Tag Archives: South Australia

Inequality between Australian States: Household Income

This is the first of a series of posts on inequality, with a particular focus on South Australia. The series begins with income inequality between states, but will then consider inequalities within South Australia. Unless otherwise stated, the data is drawn from the Australian Bureau of Statistics’ Household Income and Wealth series, but the posts often use different categories and ask different questions to those presented in the ABS data.

The primary analytic used here is often the share of total income. It is an aggregate measure used because the more usual “average” figures (mean or median) tend to individualise social and structural issues. Further, the average figures do not account for the changes in numbers of people or households within a category. This is a parallel argument to one I made in relation to the gender wage gap, but in the case of the inequality highlighted in this post, the share of total income takes account of for both differences in household income and population changes. As will be seen, this makes a difference in the story told by the data.

The share of total income as a measure of inequality between states is also important in its own right because it highlights the relative resources available to different communities. A millionaire recluse living on their own island may have a high average income, but that is the only resource available to them. By contrast, a larger community may have much lower average incomes but far more resources which can be taxed and mobilised for the community.

Inequality between States: 2020 data

In 2020 South Australian households accounted for 6.3% of all household income in Australia, while constituting 6.9% of the population. This may appear to be a small difference, but is actually quite significant. This 0.6 percentage point difference is approximately 10% of the income share. It equates to around $130m per week or $6.7bn per year which would be in the South Australian economy if the state’s share of income matched its population share.

Putting the data in this form highlights the wicked dilemma of this inequality between states. South Australia (and other lower-income states) do not have the same income resources to drive the development which could see it catch up to the other higher-income states. If there are no other national financial redistributions, the inequality is perpetuated. This potential cycle is one reason why federal government support and the distribution of the GST pool in favour of the poorer states is crucially important.

As the graph below shows that SA is not alone in having a lower share of income than population. Queensland has the largest gap between income and population shares at 0.8 percentage points, but this is on a relatively large base (equating to just 4% of the income share). Tasmania’s income share is 0.3% below its population share, but this is particularly significant when the population share is only 2.3% of the whole in first place.

By contrast, WA has the highest gap with income share greater than their population share. Their 10.7% share of national household income is 0.5 percentage points above their population share. This equates to about 5% of their population share. Again, the percentage differences may appear small, but constitute significant amounts of money and represent significant inequalities between Australian states.

Australian State and Territory Share of National Household Income plotted alongside share of population to show inequality between states.

It is noteworthy that these figures do not simply reflect differences in household income. Average (gross mean) household income in South Australia was $1,989 per week, which was 85.4% of the national figure ($2,329). Tasmania’s average household income was 75% of the national average. But both SA and Tasmania also have smaller households on average, which pulls their income averages lower.

By contrast, the average gross household income in the Northern Territory was $2,711 – the second highest in the country and 16.4% above the national average. This would seem surprising, but the territory data excludes remote areas. The result is also a product of larger household sizes (average of 2.9 people per household in the Territory, as opposed to 2.6 nationally). The NT’s share of national income roughly reflects their population share.

Of course some of these demographic differences would be captured had I used the ABS equivalised income data sets (which are adjusted to take account of household size). However, using the data on shares of national income to measure inequality between states also provides important insights on changes over time.

Changes over Time: South Australia

While South Australia’s share of national household income is currently below its share of population, its income share has also declined over the last 20 years. As shown in the graph below, the state’s share of national household income reached a high in 2003-04 at 7.4%, but dropped below 7% in 2007-08 and has not recovered.

South Australian share of total national household income 2001 to 2020, showing long term decline.

In all years the SA share of national household income was below its population share, while average household incomes were also consistently below the national average. However, (again) it was not simply about lower average household incomes. As the graph below shows, the South Australian average household income as a percent of the national average fluctuated over the period. It ranged from a high of 91.6% of the national average in 2003-04 to a low of 81.3% in 2013-14, before returning by 2019-20 to close to its 2000-01 value around 85%. In that sense, while changes in household income provide short term fluctuations, what is really evident in the graph below (which plots the three variable as indexes with the same starting point) is that the overall decline in South Australia’s share of income has been driven much more by the decline in population share.

