DEFINITIONS AND RELATED INFORMATION
The Explanatory Notes tab of this publication provides a Glossary and other information about key terms used in this feature article.
More detailed information is provided in the Survey of Income and Housing User Guide, 2013-14 (cat. no. 6553.0).
Household income and wealth estimates have been equivalised using the same equivalence scale.
Equivalisation is a method of standardising income and wealth of households to take account of household size and composition differences. This enables more meaningful comparisons to be undertaken across different households.
An equivalising factor is used which assigns a value of 1 to the household head, 0.5 to each additional person 15 years or older and 0.3 to each child under 15 years. For example, a couple with one child under 15 years would have an equivalising factor of 1.8 and therefore need an income of $1,800 to have the same equivalised income as a lone person household with an income of $1,000.
For owner-occupiers, housing costs are those that would normally be paid by a landlord, i.e. mortgage interest, general and water rates, building insurance, body corporate fees, and repairs and maintenance.
For renters, housing costs are actual rent paid.
Liquid assets are those that can be readily accessed to support consumption needs. This includes all financial assets such as bank accounts, shares, and the value of people’s own businesses. Superannuation is included in the liquid assets of individuals 65 years and over, but is excluded from the liquid assets for people under 65 years, as they cannot usually access this asset until retirement age.
Low Income Households
Low income households are those with equivalised disposable household income (EDHI) in the 3rd to 20th percentiles of the total population. In 2013-14, this equated to households with EDHI ranging from $205 to $511 per week.
In this analysis, all characteristics such as wealth levels, tenure type and financial stress indicators, are based on the circumstances of the entire household. However, the proportions cited are based on the number of people in the population of interest rather than the number of households. This means a household with four people contributes four times more to the proportions quoted than a household with one person. This method is used because in inequality studies, the number of people at risk of economic hardship is of most interest, but also recognises that people share household resources. These are ‘person weighted’ estimates.
High debt levels can leave households vulnerable to financial hardship if their economic circumstances change. Consistent with the OECD definition, over-indebted households are defined as those with debt three or more times their annual current disposable household income.
Many developed countries use relative income poverty to measure the economic wellbeing of households. These measures identify the proportion of people living in households with an income below a certain fraction of the median equivalised disposable household income for all households. The OECD commonly uses 50% of median income in its poverty studies, while the European Union often uses 60% as the cut-off.
Younger and older households
Low income households have been split into two different groups in this article:
- Younger households are those with a household reference person under 65 years, accounting for 69% of low income households
- Older households are couples and lone person households with a household reference person 65 years and over, accounting for 27% of low income households.
Other households with a reference person aged 65 and over have been excluded (about 4% of the low income population) so that the economic resources of additional people, such as non-dependent children, do not distort the analysis of older households.
However, younger households may include individuals 65 years and over, while older household couples may include a person under 65 years, because they are not the household reference person.
The following papers provide further analysis on the importance of the joint analysis of income, consumption and wealth:
- Low Economic Resource Households, Feature Article, Household Income and Income Distribution (cat. no. 6523.0), 2011-12
- Government pension and allowance recipients, Feature Article, Household Expenditure Survey (cat. no. 6530.0), 2009-10
- Trends in Household Debt, Australian Social Trends (cat. no. 4102.0), 2014
- What types of debts do households have?, Australian Social Trends (cat. no. 4102.0), 2014
- Who has household debt?, Australian Social Trends (cat. no. 4102.0), 2014
The Household Economic Wellbeing Fact Sheet Series
provide a broad overview of the key concepts and data sources for measuring household economic wellbeing. There are currently five fact sheets:
- What is household economic wellbeing?
- Understanding measures of income and wealth
- Low economic resource households
- Key data sources
- Changes over time
The fact sheets are also available for download