Modern politics goads us to be greedy, and forget the needy

Mark, a voter in the Melbourne electorate of Higgins, told the ABC’s Virginia Trioli this would be the last federal election he’d be alive to vote in. So he’d decided his vote should not be for him, but for the younger generation coming after him.

He wanted to cast his final vote for the party that best represented young people’s aspirations for their future. So he went to the local high school and got permission to talk to the senior students.

And which side did they pick? “It’s the Greens. And that’s the first and last time I’ll be voting for them,” he said.

It’s a sad commentary on modern politics that no mainstream politician would dare suggest we vote for them because they’d best advance the public interest. They know that we know their greatest interest is in advancing their own career so, to attract our votes, they offer bribes.

They’ve trained us to see elections as transactional, not aspirational. You want my vote? What are you offering? And is that better or worse than the other side’s offering?

That’s how, with climate change and so many other, lesser problems needing attention, we’re devoting most of this campaign to grappling with the great challenge of our age ... the cost of living. Really?

Now, I don’t blame people on low incomes with big commitments who really do struggle to get by for wanting to see what the two sides are offering that might make their lives easier.

But you don’t have to be struggling to tell yourself your life’s a struggle, and you wouldn’t mind voting for a pollie offering you a few more bangles and baubles.

I can’t be the only voter in the land whose comfortable lifestyle is not in any way threatened by the rising cost of living.

A reminder from Struggle Street would be timely. My co-religionists, the Salvos, release today a report on how their clients are faring, preparatory to knocking on your door the weekend after the election. (If you’re wondering, at present I hold the rank of backslider, but there’s still a lot of Salvo in me.)

The Salvos took a random sample of 10,000 of the people who had attended their emergency relief centres in the past 12 months. More than 1400 people responded to the request to complete an online questionnaire.

The survey showed that, after paying for housing costs, 93 per cent of respondents were living below the poverty line, with almost two-thirds needing to ask for financial help from family and friends.

The high proportion of these people’s meagre incomes devoted to rent is their biggest problem, leaving too little for food and all the rest.

Although some respondents would be working poor, most would be on government support payments, including the parenting payment and disability support payment. Among these people, 60 per cent say they can’t afford medical or dental treatment when they need it, and well over half say they’re going without some meals.

Dr Cassandra Goldie, head of the Australian Council of Social Service, reminds us that poverty isn’t an unfortunate but unavoidable fact of life, it’s a policy choice. We have a system of support payments that’s supposed to keep people out of poverty, but choose to set the payment level below the poverty line.

A recent national poll of 1000 adults commissioned by ACOSS and conducted by Ipsos has found that 76 per cent of respondents say they couldn’t live on $46 a day, the present rate of Jobseeker. Two-thirds agree the rate should be above the poverty line, which is $70 a day.

When the first lockdown in 2020 prompted the Morrison government to almost double the rate of Jobseeker, the payment rose above the poverty line. People couldn’t believe how much easier their lives had become, and requests for help from outfits like the Salvos fell away – although many overseas students and other holders of temporary visas needed feeding.

But Scott Morrison’s Christian charity lasted only six months. In the end, the biggest permanent increase he could afford was $6 a day. Need for help from the Salvos has returned. In this campaign, however, Morrison has been able to promise various new benefits to self-funded retirees who, by definition, are too well-off to qualify for the age pension.

When Anthony Albanese abandoned Labor’s promise from last election to review the level of unemployment benefits, he pointed to the big budget deficit he’d inherit. I can see his problem. If he were to spend more helping people living below the poverty line, how could he afford the $9000-a-year tax cut he (like Morrison) has promised me and my ilk in 2024? He’s saving up.

Last word to my superior officer, the Salvos’ Major Bruce Harmer: “We’re calling on the next elected federal government to focus on the most vulnerable in society. Being able to meet basic living expenses should be the norm for all in an advanced economy like Australia, and not something we are still discussing in 2022.” Amen to that.

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Election bottom line: taxes will be going up, not down

Whichever side wins this election, it will be taking on a serious budget problem. Both sides are promising increased government spending on various worthy causes, while also promising that taxes will be cut rather than increased. This implies an ever-growing budget deficit. Do you think either side could get away with that? Only in their dreams.

Modern politicians are quite dishonest in what they tell us during election campaigns. They speak in loving detail about the expensive goodies they’re promising, but avoid mentioning any bad things they might have to do. They never present us with the bill.

And then we wonder why so many promises are broken.

Even before it thinks about the future, the new government will have to deal with unfinished business. The budget Treasurer Josh Frydenberg produced at the start of this campaign projected significant deficits for at least the next 10 years.

This despite the worst of the pandemic being over, and almost all the stimulus programs intended to keep the economy going during the lockdowns having been wound up. And despite the rate of unemployment being at its lowest in 50 years.

Economists know this profligacy will have to be corrected soon. Treasury secretary Dr Steven Kennedy has hinted as much. But that will require unpopular cuts in government spending or increases in taxes, or both.

Scott Morrison hasn’t been interested in doing any of that prior to the election. And economists have accepted that such nasty medicine is always administered after an election, not before.

The pollies won’t warn you of this, but I can. The longer the new government hesitates, the more the Reserve Bank will be obliged to compensate by raising interest rates higher than it otherwise would need to.

But that’s just the first of the budget problems the new government will inherit. The next part is that though – as the failure of its first 2014 budget demonstrated – the Coalition lacks the courage to make deep cuts in major spending programs, it has cut areas of spending that lack political support and kept a lid on spending in areas it hoped wouldn’t be noticed.

One of these tricks is to allow waiting lists and waiting times to blow out. Whenever you hear the word backlog – or spend ages on the phone waiting for “your call” to be so “important to us” that it’s actually answered – you know somebody somewhere is trying to save money by cutting the quality of the service you’re getting.

But penny-pinching is a game you can play for only so long before the worm turns. And after nine years, the pipsqueaks have started squeaking.

