CHAPTER 2 - ANALYSIS AND COMMENTS: INCOME AND WEALTH QUINTILES, 2014-15

This chapter presents graphs and tables with accompanying text for the distributions of the Australian System of National Accounts (ASNA) household income, consumption and wealth estimates by household distributional indicators, equivalised income and wealth quintiles. This chapter uses the ASNA term 'total household' throughout the text, total household has an equivalent term in the ABS micro publications, which is 'all households'. Included in this chapter are ratios of the total value of the highest to the lowest quintile, the ratios are a measure of the spread of income, consumption and wealth across the population. The ratios are a summary indicator of inequality.


INCOME

Table 2.1 below presents the 2014-15 values of the ASNA total household income components that are distributed into equivalised income and wealth quintiles. The income graphs below are based on the detail distributional information published in electronic tables 1, 2 and 11.

Income	$m
Compensation of employees	778 113
Gross mixed income	130 339
Gross operating surplus - dwellings owned by persons	130 216
Property income receivable	164 167
Social Assistance benefits	129 918
Interest payable	70 942
Income tax payable	187 616
Social transfers in kind	229 113
Superannuation benefits received (memorandum item)	93 945
Gross disposable income	1 065 728
Adjusted disposable income	1 294 841

(a) Compensation of Employees

The total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the employee during the accounting period. It is further classified into two sub-components; wages and salaries; and employers' social contributions (payments by employers which are intended to secure for their employees the entitlement to social benefits, such as employer superannuation contributions).
In 2014-15, total household compensation of employees (COE) was $778,113m. COE for households in the highest income and net worth quintile was 46% and 24% of total household COE, by comparison for households in the lowest income and net worth quintile it was 3% and 11% of total household COE. There was an increase in the share of total household COE by households in each income quintile from the lowest to the highest. The ratio of the values of the highest to lowest quintiles was 16.9 and 2.1 for income and net worth for COE.

(b) Gross Mixed Income

Gross mixed income (GMI) is the surplus or deficit accruing from production by unincorporated enterprises. It includes elements of both compensation of employees and operating surplus (returns on capital inputs).
In 2014-15, total household gross mixed income (GMI) was $130,339m. GMI for households in the highest income and net worth quintile was 62% and 55% of total household GMI, by comparison for households in the lowest income and net worth quintile it was 3% and 8% of total household GMI. There was an increase in the share of total household GMI by households in each income and net worth quintile from the lowest to the highest. The ratio of the values of the highest to lowest quintiles was 21.2 and 7.2 for income and net worth for GMI.

(c) Gross Operating Surplus - Dwellings Owned by Persons

Dwelling "GOS" is the surplus resulting from a deduction of intermediate inputs from output. Output is the sum of actual and imputed rent on dwellings owned by households. Intermediate inputs are the goods and services consumed in the process of production (for example maintenance costs and body corporate fees). These inputs exclude property income payments such as interest.
In 2014-15, total household gross operating surplus, dwellings owned by persons (GOS Dwellings) was $130,216m. GOS Dwellings for households in the highest income and net worth quintile was 33% and 38% of total household GOS Dwellings, by comparison for households in the lowest income and net worth quintiles it was 8% and 9% of total household GOS dwellings. There was an increase in the share of total household GOS Dwellings by households in each income and net worth quintile from the lowest to the highest. The ratio of the values of the highest to lowest quintiles was 4.0 and 4.1 for income and net worth for GOS Dwellings.

(d) Property Income Receivable

Property income receivable is the income receivable by the owners of a financial asset or a tangible non-produced asset in return for providing funds. Household property income mainly consists of dividend and interest income earned directly and through superannuation and insurance reserves.
In 2014-15, total household property income was $164,167m. Property income for households in the highest income and net worth quintile was 53% and 63% of total household property income, by comparison for households in the lowest income and net worth quintile it was 5% and 2% of total household property income. There was an increase in the share of total household property income by households in each quintile from the lowest to the highest for both income and net worth quintiles, with the increase being particularly steep from the fourth to the highest quintile. The ratio of the value of the highest to lowest quintiles was 10.8 and 26.1 for income and net worth quintiles for property income receivable.

