Chapter 2The extent of poverty in Australia
Measuring and defining poverty
2.1Australia does not have a single definition of poverty and as such, it has no official, nationally agreed definition or way of monitoring poverty.
2.2In the absence of an official definition, common measures or poverty lines used by stakeholders and researchers in Australia include:
the Henderson Poverty Line;
the 50 per cent of median income poverty rate;
the 60 per cent of median income poverty rate; and
the before- and after- housing poverty rate.
2.3The submission from the Commonwealth Government, led by the Department of Social Services (DSS), stated that as poverty was a ‘multifaceted issue’, there was no single measure that could summarise every dimension of poverty and disadvantage.
2.4DSS confirmed that because of the challenges of measuring poverty, the Commonwealth Government did not subscribe to a single definition and instead relied upon a range of metrics and indicators.
2.5It explained the reasons behind this approach as follows:
The various approaches to poverty measurements, as well as the data used, tend to give different answers about the extent of poverty, and even who suffers from poverty in Australia. This information is valuable as it facilitates seeing a more holistic picture of the incidence and the extent of poverty from a range of perspectives that cannot be encapsulated in a single statistic. Acknowledging the complexity of poverty and disadvantage, the Government uses a range of metrics and indicators and does not consider any single indicator in isolation.
2.6The Australian Bureau of Statistics (ABS) confirmed that it did not have a definition or standard of poverty. However, it noted that some of its data collection activities could be useful in gaining an understanding of the extent and nature of poverty in Australia, including:
the Survey of Income and Housing;
the Household Expenditure Survey;
the Census of Population and Housing;
the Multi-Agency Data Integration Project (which combines information on health, education, government payments, income and taxation, employment and population demographics over time);
the Consumer Price Index;
the Living Cost Indexes; and
the Labour Force Survey.
2.7Other submitters acknowledged that there were various ways of measuring poverty, including different ways of calculating a poverty line and the need to factor in housing costs.Some, such as the Salvation Army, noted that if used in isolation, an income-based poverty line would have limitations given it would not capture the complex experience of someone in poverty or take into account income versus wealth. However, ultimately the majority concluded that these complexities were why an agreed definition (even if not perfect) was necessary, as it would at a minimum provide a nationally consistent measure (which could then be used in conjunction with other multi-dimensional indicators).
Estimates of the extent of poverty in Australia
2.8In the absence of an official definition, to quantify levels of poverty in Australia many stakeholders across the community refer to measures created by the Poverty and Inequality Partnership between the Australian Council of Social Service (ACOSS) and the University of New South Wales (UNSW) (the ACOSS & UNSW Partnership).
2.9The ACOSS & UNSW Partnership provided the committee with its most recent rates of poverty in Australia, ascertained from the latest data available from the ABS Survey of Income and Housing (2019–20).
2.10This analysis found that in 2019–20:
More than one in eight people (13.4 per cent) and one in six children (16.6per cent) lived below the poverty line after taking account of their housing costs.
In total, there were over three million people living in poverty, including 761 000 children.
The poverty line based on 50 per cent of median household income ranged from $489 per week for a single person to $1027 per week for a couple with two children.
People in households below the poverty line had incomes that averaged $304 per week below the poverty line (the ‘poverty gap’), after deducting housing costs. The average poverty gap is 42 per cent of the poverty line.
Cohorts more likely to experience poverty
2.11The committee was advised that particular cohorts across the community, through no fault of their own, were more likely to be living in poverty.
2.12The Life Course Centre emphasised that a focus on poverty rates across the entire population failed to highlight that poverty is not random and does not occur equally across all cohorts of the community. It observed that some groups consistently fared much worse than others, a result which underlined the systemic nature of poverty.
2.13At a broad level (and noting that these cohorts are not mutually exclusive and often intersect), the committee heard that these cohorts included:
women (particularly single mothers, older women and those experiencing family and domestic violence);
children and young people;
people living with disability;
people with caring responsibilities;
people from culturally and linguistically diverse backgrounds (particularly refugees and asylum seekers);
people living in rural and remote communities;
people on income support payments; and
First Nations people.
2.14Numerous submitters highlighted to the committee that due to the enduring legacy of colonisation, Aboriginal and Torres Strait Islander people are amongst the most profoundly disadvantaged and at risk of poverty in Australia.