Did you catch the story just before budget night of the Minister for Veterans’ Affairs, Andrew Gee, who had to threaten to resign before the government relented and gave him extra funding to reduce the backlog in processing claims from veterans? (This from the guys always so sanctimonious on Anzac Day.)

High on the list of cost cuts is the public service. Who cares about all those shiny bums? Well, when you have trouble rolling out vaccinations, or getting hold of enough RATs, maybe you wonder whether it was smart to show so much knowledge and expertise to the door.

Overseas aid is another favourite for cost cutting, and we haven’t been as generous as we could be with our Pacific neighbours. Do you think, say, the Solomon Islanders might have noticed?

The diplomatic corps is another needless extravagance we’ve cut back on. More economic to wait until our relations with big neighbours deteriorate to the point where we need to spend infinitely more on defence preparedness.

Then there’s the notion that $46 a day is plenty for the unemployed to live on. How much longer do you think governments will be able to get away with that outright meanness? Especially when both sides are planning to give battlers like me a $9000-a-year tax cut in 2024.

It’s already clear the jig is up in one of the biggest areas where successive governments have tried to keep a lid on costs: aged care.

A fair part of those endless projected budget deficits is the $17 billion additional spending on aged care in last year’s budget, following the damning report of the royal commission. But there’ll need to be much further spending on care workers’ wages and training before standards are acceptable.

And that’s before you get to the big increases in spending on the National Disability Insurance Scheme and on defence.

Everything points to strong growth in government spending in coming years. And with budget deficits needing to be smaller rather than larger, this points to taxes that are higher.

Which taxes? Obvious candidates are reduced superannuation tax concessions for high earners like me, plus higher user charges for aged care. But the big one will be more bracket creep. Higher inflation equals higher income tax.

Don’t believe any politician who claims to stand for lower taxes. They can’t deliver.

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Time to dig deep for those who haven't had a good crisis

Do the initials EOFY mean anything to you? It’s a relatively new abbreviation, but it’s become so widely used by marketers anxious to squeeze in one last bargain sale before their books close that you probably don’t need me to tell you it stands for end of the financial year.

It’s also become a standby for our tax-deductible charities which, at this time of year, are busy mailing their supporters to subtly remind them that a generous donation or two in the next few weeks would do much to fatten the refund cheque that’s the reward awaiting us when we’ve submitted our tax return.

As an accountant who’s highly conscious of what’s tax deductible and what’s not – and who, in earlier times, did his share of knocking on doors, selling buttons on button day and rattling a collection box at the entrance to the show, but drew the line at helping his father sell the War Cry newspaper in pubs – EOFY looms large on my to-do list in the next few weeks.

It’s years since I’ve helped with the Salvos’ Red Shield appeal but, in any case, no house-to-house collection day was possible this year, for obvious reasons. Which is a pity since it means the Salvos will have a lot less ability to help those it always finds needing assistance, let alone the surge in families caught short by a recession likely to be still blighting many people’s lives long after Scott Morrison and Josh Frydenberg have triumphantly declared recovery and withdrawn their extra financial support.

Thinking about it, tax deductibility is a way that we mere mortals can oblige our political masters to divert more taxpayer support to those causes to which we attach more importance than the pollies seem to. And, if that’s your motivation, the knowledge that much of what you give will be coming back to you should prompt you to give a lot more than you first thought of.

Of course, the Salvos are far from the only charity caught short by their reliance on volunteer funding drives. A report published last week by Social Ventures Australia and the Centre for Social Impact at the University of NSW is a reminder that, apart from social distancing’s disruption of volunteering and fundraising events, donations always suffer when economic times are tough.

There are more than 57,000 charities registered with the Australian Charities and Not-for-profits Commission. Before the recession they employed about 1.3 million people – one worker in 10 – and had 3.7 million volunteers.

Charities provide a huge range of services to the community: education, health care, sport and recreation, legal services, arts and culture, animal protection, environmental protection and much else.

Governments rely on charities to deliver services on their behalf: aged care, disability services, employment services (replacing the old Commonwealth Employment Service) and childcare and early learning.

Governments also rely on charities to fill in the gaps in their systems. When the dole was only $40 a day – to which Morrison says he’ll soon revert – they could be sure no one would starve because the Salvos, Vinnies and Mission Australia would be there to give them a feed or a food parcel.

All those homeless people on the street? The Salvos, Vinnies and Mission Australia will do what they can. Maybe those people enjoy sleeping in parks and under railway bridges – especially in summer.

People who get themselves deep in debt with multiple credit cards and pay-day lenders? Not to worry. I hear the Salvos have an excellent financial counselling service.

Most charities have few reserves to fall back on when donations fall short. The report by Social Ventures Australia took a sample of 16,000 charities with 1.2 million employees and found that, should their revenue fall by 20 per cent, 88 per cent of them would immediately be making an operating loss, with 17 per cent at high risk of closing their doors within six months. More than 200,000 jobs could be lost as a result of cost-cutting and closures.

To be fair, the Morrison government has modified its JobKeeper wage subsidy scheme so as to include charities and their employees, though the scheme is set to expire in September.

Mitchell Evans, leader of the Salvos’ Sydney Streetlevel mission, says they are expecting “an avalanche of need in the months to come, as the government’s JobKeeper and additional funds under JobSeeker [unemployment benefits] conclude”.

His mission in Surry Hills has already seen a 60 per cent increase in demand for its meal services, and now provides 80 takeaway lunches every day.

At Major Brendan Nottle’s Project 614 in Bourke Street, Melbourne (where my cousin Barry is working), demand for emergency relief has now tripled to 90 people a day. “We’ve particularly seen more men coming to us for help, often with a mate, as they’re embarrassed and don’t really know how to ask for help,” Nottle says.

As Morrison cuts back to be sure of affording the huge tax cuts he’s promised high income-earners like me in 2024, kicking the tin’s the least I can do.

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Politicians too poor at their jobs to fix poverty

You could be forgiven for not knowing this is anti-poverty week. The poor, as we know, are always with us – which is great because it means we can focus on our own problems and worry about the poor’s problems later.

