How the Organisation for Economic Co-operation and Development (OECD) sees Australia in 2019

Organisation for Economic Co-operation and Development, OECD Economics Department Working Papers No. 1539, 14 February 2019, excerpts: 

This paper analyses relative income poverty in Australia of individuals aged 15 or more, based on the HILDA Survey data. 

Australia has above-average poverty rates among OECD countries, but poverty has decreased in the last 15 years. 

Certain groups are more at risk than others. 

People living alone and lone parents are at higher risk of poverty. 

Old people in Australia have a more than 30% chance of living in poverty, which is one of the highest in the OECD. Among those of working age, being employed significantly reduces the risk, while those out of the labour force and the unemployed are at much higher risk of poverty. 

Nevertheless, there is poverty also among people that work, typically casual workers and part-time workers. People with low education are also at risk. 

Those living alone and one parent households face quite a high risk of poverty, even if they are employed. Indigenous Australians are almost twice as likely to be poor than the rest of Australians and they appear significantly poorer than the rest even after controlling for education, age, industry, skill and geographical remoteness, suggesting a range of socio-economic issues, including poor health and discrimination.

16. Women are at a higher risk of living in poverty compared to men (Figure 7), although the risk of poverty has been reduced for both groups over the last 15 years and more rapidly for women. In FY 2015/16, 20% of women lived below the 60% poverty line, and 13% below the 50% line. For men, the shares were 17% and 11%, respectively. 

17. Consider now the risk of poverty by age, shown in Figure 8. It is striking that the age group with by far the highest risk of poverty are the elderly. Prior to 2010 around 40% of individuals of age 65 and above were living in a household with disposable income below 50% of the median. This has since been reduced to 30%, but it nevertheless remains a high figure. For the 60% poverty line, more than half of the elderly lived in poverty until around 2010, with a declining trend to 44% in 2016. The poverty among the elderly in Australia is also very high in international comparison (Figure 9), according to the OECD Income distribution and poverty database. 

18. Very high poverty and social exclusion of the elderly are also reported for Australia in ACOSS (2014 and 2016) and Azpitarte and Bowman (2015). It is noteworthy that ACOSS (2016 and 2014) report similar overall poverty rates as in our data, however, variation across age according to their analysis is somewhat different, driven by the fact that they take into account housing costs. While for older people they still report the highest rate of poverty (except compared to the poverty rate of children below the age 15, which are excluded from our analysis), the difference with the rest of the population is less pronounced. As many older people own their houses and have repaid their mortgages, this provides significant protection against poverty (ACOSS, 2016). Moreover, many pensioners decide to take a significant amount of their pensions (superannuation) as a lump sum at the onset of their retirement, which thereafter does not count as current income and cannot be factored into HILDA measures of income poverty. 

23. We now turn to relative poverty across labour force status. As can be seen from Figure 12, full-time employed individuals have the lowest poverty rates. People employed part-time are about three times as likely to live in poverty as compared to the full-time employed. The unemployed have even higher rates of poverty, about 15% in FY 2015-16, although the rate is quite volatile over time. The highest poverty however is experienced by those not in the labour force, especially the elderly, as we already discussed above. The group “not in labour force of working age” includes students, parents not working, those who otherwise cannot or are unwilling to work. For all groups we can observe a trend reduction in poverty rates over the 15-year period, except for the part-time employed group. 

24. While concern often focuses on groups that exhibit highest incidence of poverty such as the unemployed or those out of the labour force, we should not overlook those who work, even full-time, but still end up being poor. Moreover, it is important to keep in mind that employed individuals represent the biggest group, therefore there is actually a higher number of poor among the full-time employed, compared to the poor employed part-time or the unemployed. 

29. People born in Australia have the lowest probability of living in poverty (Figure 18), followed by immigrants with English speaking background and then the rest. The gap has been closing, in particular over the last couple of years. Indigenous Australians, on the other hand, are almost twice as likely to be poor than the rest of Australians (Figure 19), and recently the gap appears to be widening. Due to limited sample size the poverty rate of indigenous people is quite erratic, therefore the data need to be interpreted with caution.

Full working paper can be accessed at https://www.oecd-ilibrary.org/docserver/322390bf-en.pdf