2.15For example, the National Aboriginal Community Controlled Health Organisation (NACCHO) emphasised that poverty among Aboriginal and Torres Strait Islander peoples was a ‘direct and deliberate consequence’ of colonisation. It observed that a long history of dispossession, marginalisation and racism (including as a result of government policies) had resulted in ‘profound inequity’ for First Nations communities, commenting:
Disproportionally high rates of poverty among Aboriginal and Torres Strait Islander people take place against a background of structural impediments to full participation in the Australian economy and are evidenced across multiple drivers and measures of inequality. Poverty is reinforced and entrenched by ongoing experiences of structural and interpersonal racism, discrimination, dispossession of culture, land and language, and intergenerational trauma.
2.16The ACOSS & UNSW Partnership informed the committee that it measured not only the rate of poverty for various demographic groups (that is, the risk of poverty among people drawn from each group), but also the profile of poverty for particular demographic groups (that is, the share of each group within the population of people in poverty).
2.17Based on these measurements, it concluded that there are groups of people who are more at risk of experiencing poverty, as well as groups of people who are over-represented within the profile of poverty.
2.18Analysis released by the Partnership in March 2023 (based on 2019–20 ABS data) identified that the following groups faced the highest risk of poverty (20 per cent or more):
people in households whose reference person (usually the main income-earner) was of working age and unemployed (62 per cent) or not in the labour force (47 per cent);
people in households receiving income support including Newstart Allowance/JobSeeker Payment (60 per cent), Parenting Payment (72percent), Youth Allowance (34 per cent), Disability Support Pension (43per cent) or Carer Payment (39 per cent);
tenants in public housing (52 per cent) and private rental (20 per cent and 50per cent for those aged 65 years and over);
people in sole parent households (34 per cent, and 39 per cent among children in those households);
single people without children (25 per cent, and 26 per cent among those under 65 years); and
people with disability and a ‘core activity restriction’ (20 per cent).
2.19Based on the same 2019–20 data, the Partnership also found that groups with a ‘high share of all people in poverty’, due either to their large share of the overall population (for example, wage earning households and couples with children), and/or their elevated rates of poverty (for example, people relying mainly on social security and people with disability) included:
women and girls;
people in households whose main income is social security;
people of working age – that is 25-64 years;
people in households whose reference person is of working age and in paid employment;
people with disability;
people in households whose reference person is under 65 years old and not in the labour force – that is, not undertaking paid work or actively seeking paid work for reasons such as study, retirement, disability etc;
couple households with children; and
people in households whose reference person receives the Age Pension, Newstart Allowance/JobSeeker Payment, or Parenting Payment.
Evidence supporting a national definition or measure of poverty
2.20A significant number of submitters to the inquiry recommended the Commonwealth Government adopt an agreed definition of poverty in order to better measure poverty levels and track progress in reducing poverty over time.
2.21There were a number of different suggestions as to what this definition should be, and in putting forward their arguments many submitters reflected on the various approaches currently used to measure poverty and the advantages and disadvantages of each.
2.22For example, ACOSS advocated for a national definition of poverty, stating that it was imperative that the Commonwealth Government commit to undertake the work to develop the correct measure.
2.23The thinktank Per Capita submitted there was a need for an ‘agreed, authoritative and contemporary’ definition of poverty, particularly as policy choices and funding allocations to tackle disadvantage were often informed by reports and comparative analysis of which groups were most in need and where resources and efforts should be best applied.
2.24Anglicare Southern Queensland observed that as Australia has no official method for measuring poverty, there was no definitive way to determine the scale of the problem or track whether any substantial progress was made in addressing it. It also identified that the different methods of calculating the poverty line generated various results in terms of the exact number of Australians living in poverty. However, in reflecting on the various measures used in Australia, it made the point that regardless of the method of measurement used, ‘there is no doubt that millions of Australians are living in poverty.’
2.25The Antipoverty Centre argued that all existing poverty measures were flawed, particularly as the relative poverty measures used internationally did not account for the significantly higher housing costs in Australia. It noted that while it advocated for a new ‘modern measure’ of poverty, it considered the Henderson Poverty Line the ‘least bad’ measure of poverty currently available.
2.26It recommended that the Government develop a ‘new, robust poverty line’ that was ‘transparent, based on real living costs for people at the low end of the income scale and ensures a fair standard of living’.