We can fight to protect our tax breaks, then get around to wondering about how easy we’d find it to be living on $280 a week from the Pollyanna-named Newstart allowance.

But it’s not just our natural tendency to let our own problems loom larger than other people’s. It’s also that, as property prices make our cities ever more stratified, we so rarely meet people from the poorer parts of town.

We find it hard to imagine how hard they find it to make ends meet, and to lift themselves out of the hole they’ve fallen into. Why can’t they work as hard as I do? (Short answer: because they can’t find anyone willing to give them a job.)

Why can’t they budget as carefully as I would if I were in their position? (Short answer: you have no idea of how carefully they have to watch their pennies.)

The question we should be asking, but rarely do, is: why hasn’t their luck been as good as mine?

Why didn’t they choose their parents more wisely? Why didn’t they go to a better school? Why can’t they afford health and car insurance? Why don’t they have a few thou in the bank in case of emergency? Why don’t they have well-placed relatives and friends to help them find a job or talk their way out of a problem with the authorities?

One of the many things the Salvos (my co-religionists) do to help the disadvantaged is run a financial counselling service called Moneycare. I’ve been reading some of their recent reports, most of them prepared by the Salvos’ research analyst, Lerisca Lensun.

It probably won’t surprise you that the number of people seeking help has increased by more than 40 per cent over the past five years. Most are there because of an unexpected change in their financial circumstances – they’ve lost their job or lost income, they or a family member have acquired a serious illness, or they’re victims of domestic violence.

The main issues they present with are managing their debt, or managing their budget. More than a third of people in the sample had financial difficulties arising from health problems.

More than 60 per cent of those needing financial counselling are women. The median income was $535 a week, less than 40 per cent of an average Australian’s income and well below the poverty line.

A quarter are on Newstart and another fifth on the disability support pension.

Almost half rent privately and, of these, 45 per cent suffer housing stress (paying more than 30 per cent of their disposable income in rent), plus a further 26 per cent in severe housing stress.

The proportion of those over 55 who are in private rental has risen over a decade from 27 per cent to 42 per cent. Of these, almost 80 per cent experience housing stress.

Of those with debt, half have credit card debt, 30 per cent have personal loans and a quarter have electricity debt. Many have more than one type, of course.

Compared with average Australian households, clients spent at least 50 per cent less on essential items such as food and health. Try this story from a 41-year-old mother of three: “Go without the main meal and just provide for the children. Before payment arrangements were organised, I would put off paying electricity and gas bills to pay for other things due.”

Or this sick 26-year-old woman, living alone: “When I don’t have money I don’t eat and only get the medication I could not live without. Bills and debts get fines. The medical conditions get worse so I end up needing more medication and get admitted to hospital to fix that.”

The counsellors at Moneycare – who spend much time interceding with creditors on behalf of clients – say they see no sign on the ground of improved behaviour by lenders since the report of the royal commission on banking misconduct.

They worry a lot about the way unscrupulous payday lenders take advantage of people with pressing debts and no money, greatly deepening the hole they’re in. Legislation to crack down on such lenders was introduced to Parliament in March last year, but has yet to be passed.

It never ceases to surprise me that a prime minister so ready to proclaim his Christian faith is so hard of heart when it comes to people on benefits (age pensioners excepted). Presumably, he’s not prepared to “give them a go” because he’s not convinced that they “have a go”.

As the Australian Council of Social Service has said, increasing Newstart would be “the single most effective step to reduce poverty” – not to mention giving a much-needed boost to the nation’s retailers.

But Scott Morrison, so generous in his promises of big tax cuts to high-income earners like me, has steadfastly refused to oblige. Rather, he’s working on an unending list of torments for people on welfare.

It’s as if he’s seeking applause from all those who think anyone on welfare must be a lazy loafer.

If that’s how you imitate Christ, things have changed a lot since I grew up in the Salvos.

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In poor countries income does trickle down

Try this test of your economic literacy: has world poverty decreased or increased since 1990? If you said decreased, congratulations. You’re smarter than the average bear.

If you were sure it had increased, you’re the victim of a news media gone overboard in indulging your preference for bad news over good.

A lot of bad things are happening in the world, but also some really good things, and we immiserate ourselves when we fail to give them the notice they deserve.

In October the Word Bank issued a report announcing that world poverty had fallen in the two years to 2015. But since this was the continuation of a longstanding trend, the media took little notice.

So let me give it the fanfare it deserves. World poverty has been falling continuously – and rapidly - for the past quarter century. In 1990, 36 per cent of the world’s population lived in extreme poverty, but by 2015 this had fallen to 10 per cent – the lowest in recorded history.

This means the number of people living in extreme poverty has fallen by a billion, from almost 2 billion to 736 million. And that really does make it “one of the greatest human achievements of our time”.

The World Bank defines extreme poverty as living on less than $US1.90 a day, which has been adjusted for the US dollar’s differing purchasing power in different countries in 2011.

But how did this great achievement come about? It’s the result of rapid economic growth in the developing countries over the past three decades, particularly in China (and its trading partners in east Asia) and India (and other south Asian countries, including Bangladesh).

These countries have made no herculean efforts to redistribute income from the rich to the poor, they’ve just grown a lot over a sustained period. Which makes the fall in poverty in these countries a fabulous advertisement for the benefits of market economies and freer trade between countries.

And it’s a reminder that, in poor countries at least, a fair bit of the income generated by economic growth does trickle down to those at the bottom. Low-income households also benefit as more of the country’s income is spent on increasing primary education and spreading access to electricity, decent water and sanitation.

Actually, lower-income households in Australia have benefited from our 27 years of continuous economic growth, with their incomes growing quite strongly in real terms. That’s because of employment growing faster than the working-age population, wages growing faster than prices (until five years ago) and pensions (but not the dole) being indexed to wages.

But real wage and pension growth occur because of government policy. And since, in truth, tax cuts for companies and high income-earners do little to boost the economy and employment, their benefits don’t trickle down to any great extent.

Back to the point. Though the rate of extreme poverty has fallen in all the world’s regions since 1990, it’s fallen only a bit in Sub-Saharan Africa, while its population has continued growing strongly.