(e) Social Assistance Benefits

Includes current transfers to persons from general government in return for which no services are rendered or goods supplied. Principal components include: scholarships; maternity, sickness and unemployment benefits; family allowances; and widows', age, invalid and repatriation pensions.
In 2014-15, total household social assistance benefits were $129,918m. Social assistance benefits by households in the lowest income and net worth quintile was 34% and 30% of total household social assistance benefits, by comparison for households in the highest income and net worth quintile it was 5% and 11% of total household social assistance benefits. There was a decrease in the share of total household social assistance benefits received by households in each income quintile from the lowest to the highest, the pattern for the net worth quintiles is not as clear. For example, households in the lowest net worth quintile received the highest share of total household social assistance benefits and households in the third net worth quintile received the next highest share of the total at 21%. The ratio of the value of the highest to lowest quintiles was 0.1 and 0.4 for income and net worth quintiles for social assistance benefits.

(f) Interest Payable

Household interest payable mainly consists of interest payable on loans on dwellings (mortgages).
In 2014-15, total household interest payable was $70,942m. Household interest payable in the highest income and net worth quintile was 50% and 42% of total household interest payable, by comparison for households in the lowest income and net worth quintile it was 7% and 6% of total household interest payable. There was an increase in the share of total household interest payable by households in each income and net worth quintile from the lowest to the highest. The ratio of the value of the highest to lowest quintiles was 7.2 and 7.0 for income and net worth quintiles for interest payable.

(g) Income Tax Payable
In 2014-15, total household income tax payable was $187,616m. Household income tax payable in the highest income and net worth quintile was 59% and 34% of total household income tax payable, by comparison for households in the lowest income and net worth quintile it was 1% and 9% of total household income tax payable. There was an increase in the share of total household income tax payable by households in each income quintile from the lowest to the highest, with the increase being particularly steep from the fourth to the highest quintile. The pattern is not as clear for the net worth quintiles, for example households in the second net worth quintile paid 20% of total household income tax payable whereas third and fourth net worth quintile each pay 19%. The ratio of the value of the highest to lowest quintiles was 47.2 and 4.0 for income and net worth quintiles for income tax payable.

(h) Social Transfers in Kind

Social transfers in kind are individual goods and services provided to individual households by general government units and non-profit institutions either free or at prices that are not economically significant, examples are education and health services.
In 2014-15, total household social transfers in kind (STiK) were $229,113m. STiK for households in the lowest income and net worth quintile was 25% and 23% of total household STiK, by comparison for households in the highest income and net worth quintile it was 13% and 16% of total household STiK. There was a decrease in the share of total household STiK by households in each income quintile from the lowest to the highest, the pattern for the net worth quintiles is not as clear. For example, households in the lowest net worth quintile received the highest share of total household STiK and households in the third net worth quintiles received the next highest share of the total at 21%. The ratio of the value of the highest to lowest quintile was 0.5 and 0.7 for income and net worth quintiles for social transfers in kind.

(i) Superannuation Benefits Received (memorandum item)

Superannuation benefits received are recorded as a memorandum item of the household income account. Superannuation benefits received in the ASNA are treated as financial transactions of households and are not recorded as income; instead they are recorded in the financial account and balance sheet.
In 2014-15, total household superannuation benefits received was $93,945m. Households in the highest income and net worth quintile received 46% and 74% of total household superannuation benefits, by comparison households in the lowest income and net worth quintile received 3% and 2% of total household superannuation benefits. There was an increase in the share of total household superannuation benefits received by households in each quintile from the lowest to the highest for both income and net worth quintiles, with the increase being particularly steep from the fourth to the highest net worth quintiles. The ratio of the value of the highest to lowest quintiles was 14.3 and 35.8 for income and net worth quintiles for superannuation benefits received.

(j) Disposable Income
In 2014-15, total household gross and adjustable disposable income was $1,065,728m and $1,294,841m respectively. The difference between the two income measures is that adjustable disposable income includes social transfers in kind and gross disposable income excludes these transfers. Gross and adjustable disposable income in the highest income quintile was 40% and 35% of total household gross and adjustable disposable income respectively, by comparison for households in the lowest income quintile it was 8% and 11% of the total household gross and adjustable disposable income. There was an increase in the share of total household gross and adjustable disposable income by households in each income quintile from the lowest to the highest quintiles. The ratio of the value of the highest to lowest income quintiles was 5.2 and 3.3 for gross and adjustable disposable income respectively.
Gross and adjusted disposable income in the highest net worth quintile was 31% and 28% of total household gross and adjusted disposable income respectively, by comparison for households in the lowest net worth quintile it was 12% and 14% of the total household gross and adjusted disposable income. There was an increase in the share of total household gross and adjusted disposable income by households from the lowest to the highest quintile, with the growth remaining constant in the second, third and fourth quintile. The ratio of the value of the highest to lowest net worth quintile was 2.5 and 2.0 for gross and adjusted disposable income respectively.