Various approaches available
2.27The Melbourne Institute observed that defining income poverty was challenging. It noted that while there was no universally accepted definition of poverty in Australia, it was ‘generally conceived of as a situation of having insufficient income to cover the expenses associated with meeting an adequate standard of living’.
2.28It further explained that in high income countries, it was common to define poverty with reference to the country’s median household income (adjusted for the ‘needs’ of the household), usually setting the poverty line at 50 per cent or 60per cent of the median income. It noted that in Australia, the longest-running poverty measure was the Henderson Poverty Line.
2.29Additionally, the Melbourne Institute highlighted the importance of the ‘equivalence scale’ when attempting to define poverty, in order to adjust the poverty line for differences across households in need. It explained:
Differences in needs can arise from several sources, but most important is household size – that is, the greater the number of household members, the greater the income needs. Other factors that can affect need include the age, health, disability status and labour force status of household members, and the region of residence of the household.
2.30The Melbourne Institute recommended the adoption of an easily measured definition of poverty for Australia, adding that poverty rates should be calculated at a ‘sub-national level’ (e.g. using measures reflecting household information within communities) to allow benchmarking of areas of concern and better tracking of poverty elimination progress within and across communities.
2.31As noted above, ACOSS argued for the development of an agreed national definition. Dr Peter Davidson, Principal Adviser for ACOSS, elaborated on ACOSS’ position, advising that there were various methods available to define and measure poverty:
Broadly speaking, we'd define 'poverty' as insufficient income to meet minimum basic living costs; that is, socially perceived necessities. That's not an absolute measure; it will vary from country to country and within Australia from time to time, as living standards change. But if you can't afford what most people perceive to be essentials, like a decent and secure home, because your income is too low, you are in poverty. How exactly that is measured, by what benchmark, is a matter for discussion and debate.
2.32As a result, ACOSS recommended a public review to develop an appropriate measure:
We think there should be a process of public review, perhaps as part of the development of the wellbeing framework, to develop that. There are a number of benchmarks for poverty, including 50 per cent or 60 per cent of median household income, with or without housing costs, and the Henderson poverty line. There are other, more direct measures, of deprivation and hardship, which aren't set as income benchmarks. Finally, there are budget standards measures which attempt to work out a minimum acceptable budget, looking at each item that a low-income household needs, from housing to groceries and transport. There's research around that as well.
2.33ACOSS further noted that the development of an agreed national definition should be done in dialogue with academic experts, individuals with lived experience of poverty, antipoverty advocates and other relevant stakeholders.
2.34The ACOSS & UNSW Partnership advised that it had developed a significant body of research measuring the level and depth of poverty and inequality in Australia, using a relative poverty line, after-housing costs, and income and wealth inequality indicators.
2.35Specifically, the Partnership noted that it used a combination of methods, based on household income, to measure the rate of poverty. It provided the committee with a brief explanation of these methods, as set out below.
50 per cent of median income poverty rate
This definition is similar to that adopted by the Organisation for Economic Cooperation and Development (OECD), in which the poverty line for a single adult living alone is set at half the after-tax income of the median (middle) household in the overall income distribution, including any social security payments received.
This measure allows for direct comparison of poverty rates in other countries.
The Partnership uses a variant of this OECD definition, including a different measure of household size, to define a ‘poverty line’.
60 per cent of median income poverty rate
The poverty line for a single adult living alone is set at 60 per cent of the after-tax income of the median household in the overall income distribution, including any social security payments received.
This measure is used by the European Union.
Before- and after- housing poverty rate
The Partnership has refined the above measures of poverty by considering the different types of housing that households have access to. This is because those who own their home outright require less income to achieve a decent standard of living than those who are renting or paying off a mortgage.
In order to factor this in, the Partnership reduces the above poverty lines by the median cost of housing across the community and then reduces each household’s income by their actual housing costs. This creates that ‘after-housing poverty rate’.
It is the Partnership’s view that this rate allows for a more effective comparison of the living standards of groups with low housing costs (for example, retired homeowners) versus those with high housing costs (for example, unemployed renters).
Poverty gap and deprivation measure
The poverty gap measurement refers to the difference between the incomes of people in various household types in poverty.
The deprivation measure is a means of measuring poverty by looking at the essential items people miss out on.
The ‘imperfect’ nature of income-based definitions
2.36Submitters acknowledged that income-based approaches to defining or measuring poverty, such as the Henderson Poverty Line, had limitations.