This means the Sub-Sahara now accounts for more than half the 736 million people remaining in extreme poverty, with south Asia accounting for a further quarter. It’s been largely eliminated in east Asia and the other regions.

If India’s present strong economic growth continues, its share of world poverty will fall away. The World Bank projects that, by 2030, Sub-Saharan Africa will account for nearly nine out of 10 of the world’s extreme poor.

Globally, poor people live overwhelmingly in rural areas and have lots of children. Judge poverty not by people’s income but by their access to education, electricity, water and sanitation, and the proportion in rural areas is even higher.

Note that the World Bank’s austere “international poverty line” of $US1.90 a day is an absolute measure of poverty. You work out the value of goods needed to barely stay alive, then adjust it for inflation over time, ignoring what’s happening to the incomes of the better-off.

By contrast, in rich countries like ours we measure relative poverty: how are real incomes at the bottom (often defined as half the median income) travelling relative to those around the middle and at the top?

So absolute poverty falls whenever low incomes grow faster than inflation whereas, for a fall in relative poverty, the real incomes of the poor need to grow at a faster rate than everyone else’s.

This, by the way, explains why absolute poverty in China and India can fall even while income inequality – the gap between rich and poor – increases. As it usually has.

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Inequality not as great as claimed, worse than others admit

This week the Productivity Commission issued a “stocktake of the evidence” on inequality in Australia. Its findings will surprise you. But it wasn’t as even-handed as it should have been.

Its report forcefully dispels the myths of the Left – that inequality is great and rapidly worsening – but is much more sotto voce in telling the Right there’s still a problem and that the reason it’s not as bad as some think is that governments have taken corrective actions the Right usually disapproves of.

This has allowed the conservative commentators of the national press to greet the report with great glee. One in the eye for their ideological opponents. Inequality? Nothing to see here.

The report looks at three different measures of economic inequality – the distribution of income, consumption and wealth – over a long period: the 27 years from 1988-89 to 2015-16. It focuses on the experience of households rather than individuals, and eliminates the effect of inflation.

The report concludes that inequality has risen only slightly over the period. Measured by the Gini coefficient – where zero means perfect equality and 1 means one household has everything – the distributions of both income and consumption have risen slightly.

The distribution of household wealth (mainly owner-occupied housing and superannuation savings) is most unequal of the three. It, too, has become a bit more unequal over the period.

But, particularly for income, inequality increased during the resources boom of the mid-noughties, then decreased in the years following the global financial crisis of 2008.

Over the 27 years, the disposable income of all households rose at an average rate of about 2.2 per cent a year in real terms.

The annual incomes of households in every decile (10 per cent group), from the bottom to the top, increased. It won’t surprise you that average incomes in the top two deciles rose by more than the economy-wide average. The top decile’s average income rose by more than 2.5 per cent a year.

It will surprise you that average incomes in the bottom decile rose at the same rate as the economy-wide average. So it was households between the bottom 10 per cent and the top 30 per cent whose incomes rose by less than the national average.

Many people would be surprised by all this. Why? Because they hear what’s happened in America and assume it must be pretty similar here. Wrong.

The report notes that our progressive income tax and highly means-tested welfare payments do a lot to equalise household incomes (as I’ve written recently in this column).

Our income inequality in 2015 was about average for the rich countries. In 2017, our wealth inequality was eighth lowest among 28 rich countries.

Australians’ chances of moving between higher and lower income groups – a rough measure of equality of opportunity – “compare favourably with many other developed countries”, the report says.

It tells us that, at 9 per cent of Australians – 2.2 million people – our rate of poverty (measured as people with incomes below half the median income) is no higher than it was 27 years ago.

But if all these truths tell you we don’t have much to worry about, you’ve been misled. The report is much less up-front in reminding us of the qualifications to its findings.

It leaves the strong impression that, if inequality hasn’t increased much, and isn’t as great as in some other countries, there’s no great problem. This implies the inequality we started with was fine.

As Professor Peter Whiteford, of the Australian National University, has noted, the report does too little to remind us that all the averaging involved in Gini coefficients and decile groups rolls households who’ve gained together with households who’ve lost and tells us little has changed.

For instance, the report downplays the issue of the huge increase in the incomes of the top 1 per cent of households. Their extreme gains are averaged with the more modest gains of the next 9 per cent to give a rise in the incomes of the top decile that’s high compared with the rest of us, but not greatly so.

Since the increase in inequality occurred during the resources boom, the report notes quietly that, contrary to what conservative politicians keep telling us, “[economic] growth alone is no guarantee against widening disparity between rich and poor”.

True. Then we’re reminded that this increase in inequality went away in the long period of weak growth following the financial crisis.

So what does the Productivity Commission want us to conclude? Let nature take its course? Don’t worry about increasing inequality because the next recession will fix it?

The report’s fine print acknowledges the truth that a country’s degree of inequality is greatly influenced by its economic institutions (such as its tax system and the rules of its welfare system), by government policy changes, and by the public’s attitudes to inequality.

I happen to agree with the commission’s value judgement that the growing gap between the top 1 per cent of incomes and middle incomes isn’t of as great concern as the gap between the bottom and the middle.

But I don’t accept another implicit value judgement that not much more could be done to reduce income and wealth inequality (presumably, for fear the rich would stop wanting to get richer) and that, at the bottom end, the government should limit its intervention to assisting those poor people whose disadvantage has become “entrenched”.

In other words, don’t acknowledge that poverty is being kept high by successive governments’ refusal to lift the freeze on real unemployment benefits.

The report proudly informs us that the bottom decile’s income has kept pace with the economy-wide average, but does little to explain how this amazing truth came about.

The chief suspect is the Rudd government’s increase in the base-rate of the age pension, a boost so big it seems to have more than offset the adverse effects of the real dole freeze and the bipartisan policy of moving disabled and sole-parent pensioners onto the much lower dole.

Still think there’s nothing to see here?

