Chapter 4The structural drivers of poverty
4.1As canvassed earlier in this report, experiences of poverty can be complex, multifaceted and all-consuming, and a purely financial lens is not sufficient to capture the full extent of the causes and impacts of poverty.
Structural drivers behind insufficient income
4.2The committee received evidence outlining the multiple structural drivers behind poverty.
4.3Broadly speaking, the structural drivers can be grouped into the following overarching categories:
Economic factors (including fiscal policies, inflation and cost of living pressures)
Labour force factors (including employment and education opportunities)
Housing factors (including rental affordability and home ownership opportunities)
Social factors (including intergenerational disadvantage and family violence).
4.4Given these structural drivers, a significant number of submitters made clear that despite the dominant political and media narrative in recent years, poverty was not simply a matter of individual inadequacy, personal deficits, or the straightforward result of private choices.
4.5As Ms Claerwen Little, National Director of UnitingCare Australia, summarised:
Poverty is the outcome of intentional policy decisions on issues such as taxation, social security, income support, housing, employment, education and community service provision.
4.6Similarly, Anglicare Australia drew attention to the role of policy settings and noted that poverty was not ‘inevitable’:
It is a result of choices made by governments. Our current policy choices and spending priorities are not only failing to reduce poverty and inequality, they are in many areas actively causing it.
4.7Save the Children and 54 Reasons also emphasised the systemic and structural forces behind poverty and observed that solutions lay in policy changes. It explained:
Poverty by definition is a result of the operation of structural economic and social forces. Poverty will not be ended by pointing the finger at individual families who are struggling due to structural disadvantage that has been inherited over generations.
4.8In a similar vein, the thinktank Per Capita put forward the view that poverty was best understood as ‘neither a personal failing nor as an historical accident’, but rather as a consequence of structural power relations, such as those between employees and employers, or between citizens and state.
4.9The Life Course Centre also contended that the narrative around poverty needed to change in order to better reflect the fact that poverty has a structural and systemic base rooted in economic and cultural systems, rather than personal and private choices.
4.10Centrecare made a similar observation and cautioned against an ‘individualised view’ of poverty which minimised the structural aspects of poverty:
Poverty flourishes when societal structures work to enhance the material success of some while diminishing that of others. An individualised view of poverty takes the burden for its resolution away from governments and diminishes collective responsibility. It also minimises the structural aspects of poverty such as the significance of tax systems, inequitable access to quality education and healthcare, the level of government supports and the intergenerational nature of poverty.
4.11It continued:
Blaming individuals for their poverty also fails to consider that many people live in poverty for reasons that are outside of their control — health, disability, homelessness following domestic violence, high housing costs, minimum wage, limited rental availability, and rising living costs are just some examples.
Economic factors
4.12Submitters to the inquiry identified that economic factors, such as fiscal policy, rising inflation and cost of living pressures, could be drivers of poverty.
4.13Many submitters made the point that at its core, poverty is the result of prolonged financial hardship due to an individual having insufficient money to meet an adequate standard of living.
4.14As Dr Cassandra Goldie, Chief Executive Officer of the Australian Council of Social Service (ACOSS) observed:
Poverty is lack of income in the face of the cost[s] that you must meet to be able to live with a level of dignity.
4.15The Life Course Centre emphasised that the economy was a ‘key institutional structure’ and as such must be an ‘enduring priority’ for addressing poverty and entrenched disadvantage in Australia.
4.16The Department of Social Services (DSS), highlighted the link between poverty and broader economic conditions. In doing so it stated:
Economic participation is the best way to alleviate poverty and disadvantage. This is widely supported in the academic literature. Economic growth leads to the expansion of opportunity and reduces occurrences of poverty.
4.17A number of submitters flagged increased cost of living pressures and the impacts of rising inflation as contributors to people falling into poverty. For example, the South-East Monash Legal Service identified that increased costs of living (including utility costs) were making it harder for individuals and families to afford basic necessities, resulting in people ‘skirting with, or dipping below, the poverty line’.
4.18The Salvation Army echoed this point. It observed that while inflation and the rising costs of living were having impacts on many Australians, the negative effects were particularly felt by those already experiencing financial hardship. It explained:
Since November 2022 ‘increased expenses’ as a result of the rising cost of living has been the most prevalent issue identified by community members seeking emergency relief in every state and territory. One in three people seeking assistance are now identifying cost of living as the reason they are seeking help.
4.19Sacred Heart Mission also noted that the current cost of living pressures disproportionately impacted people on the lowest incomes, particularly those receiving income support or in minimum wage jobs, who as a result found themselves in, or close to, poverty.