2.37Analysis released in March 2022 from the Bankwest Curtin Economics Centre acknowledged there were ‘ongoing debates’ on the precise threshold that best differentiated people in poverty from those that remained out of poverty. It noted that one of the problems with the use of a single poverty line as a binary indicator of poverty was that it categorised families or individuals who were substantially similar in terms of their disposable incomes into separate groups.
2.38Professor Roger Wilkins, an academic economist with extensive research experience in the incidence and determinants of poverty and social exclusion, in particular with the annual Household, Income and Labour Dynamics in Australia (HILDA) survey, appeared before the committee in his private capacity. He acknowledged that income-based approaches to defining poverty could be problematic, given that they did not consider wealth as a factor and economic resources were not just a function of income.
2.39He provided some insights to the committee as to the development and relative advantages and disadvantages of the Henderson Poverty Line and the line based on the 50 per cent of median income. He acknowledged the somewhat arbitrary nature of such lines and further noted that ultimately there was no definitive line at which one could say someone went from being ‘unacceptably poor’ to having an acceptable living standard.’
2.40However, despite this he noted that given it was possible to endlessly seek to finesse a measure, in practical terms the search for a ‘perfect’ measure may prove unhelpful if the overarching goal was to adopt an official poverty line.
2.41The Brotherhood of St Laurence noted that while income-based poverty measures were essential, they could only provide a partial picture of the extent and nature of poverty and disadvantage. It recommended that the Government adopt a multidimensional approach, given that different measures of poverty highlight different aspects of disadvantage.
2.42The Salvation Army observed that in its experience, a strict definition of poverty was not necessary or helpful in assisting people who experience it. It noted:
Certainly for our services, poverty is not a binary concept where a person earning below a certain income is ‘poor’ and a person earning more is not. As a working definition, we consider that a person is experiencing poverty if they do not have basic needs met because of financial constraints. How this state is experienced, and what constitutes a basic need, varies between individuals and communities, and over the life of an individual.
2.43It defined ‘basic needs’ as those required to live life with dignity and highlighted three factors — shelter, health and social and economic participation — as being essential to achieve this.
2.44The Salvation Army cautioned against adopting a definition of poverty that focussed solely on income levels as a determinant, noting that the variation of experiences in the three aforementioned factors could not be adequately accounted for in setting a single, or even adjusted, level of income.
2.45It observed that individual differences (such as the medical costs for an individual with a chronic health condition compared to someone in good health) and community differences (such as the comparative costs of housing between different locations) made setting a single income level as a definition fraught.
2.46Additionally, the Salvation Army asserted that exclusively focussing on an individual’s income, rather than considering the impact of societal systems and structures, would miss a ‘critical part’ of the experience of poverty. For example, while an individual needs sufficient income in order to secure housing, there must also be an appropriate supply of housing available for them to access.
The importance of a national definition of poverty
2.47In regard to discussions around the limitations of income-based definitions, Professor Wilkins posited that it was useful to be mindful of parameters when seeking to define poverty in order to keep focus on the crux of the problem — that is, a lack of money. He explained:
In terms of what poverty is, in the Australian context we think about it as not being able to live what most Australians would call a normal life —participating in the normal activities of an Australian life—and that the reason for the inability to do that is a lack of money. It is not about all forms of disadvantage and injustice in a society that we would like to address; it is very much focused on not having the economic resources needed to participate in Australian life.
2.48He continued on to highlight the dangers of ‘overcomplicating’ the matter:
There is a tendency to overcomplicate this and talk about poverty being complex and multifaceted, but it is actually not that complicated. Sure, the underlying causes of poverty can be multifaceted and complex, but the basic problem is simple: it is just not having enough money.
2.49Professor Wilkins advocated for an official poverty measure, noting that an agreed measure, even if imperfect, would function as a metric to which government could be held to account.
2.50He expanded upon this point:
There is lots of handwringing about how you should measure poverty. We end up in a situation where the perfect ends up being the enemy of the good. Governments target a lot of things that are imperfectly measured; poverty should be no different. I would gravitate towards a measure that is being used widely internationally even though it is highly imperfect, and that is a 50 per cent of median income poverty line. It is a fairly austere line, but at least if it is adopted by governments it is something to which they can be held to account on.
