or negative income, or income significantly below government pension rates. Such households often are either experiencing a temporary economic setback or have stores of wealth to support their living costs.

Equivalised disposable household income (EDHI) estimates are adjusted by equivalence factors to standardise them for variations in household size and composition, while taking into account the economies of scale that arise from the sharing of dwellings. When discussing income in this chapter, we are referring to EDHI.

To compare different wealth levels:

• High wealth households refers to the 20% of households in the highest net worth quintile;
• Middle wealth households refers to the 20% of households in the third net worth quintile; and
• Low wealth households refers to the 20% of households in the lowest net worth quintile

For more information see the User Guide (cat. no. 6503.0) which will be released later in 2017.

---

CHARACTERISTICS OF LOW, MIDDLE AND HIGH WEALTH HOUSEHOLDS


In 2015–16, over a third (37%) of low income households had wealth levels in the lowest wealth group (less than $104,500), one in four (25%) had medium levels of household wealth. Less than ten percent (8%) of low income households had net worth exceeding $1.3 million (that is they were in the top net wealth quintile) and are unlikely to be at risk of experiencing economic hardship, as shown in Graph 1.


Graph 1 - COMPARISON OF WEALTH(a), by income group(b), 2015-16

Footnote(s): (a) Based on equivalised disposable household income (b) Based on net worth of the household
Source(s): ABS Survey of Income and Housing, 2015–16


The main asset for low wealth households in 2015-16 was property (owner occupied dwellings and other property) (34%), however, due to the lower level of property ownership for this group (7%), the majority of the low wealth group did not benefit from property ownership. For this group, owner occupied dwellings contributed 16% to their wealth. Other non-financial assets (including dwelling contents and vehicles) made up a third (33%) of the assets for the low wealth group.

The main asset for middle and high wealth households was also property, but in contrast to low wealth households, both these groups have property ownership rates over 95%. For middle and high wealth households, owner occupied dwellings contributed 57% and 35% respectively to their wealth, as can be seen in Graph 2.


Graph 2 - COMPOSITION OF ASSETS BY WEALTH GROUP, 2015-16

Footnote(s): (a) Includes contents of dwelling and vehicles (b) Includes accounts held in financial institutions, offset accounts, shares, public unit trusts, private trusts and own business (net of liabilities)
Source(s): ABS Survey of Income and Housing, 2015–16


As shown in Graph 3, the major source of debt for high and middle wealth households are property loans. Property loans made up 88% of total liabilities for the high wealth households, with almost half (46%) of this group having property loans. Although just over half (55%) of middle wealth households had property liabilities, they made 93% of the total value of liabilities for this group. This drops significantly to two thirds (66%) of total liabilities for low wealth households, where only 5% have an owner occupied dwelling or other property liability.

Additionally, 21% of low wealth households have debt outstanding on study loans which accounts for 16% of total liabilities for all low wealth households. This drops significantly to account for less than 2% of total liabilities owed by both middle and high wealth households due to the much higher value of other liabilities for these groups. Around 15% of middle wealth households and 17% of high wealth households have study loans.


Graph 3 - TYPES OF LIABILITIES (% OF ALL LIABILITIES), by wealth group, 2015-16

Footnote(s): (a) Includes principal outstanding on loans for vehicle purchases (excludes business and investment loans), principal outstanding on investment loans (excludes business and rental property loans), and principal outstanding on loans for other purposes (excludes business and investment loans)
Source(s): ABS Survey of Income and Housing, various years


For the analysis below a retiree household is defined as a household where the reference person in the household was 65 years or older and not in the labour force.

High wealth retiree households are more likely (66%) to draw the household income from other income (including superannuation) than any other income source. For low and middle wealth retiree households the main source of income was most likely to be government pensions and allowances (96% and 88% respectively).


Graph 4 - PROPORTION OF RETIREE(a) HOUSEHOLDS, by main source of household income, by wealth group 2015–16

Footnote(s): (a) Households where reference person was 65 years or older and they were not in the labour force (b) Employee income and other income proportions for low wealth households has an RSE of 25%-50% and should be used with caution (c) Own unincorporated business income for high wealth households has an RSE of more than 50% and is considered too unreliable for general use
Source(s): ABS Survey of Income and Housing, 2015-16