Index of Changes in South Australia's Income and Population showing volatility of average income in SA as % of national, but steady and same decline of population and income share.

Again, the fall of 0.7 percentage points in South Australia’s share of national household income over the period may seem minor, but it is actually a drop of around 10% of South Australia’s share of national income. It equates to well over $8bn annually in current dollars that would be in SA if income share had been maintained its share of national household income over the period.

While the COVID pandemic has changed some migration and population patterns, the longer-term trends remain to be seen and the wicked problem of maintaining income and population shares is likely to remain for a while yet.

Caveats

There are of course a number of caveats to the above data and analysis. In previous posts I have been critical of these household income figures: (here) for not taking account of capital gains and non-cash housing income, and (here) noting Piketty’s critique of the categorisation and data sources. The ABS does publish some data on non-cash income (imputed rents, and “social transfers in-kind” [i.e. provision of free services like health and education which do not appear in household budget]). This provides a fuller account of household income, but it is still without capital gains and is not published at the state level.

Without that state data on total income, the analysis is incomplete. It is likely that imputing rent for owner-occupied dwellings would reflect higher rental prices in eastern states and increase the differences between South Australia and some of those states. By contrast, the social transfers in-kind are likely to disproportionately benefit the lower-income states and reduce inequality. However, without the data I can’t be sure or estimate the extent of impact.

Conclusions and Implications

Even with these caveats though, the income share data does show significant geographic inequality between states. Alarmingly, it also shows the situation is getting worse for South Australia and points to a vicious cycle of falling relative incomes leading to shedding population which itself leads to lower incomes shares and a decreasing ability to generate the things that could build/maintain population and income shares.

It is also coincidental but noteworthy that the period studied here is the period since the GST was introduced. That is important because the formula for the distribution of the GST is explicitly designed with an equalisation objective to “provide states with the opportunity to provide their residents with comparable services” (Commonwealth Grants Commission). The formula is based on a complex range of metrics (not income shares) and the distribution has been controversial. Western Australia in particular in recent times has complained of not getting their fair share. However, the data in this post suggests not only an ongoing need to support a redistributive approach to states with weaker income and revenue, but indeed that more needs to be done (within and/or beyond the GST).

The alternative is greater inequality between states driven by some states capturing a greater and greater share of national income and population, leaving the weaker states in their wake.

Who is providing low-cost rental housing?

An analysis of the recently published 2021 ABS Census data clearly shows that low-cost rental housing is provided predominantly through public and social housing, and provides another reason to argue for the importance of public housing for rental affordability. While much of the detailed microdata is not yet available, the following looks at the South Australian rental data as published in the Community Profiles and QuickStats version of the census publications.

The SA Rental Market

The census data shows that in 2021, 27.6% of South Australian households were renting (percentage unchanged since the last census in 2016), with a median rent in 2021 of $300 per week. The ABS (Table G40) divides these numbers by landlord-type as follows:

Numbers of SA Renters by Landlord Type: RE agent = 51% Public Housing = 15% Person not in same h/hold = 24% Other landlord type = 4%

The category of “landlord as a person not in the same household” comprises those renting from family members or other persons – which means that private house or unit renters constitute 75% of all renters, although around a two-thirds of them are not necessarily renting at market rates (hence we will see later a skew to low rent properties). The “other landlord type” “comprises renters in residential parks (including caravan parks and manufactured home estates), renting from employers (including government employees under the Defence Housing Australia), but represents very different tenancies and will not be considered in this post.

The key categories for this analysis are the rental properties managed by real estate agents, which can be used as a proxy for the market rate for private investor landlords, and public housing – although some comparison will also be done for community housing.

Provision of Low-Cost Rent Housing

While South Australia retains a proportionately larger public housing state by comparison with other states, it remains the case that private landlords own the majority of rental properties in South Australia. Yet, when we look at the rent profile of these properties, we see the importance of public housing in providing low-cost rental housing.