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Indigenous middle class arises despite slow closing of the gap

It's easy for prime ministers to make big promises at some emotion-charge moment of national attention, but a lot harder to keep those promises when the media spotlight (and that prime minister) are long gone.

I could be alluding to the promise Kevin Rudd made that the federal government would never forget the needs of the victims of Victoria's Black Saturday bushfires in 2009, but I'm referring to the promise he made a year earlier, at the time of his apology to the stolen generations, to Close the Gap between Indigenous and non-Indigenous Australians.

The gap needing to be closed – and the commitments Rudd made – referred particularly to health, education and employment.

But all of those gaps contribute to another one: the gap between Indigenous and non-Indigenous incomes. What's been happening there?

I'm glad you asked because Dr Nicholas Biddle and Francis Markham, of the Centre for Aboriginal Economic Policy Research at the Australian National University, have just written a paper on the subject.

And, on the face of it anyway, the news is reasonably good.

First, however, some background. You won't be surprised that there is a gap between the two group's incomes. But it's worth remembering that gap has existed since the early days of European settlement of the Wide Brown Land.

To be euphemistic, it's a product of our colonial history. To be franker, Indigenous people were systematically and violently deprived of access to economic resources, especially land, a process that continued until well into the second half of the 20th century.

And though Aboriginal and Torres Strait Islander people engaged with the settler-colonial economy in many ways, underpayment or theft of wages was systematic in many parts of the country until the 1950s and '60s.

This colonial legacy endures into the present, Markham and Biddle say.

They quote another academic saying that "Aboriginal people, families, households and communities do not just happen to be poor. Just like socioeconomic advantage, socioeconomic deprivation accrues and accumulates across and into the life and related health chances of individuals, families and communities" (my emphasis).

The authors use the censuses of 2006, 2011 and 2016 to study what's been happening to the level and distribution of incomes within the Indigenous population, and between it and the non-Indigenous population.

The good news is that the median (the one dead in the middle) disposable equivalised​ household income for the Indigenous population rose from 62 per cent of non-Indigenous income in 2011 to 66 per cent in 2016. ("Equivalised" just means adjusted to take account of differences in the size and composition of households.)

That's the highest the percentage has been since reliable data started in 1981. And, in fact, it's been trending up since then.

There's progress, too, on the Indigenous "cash poverty rate", which measures the proportion of Indigenous incomes falling below 50 per cent of the median disposable equivalised household income of the nation's entire population.

So, as is usual in rich countries, it's a measure of relative poverty (how some incomes compare with others) rather than absolute poverty (whether people's incomes are high enough to stop them being destitute).

It's called "cash poverty" in recognition of the truth that there's more to poverty than how much money you have. As well, it acknowledges that no account is taken of "non-cash income", such as the value of food gained by hunting and gathering in remote areas.

Remember, however, that there are also costs involved in hunting. And the prices of basic necessities are much higher in remote areas.

Measured this way, the Indigenous poverty rate has declined slowly over past decades. More recently, it's gone from 33.9 per cent in 2006 to 32.7 per cent in 2011 and 31.4 per cent in 2016.

Sorry, that's where the good news runs out.

For a start, the rate of improvement is far too slow. Markham and Biddle calculate that if the gap kept narrowing at the rate it did over the five years to 2016, the medians for Indigenous and non-Indigenous incomes would be equal by 2060. That fast, eh?

Now get this: while the gap between the two groups has been narrowing, the gap within the Indigenous group has been widening.

If you take the weekly disposable personal incomes of all Indigenous people aged 15 or older, adjust them for inflation, rank them from lowest to highest, then divide them all into 10 groups of 10 per cent each, you discover some disturbing things.

Between 2011 and 2016, the average income of those in the top decile rose by $75 a week, compared with $32 a week for those in the middle decile. Individuals in the bottom decile had no income (possibly because they were students or home minding kids), while those in the second and third lowest deciles saw their incomes fall.

But what explains this growing gap between the top and the bottom within the Indigenous population?

Turns out it's explained by where an Indigenous person lives. Household disposable incomes are highest – and have grown fastest - in the major cities, with a median of $647 a week, but then it's downhill all the way through inner regional areas, outer regional, and remote, until you get to "very remote", where the median income is $389 a week.

Over the five years to 2016, the real median income in remote areas hardly changed, and in very remote areas it actually fell by $12 a week.

Got your head around all that? Now try this: despite the weakness in median incomes in remote (but not very remote) areas, the incomes of the top 20 per cent are higher and have been growing relatively strongly.

Get it? However poorly we're doing on Closing the Gap, we are getting an Indigenous middle class.

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What you'd have to live on if you were poor

Speaking of the cost of living, how much do you need to live on? Surveys show most people's answer is: just a bit more than I'm getting at present. Trouble is, they keep saying that no matter how much their income rises.

One way to convince yourself you're not doing all that well is to compare what you earn with people of your acquaintance who're earning a lot more than you.

A better assessment would be to compare your finances with those of people a lot closer to the bottom – if only you knew any.

Not to worry. On Wednesday, Professor Peter Saunders and Megan Bedford, of the Social Policy Research Centre at the University of NSW, will publish new "budget standards" for low-paid and unemployed Australians.

The study was funded by the Australian Research Council, with a quarter of the cost covered by donations from Catholic Social Services Australia, the United Voice union and the Australian Council of Social Service.

In a painstaking exercise, the researchers have put together, and costed, the baskets of goods and services different-sized families at these income levels would need to allow each individual – adult or child – to lead a fully healthy life.

So it's not a poverty line and it does take account of prevailing community standards, but it's the minimum amount required to satisfy basic needs.

"There is no allowance for even the most modest or occasional 'luxuries' and wastage was kept to an absolute minimum. The budgets are thus extremely tight," the researchers say.

For instance, low-income families are assumed to have a car, but it's a second-hand, five-year-old Toyota Corolla, kept for five years. Unemployed people have no car.

Because it's a healthy standard, its only allowance for alcohol is a couple of glasses a week, with no allowance for smoking.