(k) Impact of the redistribution by government and non-profit institution serving household (NPISH)

Table 2.2 and the graph below presents total household gross disposable income (GDI) and the share of total household GDI in a step by step format, each step includes an income receivable or payable component that illustrate the impact of the redistribution of income by government and NPISH. The graphs below are based on the detail information published in electronic table 11.

• Step 1: gross disposable income (GDI) before the addition of income from government social assistance benefits (cash) and the payment of income tax;
• Step 2: step 1 GDI less income taxes payable;
• Step 3: step 2 GDI plus income from government social assistance benefits (cash);
• Step 4: step 3 GDI plus government and NPISH payments to household from social transfers in kind (STiK).

Steps	$m
GDI (before tax and social assistance benefits)	1 123 427
GDI (after tax and before social assistance benefits)	935 810
GDI (after tax and social assistance benefits)	1 065 728
GDI (after tax, social assistance benefits and social transfers in kind)	1 294 841

For households in the lowest, second and third income quintiles the share of total household income increased with each step. For households in the fourth and highest income quintiles, the share of total household income decreased with each step. For households in the fourth income quintile, the share of total household income increased by step 2 (payment of income taxes), and declined in step 3 and 4 (transfer payments in cash and kind).
For households in the lowest net worth quintile, the share of total household income increased with each step. For households in the highest net worth quintile, the total share of total household income remained constant for step 2 (payment of income taxes), and declined in step 3 and 4 (transfer payments in cash and kind). For households in the second, third and fourth net worth quintile, the redistributive measures do not significantly change the share of total household income.


CONSUMPTION AND SAVING

Table 2.3 below presents the 2014-15 values of the ASNA income and consumption components, and gross saving, by income and net worth quintiles, to assist the interpretability of the equivalised income and net worth quintile graphs presented below. The consumption and gross saving graphs below are based on the detail distributional information published in electronic tables 1, 2 and 5

Income and Consumption, $m			Lowest	Second	Third	Fourth	Highest	Total
Income quintiles
	Gross disposable income		81 251	136 124	183 388	240 424	424 541	1 065 728
	Household final consumption expenditure		111 787	133 193	161 923	196 996	259 478	863 378
		Health	6 380	11 023	7 527	10 343	10 137	45 411
	Social transfers in kind		58 346	56 800	46 494	37 156	30 316	229 113
		Health	21 397	25 307	20 833	18 415	17 034	102 986
	Adjusted disposable income		139 597	192 923	229 883	277 580	454 857	1 294 841
	Gross saving		-30 536	2 931	21 465	43 427	165 063	202 351
Net worth quintiles
	Gross disposable income		132 914	201 187	200 520	203 002	328 105	1 065 728
	Household final consumption expenditure		122 208	156 146	180 932	174 676	229 416	863 378
		Health	4 851	7 659	13 519	9 466	9 916	45 411
	Social transfers in kind		53 396	46 339	48 398	43 859	37 121	229 113
		Health	17 195	17 885	22 323	23 333	22 250	102 986
	Adjusted disposable income		186 311	247 525	248 917	246 861	365 226	1 294 841
	Gross saving		10 706	45 041	19 588	28 326	98 689	202 351