The ABS data (Table G40) records the number of households by landlord type in a range of rental price brackets. While these rental brackets are not as good as individual household data, they are enough to show key differences. The graph below shows my calculation of the profile of rental housing provision based on the proportion of houses in each rental price bracket provided by private market investors (acting through real estate agents) and by public housing. Clearly the vast bulk of very low-cost rental housing is provided by the public housing estate, and indeed 70% of the public housing estate is being offered at rentals below $200 per week.

By contrast, the private rental market (via real estate agents) accounts for the vast bulk of properties in the higher rental brackets. And even though these private landlord rentals make up a higher proportion of rental properties at a fairly modest figure of just over $200 a week (the cross-over point of the graph), this represents a much smaller proportion (just 8%) of the private landlord estate.

Line Graph: Profile of Rental Property Provision by Price and Landlord Type showing public housing dominance in the provision of low-cost rental housing

Another way to look at this is by comparison to the median rental of $300 per week – which sits in the $275 – $$349 per week bracket. As shorthand, we can consider the rental price brackets below that as being “more affordable” and the brackets above it as “less affordable” – although this is a gross generalisation which will depend on income. Quite clearly some of the “more affordable” brackets are still not affordable for those on low incomes.

But based on this description, the data shows that while private landlords using real estate agents account for 51% of all rentals in SA, they only provide 27% of the rentals in the more affordable brackets below the median rent. By contrast, public housing provides 15% of all SA rental housing, but 33% of the rentals in the bracket below median rent.

It is also worth noting that the rentals from “persons not in same household” account for around 1 in 5 of rentals below $200 per week (and 1 in 3 at $200-$225 per week), so clearly family subsidy is a significant factor in the low-cost rental housing market. However, those without family owning properties will be largely reliant on public housing or facing the more expensive private rental market.

This importance of public housing in providing the lowest rental properties is probably not surprising given the ideological shift to “public housing as welfare” and the Productivity Commission data showing the extent of public housing “subsidy” on market prices (see my previous post for discussion and critique). However, the profile of private landlord properties evident in the data here should at least make one question whether policies aimed at incentivising more private landlords are likely to help with rental affordability for those on lowest incomes.

Community Housing

Another useful comparison that can be made from this data is between public housing and rentals from community housing providers. This is particularly important given significant transfers of public housing stock to community housing providers in South Australia (including the transfer of over 1000 public housing properties in 2017-18). This transfer was driven by a mix of policy concerns from broad neoliberalism to simply lobbying around ideas of greater flexibility or community connection in the not-for-profit housing sector. And more cynically, the state government may have been shifting maintenance and other costs to the community sector or simply gaming Commonwealth Rent Assistance (which is payable but tenants in community housing, but not public housing).

The graph below shows the profile of public and community housing, but not as above (as a percentage of provision of housing in each brackets) because the data is dominated by the public housing estate which is 3 times larger than community housing. Rather the graph shows the proportion of each estate in each bracket.

Both public and community housing are loaded towards low-cost rentals and both have very few high-rental properties, but the community housing sector has a greater proportion of properties with higher rent than public housing. While 70% of the public housing estate is rented at less than $200 per week, the figure is 54% for community housing, and community housing has proportionately more of its rentals at above $200 per week. In both systems are generally based on a percentage of income, so the difference is partly a product of different rent caps in the community sector and a clientele with slightly higher incomes.

Comparison of Profile of Public and Community Housing showing provision of low-cost rental housing

Conclusion

This is just a quick snapshot based on one part of the recently released census data, and there are of course regional differences in public and community housing estates (see separate Briefing Note). However, the snapshot data does suggest the important role of public housing in providing low(er)-cost rental housing in South Australia (and it would be the same elsewhere). The figures do not suggest that more public housing would provide downward pressure on rent across the market. That argument could be carried by simple supply and demand economics: more supply would lower (or put downward pressure on) prices, but the data does suggest that private landlord investment (outside of family and less-formal rentals) is largely not providing low-price rental accommodation – or at the very least, under-performing in its provision. Added to my previous arguments, both here and at SACOSS, it is another reason to invest in public housing!