Let's see how you fancy living on these budget standards (I've rounded the figures to the nearest $10 for ease of comprehension). Each of the low-paid categories assumes one person working full-time on the national minimum wage.

A single adult would need to spend $600 a week. A couple with no children would need $830. Add a child of six and that rises to $970. Add a second child, of 10, and it's up to $1170. A sole parent working part-time, with a child, would need to spend $830 a week.

Let's take a couple with two children. Their biggest expense would be rent, $460 a week for a three-bedroom unit in an outer suburb. Then $200 for food, $140 for transport, $140 for household goods and services, $80 for recreation (swimming lessons; bit of sport for the kids), $60 for education, $40 for personal care, $30 for clothing and footwear and $20 a week for out-of-pocket healthcare.

The budget standards for unemployed families are, perforce, a lot tighter.

Whereas the low-paid were assumed to shop at Woolworths and Kmart, unemployed people in the focus groups used to check the realism of the standards said they couldn't afford such stores and went to Aldi and discount stores. They chase specials and collect discount vouchers, make things last longer and waste nothing.

Even with this frugality, an unemployed single adult needs $430 a week. A couple without children needs $660, but that rises by $110 to $770 with one kid, then by a further $170 to $940 with a second kid. An unemployed sole parent with one child needs $680 a week.

It's true that economies of scale mean a couple needs only 1.5 times as much money as a single. But additional kids cost more, partly because older kids cost more, but also because you need to rent a bigger unit.

The good news is that a single adult on the minimum wage earns about $60 a week more than they need to maintain the minimum healthy standard of living, costing $600 a week. A sole parent working part-time, with one child, gets wages and welfare benefits of $45 a week more than their minimum living costs of $830 a week.

After that, however, the news is bad. A low-paid couple with no children earns $40 a week less than the $830 they need. After allowing for family benefits, a low-paid couple (one in full-time work and one doing some part-time work) with one child is almost $10 a week shy of their $970 healthy standard, while a couple with two children is short by $90 of the $1170 a week they need.

One of the great stains on our fair-go nation's conscience is the long-running attempt by governments of both colours to starve the unemployed until they find a (usually non-existent) job.

The study finds that the dole, plus any other welfare benefits for which the jobless are eligible, falls almost $100 a week short of the much tighter minimum healthy living standard for the single jobless.

A childless couple on the dole falls short by almost $110 a week and a couple with two kids is shy about $130 a week.

In our boundless generosity, however, we go easy on an unemployed couple with one kid (short by a mere $60 a week) and a jobless sole parent with one kid, short by a piddling $50 a week.

If only you and I weren't having such a struggle to maintain our own living standards, we could perhaps ask the pollies to be a tad more munificent.

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Poverty rises as you move from the centre

In Bill Bryson's fascinating book, Shakespeare, he says we know remarkably little about the man, and most of what we think we know has been dreamt up by overenthusiastic scholars. But of at least one point he was sure: in Shakespeare's London, rich and poor lived side by side. A case, I guess, of the rich man in his castle, the poor man at his gate.

They don't make cities like that anymore. Or rather, modern cities seem to be a lot more socially segregated, with the rich tending to live together on one side of the tracks and the poor living on the other.

Research undertaken some years ago by economists at the Australian National University found Australian cities had become more divided, and there is much American research to similar effect. But a research report to be issued on Wednesday has found something a bit different. It is Promoting Inclusion and Combating Deprivation, by Professor Peter Saunders and Dr Melissa Wong, of the Social Policy Research Centre at the University of NSW.

They conducted a survey of 6000 people drawn at random from around Australia in May 2010. They got more than 2600 responses, which they divided into six categories according to where people lived: inner metropolitan area, outer metropolitan, large towns (more than 25,000 people), larger country towns (more than 10,000 people), small country towns (fewer than 10,000 people) and rural areas.
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Not surprisingly, they found there were poor, socially disadvantaged people living in all areas. But they also found a strong correlation between where people live and how likely they are to be socially disadvantaged. As the degree of population concentration declines, the rate of social disadvantage tends to increase. To be blunt, the further out you go from the centre of big cities, the higher the proportion of poor people you find.

After allowing for family size, the average disposable income of households was $970 a week. But inner metropolitan households averaged 12 per cent above this, whereas rural households averaged 14 per cent below. (Of course, if some locations have a higher proportion of retired people, the average income will be lower.)

In inner metropolitan areas, the proportion of households living in poverty (that is, with incomes below half the median income) was 12 per cent. It rose to 12.4 per cent in outer metropolitan, 12.6 per cent in large towns, 14.8 per cent in larger country towns and 16.8 per cent in small country towns, dropping a little to 15.5 per cent (still the second highest rate) in rural areas.

Those poverty rates were calculated by the researchers. When the survey respondents were asked whether they considered themselves to be living in poverty, their answers followed pretty much the same pattern.

What's notable, however, is that their subjective assessments were about 2 percentage points lower than the calculated rates. So, unlike many of the rest of us, the genuinely poor don't seem to be feeling particularly sorry for themselves.

But poverty – how much money you have to spend – is not the only dimension of social disadvantage. And there's been controversy over the unavoidable arbitrariness of where poverty lines are drawn. So Saunders and his colleagues have put much work into developing a different approach, one based on people's access to 24 items that a majority of Australians responding to an earlier survey regard as the "essentials of life".

The items include a substantial meal at least once a day, warm clothes and bedding, a washing machine, a decent and secure home, roof and gutters that don't leak, a separate bed for each child, presents for family or friends at least once a year, being able to buy medicines prescribed by a doctor, and up to $500 in savings for an emergency.

When you assess the respondents to the latest survey according to their access to these essentials you find the same story: deprivation tends to rise as you progress from inner metropolitan to rural. The highest levels of deprivation are in social functioning (such as regular social contact with other people) and risk protection (such as car insurance).

All very interesting, but also worrying. Higher rates of social disengagement in smaller communities cast doubt on the happy notion that, in the country, everyone knows each other and everyone looks after each other. But it's not surprising that, the further out you are, the less your access to public services such as dentists and childcare. Nor that unemployment rates are usually much higher.