2.51In making this argument, Professor Wilkins acknowledged that the imperfect nature of such a measure would need to be counterbalanced by a recognition of the importance of other policy settings when measuring disadvantage:
Such an austere standard is more defensible if we acknowledge that is not the end of the story when it comes to addressing disadvantage. We need to get housing policy right, we need to get health policy right, we need to get education policy right, we need to get the justice system right, and so on. There is a whole set of other things that we need policymakers to get right to ensure that we have a just and equitable society for all. That is why I would probably advocate for that rather austere standard.
Incorporating a definition into a national well-being framework
2.52In the 2022–23 Budget handed down in October 2022, the Commonwealth Government sought to initiate the beginning of a ‘conversation about how to measure what matters to Australians’. It flagged the development of an overarching reporting framework, suited to the Australian context, to better measure progress and well-being in society.
2.53As Statement 4 in Budget Paper No. 1 set out:
Measuring what matters can provide an important foundation for Australia’s efforts to lift living standards, boost intergenerational mobility and create more opportunities for more people.
Traditional macroeconomic indicators provide important insights, but not a complete or holistic view of the community’s well-being. A broader range of social and environmental factors need to be considered to broaden the conversation about quality of life.
A number of countries have developed national or subnational frameworks to measure progress and well-being. While the specific indicators vary across frameworks, all of those reviewed here cover similar policy areas, like income and employment, personal and community safety, health, education, and the environment.
While Australia does not currently have an integrated approach to measuring what matters, it does publish a wide range of indicators through specialised reporting (such as Closing the Gap and the State of the Environment reports). An overarching framework could complement these processes by providing a fuller perspective and improving visibility of the progress made on agreed priorities.
2.54Budget Paper No. 1 indicated that Treasury would work and consult with a range of stakeholders to inform the development of a stand-alone ‘Measuring What Matters’ statement in 2023.
2.55A number of submitters welcomed the Government’s steps towards grounding future budgets in a ‘well-being framework’ and urged the Government to incorporate a national definition of poverty into this work.
2.56For example, ACOSS was of the view that a well-being framework should be considered an integral tool for reducing poverty across communities and improving equity in budget policy making. As a result, it recommended that the framework include a headline poverty measure and poverty reduction goal, detailing:
A first priority for ACOSS is that the framework includes a poverty reduction goal, targets and relevant indicator(s). Unfortunately, Australia has no national definition of poverty, nor a plan to reduce it. As freedom from poverty is a key determinant of wellbeing, this should be a headline indicator for Australia’s framework – commencing with developing an agreed national definition (in dialogue with academic experts, people directly affected by poverty, advocates, and other relevant parties). Any definition and plan must reflect the Sustainable Development Goal (GDP) 1 commitment to halve the number of people living in poverty by 2030, according to national definitions.
Committee view
2.57The committee notes that discussion around the need for an agreed national definition of poverty is not new, and that the matter has been extensively canvassed in a variety of forums, including in reports by previous iterations of the committee.
2.58The committee acknowledges the calls from submitters for a national, contemporary and robust definition of poverty. It recognises that a significant number of submitters argued that without an agreed, contemporary definition (such as an income-based poverty line) there is no definitive way to determine the scale of poverty, to decide where resources should be applied, or to track whether any substantial progress is made towards addressing it.
2.59Additionally, the committee is mindful that no measure or definition of poverty is perfect, a point emphasised by submitters to the inquiry. It is also aware that the experience of someone in poverty is far more nuanced than a simple dollar figure can convey, and that a definition of poverty that focuses solely on an ‘arbitrary’ income level will not encapsulate the full picture of poverty.
2.60The committee is encouraged by the Commonwealth Government’s proposal for a well-being framework that considers broader social and environmental factors alongside traditional macroeconomic indicators. The committee recognises that such a framework has the potential to drive better public policy decisions, as well as measure progress towards policy goals.
2.61The committee notes the view put forward by ACOSS that the well-being framework should be used as a tool for reducing poverty across communities and improving equity in budget policy making; and that it should include a poverty reduction goal and that ‘freedom from poverty’ is a key determinant of wellbeing that should be included as a ‘headline indicator’ in the framework.
2.62The committee also notes the Interim Economic Inclusion Advisory Committee’s recommendation 36 that:
The Government establish a multidimensional poverty index to supplement legislated measures, to provide a more comprehensive picture of the nature and extent of poverty, and to enable monitoring of trends and targeting of effort by population and dimensions such as health, education and living standards.