NO.104

INCOMES RISE ACROSS THE BOARD

The latest Australian Bureau of Statistics Household Income and Income Distribution

publication for 2002-2003 shows that living standards have increased considerably

since 1995-96.

In 1994-95 the equivalent disposable income was $445 per week. It dropped to

$439 in 1995-96 and then rose steadily to $510 in 2002-03. This equates to a

16 per cent rise in the standardised measure of household disposable income

since 1995-96.

This improvement in living standards has occurred at all income levels, with

the spending power of households in the lowest income quintile – that

is, the bottom 20per cent of households by income level – improving by almost

10 per cent, the middle quintile by around 16percent and the top quintile

by 19percent in real terms.

In addition, the ABS data shows that several measures of income equality have

improved since the introduction of The New Tax System in July 2000.

A summary measure of income equality is the ratio of incomes for high income

earners to low income earners. The ABS data shows that the ratio of the income

of the 80^th percentile to the 20^th percentile declined

in 2000-01 and held that level in 2002-03. The decline indicates a relative

increase in the incomes of low income households and therefore an improvement

in income equality since 2000-01.

Another measure of income equality is the income share of the lowest quintile

– that is, the percentage of total income that goes to low income households.

This measure has remained stable at 7.7 per cent since 1999-2000, with the income

of low income households growing broadly in line with that of higher income

households since that time.

The improvement in income equality since 2000-01 coincides with the introduction

of the TheNew Tax System and a more generous family payments system.

Other factors that have contributed to improved living standards for low income

households are strong real wages growth and a lower unemployment rate.

Since the Government was elected in March 1996, real wages have grown 12.2

per cent, underpinned by strong growth in labour productivity. This is ten times

the 1.2percent real wages growth recorded over the whole 13 year term of the

previous Government.

In addition, the ABS’s Household Income and Income Distribution publication

shows an increase in working households and a decrease in the percentage of

households dependent on Government payments since 1995-96, with the largest

improvements recorded since the introduction of The New Tax System.

CANBERRA

6 December 2004