4.20The Brotherhood of St Laurence specifically flagged rising living costs as a driver of poverty in Australia. It explained:
Recent cost of living increases have disproportionately impacted low-income households, who spend a higher proportion of their income on essentials. Importantly the cost of essentials has risen even faster than the 7.4% increase in CPI, rising by 8.4% in the 12 months to December 2022, driven by strong increases in the price of housing and utilities (10.7%), food (9.2%) and transport (8%). These increases come at a time when many low income households were already struggling with the cost of essentials, with 41% of households in the lowest income quintile were in energy stress in 2020, while 42% of low income households were in rental stress.
Labour market factors (employment and education opportunities)
4.21Submitters observed that factors related to labour market participation, including employment and education opportunities, as well as access to affordable childcare, were structural drivers of poverty.
4.22DSS provided the committee with an overview of the state of the Australian labour market and stated that joblessness was a ‘key driver’ of poverty, particularly for single people and people living in large families.
4.23It cited findings from a 2018 Productivity Commission report which identified that people living in single-parent families, unemployed people, people with disabilities and First Nations Australians were particularly likely to experience income poverty. It explained:
For people in these circumstances, there is an elevated risk of economic disadvantage becoming entrenched, limiting their potential to seize economic opportunities or develop the skills to overcome these conditions. These risks were particularly elevated for children living in jobless households.
4.24The Melbourne Institute stated that a ‘key trigger event’ for individuals falling into poverty or rising out of it was often associated with engagement with the labour market. It advised that those who were more likely to experience persistent poverty tended to be constrained in their ability to participate in the labour market — for example because of long-term health conditions or because of high caring responsibilities for young children or individuals with significant disabilities.
4.25The Poverty and Inequality Partnership between ACOSS and the University of New South Wales (UNSW) (the ACOSS & UNSW Partnership) made clear that labour force status (including unemployment) could be considered a structural driver of poverty in Australia. It detailed:
Wage and salaries provide 78% of all income in Australia, while social security payments such as JobSeeker provide only 8% of income. This means that the labour force status of the main income-earner in a household makes a major difference to poverty rates among people of working age. Among people in households where the reference person (or main income-earner) is unemployed, 66% are in poverty (using the 50% of median income poverty line), and if they are not in the labour force (for example have a disability or full-time caring responsibilities), 45% are in poverty.
In contrast, where the main income-earner is employed full-time, the poverty rate is 6%. Households relying on a single part-time wage are more than twice as likely as those relying on a full-time wage to be in poverty (15%). This reflects lower hours worked but also the fact that low-paid employment is more likely to be offered on a part-time rather than a full-time basis.
4.26Per Capita asserted that there was a ‘gradual degradation’ of the traditional routes out of poverty into economic security, such as employment. It noted that employment was becoming ‘less and less’ a means to earn adequate income, and that data demonstrated that having a job was in itself not necessarily enough to prevent, or indeed lift individuals and families out of poverty.
4.27It highlighted that factors such as low wages, the prevalence of non-standard or insecure employment — such as long-term casual work, labour hire arrangements and the rise of the gig economy — meant that paid work was not a guaranteed way of making ends meet and achieving adequate income to live.
4.28The Brotherhood of St Laurence noted that poverty was not limited to those who were unemployed or whose sole source of income was social security payments. It identified that low wages, insecure work and underemployment were structural drivers of poverty, noting:
Stagnant wage growth, endemic underemployment and insecure work – coupled with increasing inflation, declining housing affordability and rising power prices – are putting immediate pressure on low-income households, while also threatening to deepen long-term disadvantage.
4.29The Paul Ramsay Foundation made reference to the ‘working poor’ — that is individuals with low-paying, insecure jobs which undermine the power of employment as a disruptor of disadvantage and can drive or keep people trapped in poverty.
4.30In regard to education, Per Capita argued that education and training pathways out of school and into employment were increasingly obscure, noting:
Profoundly unequal distribution of education opportunities, from pre-school through to post-secondary education, make a mockery of the idea that getting a good education will automatically lead to a decent job.
4.31It contended that the privatisation and outsourcing of both employment services and vocational education and training had led to poorer outcomes for young people seeking educational and employment opportunities. Further, it observed that this ‘entanglement of commercial drivers’ had led to disadvantaged and vulnerable young people in the labour market being at greater risk of ‘churn’ in both study and work, which often led them into, not out of, poverty.
4.32Jesuit Social Services also noted the connection between poor educational attainment and poverty, given that it limited a person’s productive potential and therefore employment opportunities in the labour market.
Early education
4.33Submitters pointed out that a lack of early childhood or school-based education opportunities could have a lifelong impact on an individuals and act as a structural driver of poverty. They noted that limited education opportunities and engagement early on led to diminished educational outcomes for a child, which in turn had flow-on impacts for their labour market participation later in life.