It's possible the socially disadvantaged tend to gravitate to the country – say, because rents are lower. The greater probability, however, is that people living further from the centre are more likely to suffer disadvantage because of the deficiencies of the areas in which they live.

The trouble is, disadvantage breeds disadvantage. Whatever problems you have of your own, they're likely to be compounded if a lot of the people around you have similar problems.

"Once population decline and poverty become entrenched in an area, further problems emerge that act as barriers for those who remain," the researchers say. "The result is that, increasingly, where one lives (or is born) has a major impact on one's life chances."

It follows that, as governments seek to reduce social disadvantage, they should see the disadvantaged not just as individuals needing help, but also as people living in disadvantaged areas – people unlikely to get far unless something is done to improve conditions in their district.

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Psst. Don't tell anyone about poverty

It's remarkable that, despite all the effort and expense the government goes to in measuring gross domestic product, it doesn't run to the modest extra expense of measuring poverty. But this being so, it's hardly remarkable the media and the public pay far more attention to the gyrations of GDP than to the extent of poverty.

Why the lack of official interest in such a basic measure of how we're doing as a nation? Because, in an egalitarian country such as ours, poverty isn't much of a problem?

Err, no. In the mid-2000s, Australia's rate of poverty was the fourth highest among 18 developed economies. Surely the reason couldn't be that our record is so bad that the government would prefer us not to think about it? Hmmm.

The more I think about it, the more I want to know what there is to know about poverty in Australia.
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And, when some of our big charities - Anglicare, St Vincent de Paul and the Salvos - feel it worth expending some of their precious funds to commission a report on the subject, as they did this week, I'm inclined to take notice. Who knows when next the problem will be drawn to our attention?

As you've seen from the headlines, the report finds that more than 2 million Australians - one person in eight - is living in poverty. This poverty rate of almost 13 per cent has changed a bit but not a lot over the past decade. It's not shooting up, but neither is it falling.

What exactly is meant by ''living in poverty''? How is it measured?

There is more to being poor than just an absence of money. Another dimension is how isolated you are from the support of other people. But this measure - calculated from official surveys by the social policy research centre at the University of NSW - is a purely monetary one.

The next point is that poverty is measured differently in rich countries from poor countries.

In the developing world they measure ''absolute poverty'' - whether you're so poor you're at risk of death from malnutrition.

In rich countries few people, no matter how poor, are starving. So we measure ''relative poverty'' - how many people or households have incomes well below what's typical in our community. And how low is ''well below''? Usually, that's a case of drawing an arbitrary line, and drawing it so low there isn't much room for argument.

This study sets the poverty line at a level commonly used in comparisons between the rich countries. It ranks the disposable (after-tax) incomes of all households from highest to lowest, then draws the line at 50 per cent of the median (dead-middle) income.

The study finds almost 13 per cent of households fall below the line. Hold that thought.

The main way people avoid poverty is by having a job and earning income from it. So you'd expect that, unless people were on particularly low wages, or could find only part-time work, or had a lot of others depending on them, working households would avoid poverty.

The main way governments seek to avoid poverty in the community is by paying a range of social security benefits to those people who, for one reason or another, are unable to work.

Those too old to work get the age pension; those too sick get the sickness benefit; those physically or mentally unable to work get the disability support pension; those too busy minding children get the single parenting payment; those too busy caring for a relative get the carer payment. And those who just can't find a job get the dole.

The federal minimum wage - increased each year by Fair Work Australia - is comfortably above the poverty line which, in 2010, was $358 a week for single adults.

And, most people with children to support get the relatively generous family tax benefit.

So why do 13 per cent of people fall below the poverty line? The biggest single reason is that the levels of the various social benefits fall below the line. Way below in the case of the dole; a little below in the case of the single parenting payment and the age pension.

It follows that, unless they can supplement their payment with income from savings or a little part-time work, people living on social security payments are at great risk of poverty. Overall, 37 per cent of people on social payments live below the line. But the proportions vary widely according to the type of payment: 14 per cent of those on the age pension, 42 per cent of those on the disability pension, 45 per cent of those on the parenting payment and, get this, 52 per cent of those on the dole. Not surprising then, that people on social payments account for almost two-thirds of those in poverty.

The next most important factor explaining why people fall below the line is the high cost of housing.

In particular, the gap between the costs of owning and renting. It's a safe bet the majority of people in poverty are renters.

It may surprise you that the retired account for only about 15 per cent of those below the line. That's because so many own their homes outright.

When you're measuring relative poverty, it follows as a matter of arithmetic that the only way to reduce the proportion of people falling below the line is for their incomes to increase at a faster rate than incomes generally.

Julia Gillard could reduce poverty at a single (expensive) stroke: a decent, one-off increase in the indefensibly low rate of the dole.

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BY 2020 ONLY THE RICH WILL BE AT HOME IN AUSTRALIA

IQ2 Debate Sydney City Recital Hall
Tuesday, July 8, 2008

Some of you who read my column may be wondering what on earth I’m doing on the side opposing this motion that, by 2020, only the rich will be at home in Australia. Don’t I care about inequality? Well, yes I do. Do I believe everything in the garden is rosy? No I don’t. I do believe the gap between high and low incomes is too wide and I’d be happy to see governments do more to redistribute income from high income-earners like me to lower income-earners like you. (No, I suspect few of you are low income-earners.)

So why am I opposing this motion? Because it’s too extreme; it’s way too pessimistic and it goes over the top. Think about it: by 2020, only the rich will be at home in Australia. Let me ask you: do you feel at home in Australia right now, or do you feel like an outcast? Are you rich? No, you’re not. But what this motion asserts is that, within just 12 years or less, you’ll be dispossessed. If you own your home now, within 12 years you’ll have lost it. If you’ve got any superannuation, it won’t have grown in the next 12 years, it will have disappeared. If you’re middle-class, educated and reasonably comfortable now, within 12 years you’ll have lost it all. You’ll by like a new migrant who isn’t sure he jumped the right way; who doesn’t feel at home in Australia.