(a) Consumption
In 2014-15, total household final consumption expenditure (HFCE) was $863,378m. HFCE for households in the highest income and net worth quintile was 30% and 27% of total HFCE, by comparison for households in the lowest income and net worth quintile it was 13% and 14% of total HFCE. There was an increase in the share of total HFCE by households in each quintile from the lowest to the highest for both income and net worth quintiles. The ratio of the value of the highest to lowest quintiles was 2.3 and 1.9 for income and net worth quintiles for HFCE.
In 2014-15, gross disposable income (GDI) of households in the lowest and highest income quintile was $81,251m and $424,541m respectively. Households in the lowest income quintile consumed approximately 67% or $54,356m of their GDI on key expenditure components, while households in the highest income quintile consumed 24% or $100,845m, of their GDI on the same key expenditure components. The key expenditure components included: rent and other dwelling services, 34% and 12%, food 19% and 5%, and transport 14% and 7%, respectively, for the lowest and highest income quintiles.
In 2014-15, adjusted disposable income (ADI) of households in the lowest and highest income quintile was $139,597m and $454,857m respectively. Households in the lowest income quintile consumed 20% of their ADI in health services, of this 5% was in direct payments and 15% in transfers in kind. In comparison, households in the highest income quintile consumed 6% of their ADI in health services, of this 2% was in direct payments and 4% in transfers in kind. There was a decrease in the consumption of health plus STiK health as a share of ADI by households in each income quintile from the lowest to the highest.
In 2014-15, adjusted disposable income (ADI) of households in the lowest and highest net worth quintile was $186,311m and $365,226m respectively. People in the lowest net worth quintile consumed 12% of their ADI in health services, of this 3% was in direct payments and 9% in transfers in kind. In comparison, households in the highest net worth quintile consumed 9% of their ADI in health services, of this 3% was in direct payments and 6% in transfers in kind. The pattern on health services consumption in the net worth quintiles is not clear, for example households in the third net worth quintile consumed largest share of health plus STiK health, 14% of ADI, followed by people in the fourth net worth quintile at 13% of ADI.

(b) Gross Saving
In 2014-15, total household gross saving was $202,351m. Gross saving for households in the highest income and net worth quintile was 82% and 49% of total household gross saving. The total share of households in the second, third and fourth income quintiles was 34% of total household gross saving, in terms of net worth, households in the second, third and fourth quintiles saved 46% of total household gross saving. By comparison, households in the lowest income quintile were dis-savers, with -15% of total household gross saving, and households in the lowest net worth quintile saved 5% of total household gross saving.


WEALTH

Table 2.4 below presents the 2014-15 values of the ASNA total household wealth components that are distributed into equivalised income and wealth quintiles. The wealth graphs below are based on the detail distributional information published in electronic tables 1 and 2.

Wealth		$m
Dwellings and residential land		5 461 382
Financial assets		4 190 479
	Currency and deposits	898 735
	Shares and other equity	757 640
	Superannuation and insurance reserves	2 429 235
Loan liabilities		1 941 446
Net Worth		8 366 416

(a) Dwellings and Residential Land
In 2014-15, the value of total household dwellings and residential land was $5,461,382m. The share of total household dwellings and residential land held by households in the highest income and net worth quintile was 37% and 47%, by comparison 9% and 1% of total household dwellings and residential land was held by households in the lowest income and net worth quintile. There was an increase in the share of total household dwellings and residential land held by households in each quintile from the lowest to the highest for both income and net worth quintiles. The ratio of the value of the highest to lowest quintiles was 4.0 for income quintiles and 61.1 for net worth quintiles for dwellings and residential land.

(b) Financial Assets- Currency and Deposits, Shares and Other Equity, and Superannuation and Insurance Reserves
In 2014-15, total financial assets held by households were, currency and deposits ($898,735m), shares and other equity was ($757,640m), and superannuation and insurance reserve ($2,429,235m). These financial assets accounted for 97% of total household financial assets. Households in the highest income and net worth quintile held 38% and 56% of total household currency and deposits, 62% and 84% of total household shares and other equity, and 48% and 59% of total household superannuation and insurance reserves, respectively. Households in the lowest income and net worth quintile held 9% and 3% of total household currency and deposits, 5% and 1% of total household shares and other equity, and 5% and 2% of total household superannuation and insurance reserves, respectively. The ratio of the value of the highest to lowest quintiles was 7.7 for income quintiles and 30.9 for net worth quintiles for total financial assets.

(c) Liabilities - Loans
In 2014-15, total household loan liabilities was $1,941,446m, majority of these household loans were for dwellings. Loan liabilities of households in the highest income and net worth quintile was 39% and 26% of total household loan liabilities, by comparison loan liabilities of households in the lowest income and net worth quintile was 10% and 5% of total household loan liabilities. The ratio of the value of the highest to lowest quintiles was 4.1 for income quintiles and 5.3 for net worth quintiles for loan liabilities.

(d) Net Worth
In 2014-15, total household net worth was $8,366,416m. Net worth for households in the highest income and net worth quintile was 43% and 62% of total household net worth, by comparison for households in the lowest income and net worth quintile it was 8% and 0% of total household net worth. There was an increase in the share of total household net worth by households in each quintile from the lowest to the highest for both income and net worth quintiles. The ratio of the value of the highest to lowest quintiles was 5.4 for income quintiles and 143.3 for net worth quintiles for net worth.