4.34For example, ACOSS noted that children who attended early childhood education for at least a year before starting school were half as likely to have developmental vulnerabilities when they started school as children who had not received early learning services.
4.35The Smith Family further advised that young people from disadvantaged backgrounds were less likely to complete Year 12 or equivalent, less likely to complete a post-school qualification and were less likely to be in work, study or training post school.
4.36Save the Children noted that education was a source of opportunity and could be a ‘pathway out of poverty’ for those who were able to remain engaged. However, it also pointed out that poverty acted as an ‘enormous barrier’ to engaging in education, which therefore rendered it crucial that children experiencing poverty were supported to engage or re-engage with education.
4.37ACOSS stated that there was a role for access to high-quality early education and care in tackling issues like intergenerational poverty and disadvantage, noting:
For all families, we think having high-quality access to early childhood education and care gives children the capacity to participate outside of the home and for the families to be connected around early childhood education and care. We have had a longstanding concern about the increasing tiers of access to quality. If we get this wrong, it drives inequalities and a sense of people and families not having the same kinds of supports. You have to buy your way in to something as essential as high-quality early education and care.
4.38The Australian Education Union made a similar point, stating that early childhood education contributed to improved employment outcomes for individuals in the long term as they progressed through life:
The benefits of early childhood education for children include increased cognitive capabilities, which can be measured in terms of improved literacy and numeracy. These can be linked to improved achievement at school, which in turn affect school completion rates and levels of educational attainment. Educational attainment is in turn a strong predictor of earnings over a lifetime.
4.39The committee also heard that a lack of affordable early childhood education or care limited the opportunities for adults with caring responsibilities to enter or re-enter the labour market and remain in paid work. For example, ACOSS stated:
We have had a longstanding call for elevating the affordability and universal access to early childhood education and care. It is great for children and it is also great for a range of different kinds of families who are looking to be able to cover the costs of the essentials to be able to, as appropriate, retain access to participation in paid work so that there can be, essentially, a smoothing of supports for families.
4.40Dr Goldie further explained how a lack of affordable childcare could act as a barrier to paid employment for parents:
…in terms of it being a driver of poverty, if you are a single parent and you don't have affordable access to this kind of care, it is a barrier for you to be able to participate in paid work but also, essentially, to have the social connections and supports that are meaningful for you as a member of our community.
4.41The Australian Education Union also highlighted how affordable access to early childhood education or care could increase labour market opportunities for parents:
Some of the parents and carers of children who participate in early childhood education are able to participate in paid work, when they otherwise would not be able to, or choose to work more hours. They benefit from higher incomes, including over an extended period as a result of less career disruption.
Housing factors
4.42Submitters identified housing factors, such as insecurity and unaffordability, as core structural drivers of poverty.
4.43For example, the Victorian Public Tenants Association characterised the relationship as such:
Poverty in Australia cannot be separated from our housing problem. They are ‘wicked’ siblings, each driving growth in the other.
4.44The Salvation Army commented that entire segments of the Australian population found themselves excluded from affordable and secure housing (be it via home ownership or attainable rental options) which led them into poverty:
Consultations with staff and clients consistently tell us that the depth, breadth, and ongoing escalation of unaffordable housing is impacting negatively on the lives and welfare of an increasing number of Australians and is resulting in homelessness and poverty.
4.45It expanded on this point:
The current housing system fails to meet the housing needs of low-income households and exacerbates the harms to individuals and communities arising from housing insecurity, the inability to access affordable housing and ultimately, the drivers of poverty and homelessness.
4.46The submission from the ACOSS & UNSW Partnership advised of the strong correlation between poverty rates and housing costs. It outlined:
In Australia, housing represents the highest cost in most family budgets. Those with lower housing costs, especially those who own houses outright, can achieve a higher standard of living than people on the same income but with higher housing costs.
4.47National Shelter also emphasised housing insecurity and affordability as structural contributors to poverty:
It is well accepted that housing costs can be a significant contribution to poverty because it is the largest fixed cost for most households. Households that have lower housing costs can generally afford a higher standard of living than those on the same income with higher housing costs. Also, low incomes and poverty can prevent people from accessing and sustaining housing options. There are also tenure and spatial aspects to housing related poverty, with private renters and the public housing tenants more likely than home purchasers and homeowners to experience after housing costs poverty.
4.48In particular, submitters emphasised the link between poverty and the insecurity and unaffordability of the private rental market.
4.49As the Tenants’ Union of New South Wales argued:
Over the last 20 years there has been an increasing reliance on the private rental market for those on low or very low income, relative to social housing. Just over a million low income households rent in the private rental sector.7 Two-thirds (66%) of these households are paying more than they can afford, with more than 30 percent of their weekly income being spent on rent. Almost a quarter spend more than half of their income on rent. This leaves vulnerable households with little to no money left each week for other necessary household items.