Another question: what proportion of the population would you consider to be rich? The top 50 per cent? 20 per cent? 10 per cent? What about the top 2 per cent? To be in the top 2 per cent of taxpayers you have to be earning more than $180,000 a year. So let’s say the top 2 per cent. This motion is saying that, within 12 years, the remaining 98 per cent will be stuffed. Now, I don’t pretend to know what will happen in the next 12 years, but the other side is certain they know: you are going to be completely buggered.

I don’t believe that for a minute, and that’s why I’m opposing this motion. It takes a sensible argument - the gap between rich and poor is too wide - and goes way over the top, predicting death and destruction for everyone in the middle.

Let me make three points. First, don’t believe everything you read in the paper. (Except the Herald, of course.) By their intense focus on the amazing salaries of a relative handful of chief executives and rich businessmen they’ve left us with a quite exaggerated impression of how well everybody earning more than we are is doing. What happens to the incomes of about 2000 men (and the odd woman) may be big news, but it tells us little about what’s happening to the remaining 21 million of us.


Second, it’s naïve to assume, as our opponents do, that things just keep moving in the same direction forever. If they’ve been getting worse, they can only keep getting worse. History shows that’s not true. The economy moves in cycles - house prices move in cycles, home loan affordability moves in cycles, interest rate go up and then come down. I believe in the pendulum theory of history, under which things keep moving in one direction until there’s a reaction, and they start swinging back in the opposite direction, only eventually to go too far in that direction. The proposition that gap between rich and poor can only widen in the next 12 years reveals an ignorance of the way the world works.

Third, what will all the low and middle-income voters be doing while they’re being dispossessed by the top 2 per cent? Democracy protects us from such extremes because the rich will never have more votes than the bottom and the middle, and governments that want to stay in power must attract the votes of the non-rich. The notion that elected governments do nothing but pander to the rich and powerful is defies common sense.

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Sympathy for those on $150,000, but...

One thing I despise about public life in Australia today is the way power-chasing pollies and self-promoting media personalities seek to advance themselves by encouraging people living during the most prosperous period in our history to feel sorry for themselves. Apparently, the soaring cost of living is absolutely killing us.

So forgive me but, just this once, we're going to worry about other people's problems, not yours.

Years ago, long before I became a journalist, I used to do the tax return of a lecturer in social work. One day he dumbfounded me by remarking that it wasn't good enough to measure poverty in money terms.

I was just a simple accountant; what on earth was he on about? How else could you judge it?

It's taken me a long time to realise he was on to something. Part of the trouble with economics is its confident assumption that all problems worth worrying about can be measured in dollars.

The economist Professor Peter Saunders, of the University of NSW, is probably Australia's leading expert on poverty. But in his latest book, Down and Out, he argues that poverty - lack of income - is just one aspect of the broader problem of social disadvantage. The other aspects are deprivation and social exclusion.

''Social disadvantage'' refers to a range of difficulties that block life opportunities and prevent people from participating fully in society. Although poverty is a factor contributing to disadvantage, the root causes of disadvantage extend beyond the lack of money and need to be identified and tackled separately.

Saunders offers the example of Leah, a single parent born in North Africa, now living in the south of Israel, leading a harsh and miserable life dominated by men.

Giving Leah money could help her a lot, but unless something is done about the underlying causes of her problems - lack of education, exposure to discrimination, lack of voice in events that affect her, induced depression, unwise choices and bad luck - there will be little prospect of relieving the disadvantages she experiences and preventing them from being transmitted to future generations.

Do you really think there are no Leahs in Australia?

''Cycles of poverty that result from an inadequate education that restricts employment prospects and constrains earnings will not be prevented by income transfers alone, but also require efforts to raise human capital in ways that can provide the foundation for economic independence and improved social status,'' Saunders says.

One of the most important determinants of social disadvantage is where you live. This is true not only of which country you live in, but also of where you live within a country. ''Increasingly, where one lives can have a powerful impact on access to employment, on the ability of a given level of income to support a particular standard of living and on the availability and effectiveness of services to address disadvantage,'' he says.

Tony Vinson, a former professor of social work, has written that ''when social disadvantage becomes entrenched within a limited number of localities, the restorative potential of standard services in spheres like education and health can diminish.

A disabling social climate can develop that is more than the sum of individual and household disadvantages and the prospect is increased of disadvantage being passed from one generation to the next.''

Historically, poverty has been measured by setting a level of income and saying everyone who falls below that line is poor. But such ''poverty lines'' can be set in fairly arbitrary ways - half of the median income is a common measure, for instance - and so are open to argument.

The concept of ''deprivation'' has been developed to try to measure poverty more directly. It seeks to identify what is an unacceptable standard of living by using community views to specify the items and activities that are regarded as normal or customary in a particular society at a particular time.

Surveys show that the list of items Australians regard as the ''essentials of life'' include such things as medical treatment if needed, warm clothes and bedding if it's cold, a substantial meal at least once a day, and the ability to buy medicines prescribed by a doctor. By contrast, the concept of ''social exclusion'' focuses on how relationships, institutions, patterns of behaviour and other factors (including lack of resources) prevent people from participating fully in the life of their community.

Australian research has divided social exclusion into three domains: disengagement, service exclusion and economic exclusion. Indicators of disengagement include: no regular social contact with other people, children don't participate in school outings, children have no hobby or leisure activity, and unable to attend wedding or funeral in the past 12 months.

Indicators of service exclusion include: no access to a local doctor or hospital, no access to dental treatment, no childcare for working parents, no aged care for frail older people, and no access to a bank or building society. Indicators of economic exclusion include: not having $500 in savings for use in an emergency, having to pawn or sell something in the past 12 months, not having spent $100 on a special treat in the past 12 months, and living in a jobless household.

The groups with the highest risk of facing ''deep exclusion'' are (in declining order) unemployed people, public renters, lone parents, indigenous Australians and private renters.

So that's how the other half lives. What a pity these people have no idea what a struggle it is trying to make ends meet on $150,000 a year.

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