4.50Research from the Bankwest Curtin Economics Centre set out the role of housing costs in driving poverty. Among the issues it identified in a March 2022 report were the impact of the lack of social housing places and the high proportion of renters who fall below the poverty line as a result of housing costs. The report flagged that supply pressures, high housing costs, and rental vacancy rates at unprecedented lows had driven rental costs to record highs across some states and territories.
4.51It noted:
How much income a family has left for food, clothing and other necessities once housing costs have been paid is heavily affected when rents rise, and this explains much of the growth in poverty rates among those in private rented accommodation.
4.52Per Capita asserted that housing and poverty were intimately linked, with access to secure housing through home ownership (thereby offering a route to economic security) becoming less likely for Australians in recent decades.
4.53It noted that government policies over the last 30 years had led to an excessive marketisation in the housing policy space, with dramatic house price increases, a decline in non-market housing options, and limited efforts to regulate the private rental market having detrimental impacts on those attempting to avoid or escape poverty. It commented:
It is clear that the current patchwork of policies is insufficient to return housing to a poverty-reducing, rather than poverty-increasing, area of public policy. An overreliance on market solutions for low-cost housing has failed to produce the appropriate number, type and location of new housing particularly for those living in poverty. Our current trajectory is one in which housing-induced poverty is likely to rise.
Social factors
4.54The committee also received evidence relating to social drivers of poverty which could be considered structural or systemic in nature. These included domestic and family violence, and intergenerational disadvantage stemming from child poverty.
4.55For example, in regard to family violence, Financial Counselling Victoria commented:
Poverty is well established as linked to, and resulting from, family violence. One reason for this is that financial abuse is a widespread form of family violence, often deliberately designed to isolate and impoverish the victim/survivor, making them financially reliant on the perpetrator, or loading them with debts and financial obligations, and taking away financial resources and capacity.
4.56 In a similar vein, South-East Monash Legal Service observed:
Family violence is a significant driver of poverty in Australia, particularly amongst female victim survivors. An issue that has recently received more attention is what is considered ‘the impossible choice’ - victim survivors are forced to choose between remaining in violent relationships for financial stability, or living in poverty should they leave.
4.57It further noted:
The reality of living in poverty after fleeing violence is particularly present for single mothers who are looking for after dependent children. 60% of 185,700 single mothers who experienced partner violence were employed but were not earning enough to support themselves or their children, and 50% relied on government benefits.
4.58A 2022 report titled ‘The Choice: Violence or Poverty’, authored by Professor Anne Summers of the University of Technology Sydney, investigated the extreme financial hardship and poverty faced by Australian women and their children as a result of domestic and family violence. The report acknowledged this violence as a structural driver of poverty, concluding that there was a need for urgent policy reforms to ensure that women who wanted to leave violent relationships could do so without being forced into poverty.
4.59Evidence from submitters also raised the concept of intergenerational disadvantage as a structural driver of poverty, highlighting that an individual who experiences poverty as a child is more likely to find themselves in poverty as an adult.
4.60As Save the Children & 54 Reasons explained:
Children who experience poverty are far more likely to also be poor as adults, as are their own children, entrenching poverty intergenerationally. Ending child poverty is the key to ending poverty.
4.61Additionally, analysis from the Australia Institute stated that children who grow up in poverty are more likely when they are adults to have lower incomes and to be unemployed or marginally attached to the labour market.
4.62The Children’s Policy Centre emphasised that childhood poverty impacted on a child’s future outcomes and explained the broader social implications that entailed. It cited research findings indicating that a failure to invest in children resulted in immediate inequities in child development indicators, social exclusion, and long-term impacts on human capital and productivity
4.63On this point, Save the Children & 54 Reasons further detailed:
Research tells us without doubt that children who live in poverty for any period of time are more likely to struggle in school, have poor physical and mental health, and suffer worse outcomes across virtually every domain of development and opportunity.
4.64Adjunct Professor Tony Pietropiccolo AM, Director of Centrecare and founder of the Valuing Children Initiative, also spoke to the committee on the life-long impacts of child poverty on a person:
We know that the result of experiences largely created by poverty can have tragic long-term outcomes for many children, who often face an adult life of poor educational achievement, unemployment, homelessness and other personal problems. Entrenched poverty that continues for extended periods creates experiences that become habitual and difficult to escape.
Committee view
4.65The evidence received by the committee to date indicates that in broad terms poverty is underpinned by structural and systemic disadvantage within society, which is often multidimensional and determined by policy settings.
4.66The evidence also shows that the experience of child poverty itself can be considered a structural driver of adult poverty.
4.67The committee intends to canvass these issues in more detail as the inquiry progresses.