Table Of ContentArts Social Sciences
Social Policy Research Centre
New Minimum Income for Healthy
Living Budget Standards for Low-Paid
and Unemployed Australians
Peter Saunders & Megan Bedford
August 2017
Prinicipal Investigators
Peter Saunders, Megan Bedford
Research Team
Liz Adamson, Marilyn McHugh, BJ Newton, Melissa Wong
For further information
Peter Saunders,
Acknowledgements
Research on budget standards draws on a huge array of information, data, experience,
insight and advice and this study is no exception. Those inputs must be combined with the
professional expertise of a dedicated team of researchers and that too has been a feature of
the project that underpins this report. Without all of this effort and commitment, the research
reported here would not have been possible.
First, I wish to thank the three Partner Organisations (POs) that supported the idea of the
project from the outset. The idea grew out of several discussions with the then Executive
Director of Catholic Social Services, Australia (CSSA) Frank Quinlan, who frst raised
the idea of the project with me. He and others at CSSA – notably his successors Paul
O’Callaghan and Marcelle Mogg, Policy Offcer Don Arthur and Director of Strategic Policy
and Engagement, Joe Zabar were supportive throughout, supplementing CSSA’s substantial
cash support. At United Voice, National Secretary Louise Tarrant was similarly supportive
at the outset as was her successor Jo Schofeld, while hands-on support was provided by
Mel Gatfeld and Melissa Coad. Finally, at the Australian Council of Social Services (ACOSS)
we were lucky to have the support and assistance of CEO Cassandra Goldie and Peter
Davidson – two of my long-term collaborators.
The project was funded by the Australian Research Council under Linkage Project grant
LP120200481, with additional cash and in-kind support provided by the POs. The research
benefted from the advice of a Project Reference Group that included members of the
POs and Professors John Buchanan and Adrian Bauman from the University of Sydney
and Associate Professor Paul Henman from the University of Queensland. My thanks go to
all three for their advice and feedback, and to Paul Henman in particular for his insightful
and helpful comments on the Draft Report. Helpful advice and concrete suggestions were
also provided at several stages by Jonathan Bradshaw, Tim Goedemé and Donald Hirsch
although none of them bear any responsibility for how that advice has been used in the
research.
At the SPRC I had the great fortune to be able to draw on the input of a small army of top-
notch researchers. Megan Bedford was a constant source of sensible refection and sheer
hard work and she and I received excellent support from Marilyn McHugh (who provided
general advice and assisted with the focus group discussions), BJ Newton (who helped with
the project set-up and undertook the initial pricing with Megan), Liz Adamson (who helped to
construct the health budget) and Melissa Wong (who undertook a range of data analysis).
In addition to the help provided by CSSA, the focus groups would never have taken
place without the support provided by CatholicCare Sydney, The Salvation Army and The
Smith Family. The staff we worked with were always cooperative, and I would also like to
thank those who participated in the focus group discussions for sharing their insights and
experiences with us. It is not easy to talk to strangers about the day-to-day struggles of living
in poverty, but without that input our understanding of these processes would have been
diminished.
Most of the shelf pricing of items took place in Woolworths and Kmart and we thank both
for allowing us to collect that critical information in their stores. The Department of Social
Services (DSS) provided information that was used to estimate the social safety net incomes
I
presented in Chapter 5, and the Real Estate Institute of Australia (REIA) generously provided
us with their Real Estate Market Facts (REMF) data that was used to estimate housing costs.
While the support and contribution of all of these organisations is gratefully acknowledged,
the research team is solely responsible for how the advice and data they provided has been
used and interpreted.
Budget standards refer to an ever-changing world and research such as this will inevitably
lag behind what is actually happening. Since the estimates reported here were completed,
the Consumer Price Index has risen by a further 1.7%, Newstart Allowance has been
increased (in September 2016 and March 2017) by just over 1.0% and the minimum wage
was increased by 2.4% in July 2016, and by a further 3.3% from July 2017. These increases
make the reported estimates slightly outdated but do not affect our broad conclusions.
Peter Saunders
Chief Investigator
II
Contents
Executive Summary 1
1 Background to the Project 5
1.1 Introduction to Budget Standards 5
1.2 Defning Adequacy 9
1.3 The Role and Impact of Budget Standards Research 11
1.4 Research Aims 15
1.5 Outline of the Report 17
2 Recent Developments and Applications of Budget Standards Research 19
2.1 The Changing Research Landscape 19
2.2 Basic Building Blocks 21
2.3 The EU Reference Budgets Study 24
2.4 The Healthy Living Standard 25
2.5 Uses of Budget Standards 26
2.6 Concluding Comments 27
3 The Approach Adopted – Key Methods and Assumptions 28
3.1 General Approach – Key Elements 28
3.2 Specifying Family Types 31
3.3 Other Major Differences 34
3.4 Other Deviations from the Earlier Methods 40
3.5 Detailed Methods and Assumptions by Budget Area 42
3.6 Summary 51
4 The Focus Group Findings 52
4.1 Overview 52
4.2 Recruitment, Conduct and Participant Characteristics 53
4.3 Focus Group Findings: Economising Strategies 58
4.4 Specifc Comments on Main Budget Areas 63
4.5 Comments on the Overall Budgets 70
4.6 Concluding Comments 71
III
5 The New Estimates: Presentation and Analysis 73
5.1 Introduction 73
5.2 The New Budget Standards Estimates 73
5.3 Incorporating Housing Costs: Alternative Approaches 83
5.4 Estimates of Individual Costs and Economies of Scale 93
5.5 Comparisons with Existing Poverty Lines 99
5.6 Comparisons with Existing Social Safety Net Provisions 102
5.7 Summary 105
6 Summary and Conclusions 106
References 1
Appendix A: Focus Group Material 120
Appendix B: Comparing the New and Original Budget Standards 126
Appendix C: Comparing the New Budget Standards Estimates with ABS Expenditure
Data 132
IV
List of Tables
Table 3.1 Specifcation of Family Types 32
Table 3.2 Need Classifcation of the Essentials of Life in 2006 and 2010 40
Table 5.1 Budget Standard for a Single Female Aged 35 ($/week) 75
Table 5.2 Budget Standard for a Single Male Aged 40 ($/week) 75
Table 5.3 Budget Standard for a Couple with No Children ($/week) 76
Table 5.4 Budget Standard for a Couple with a 6 Year-Old Girl ($/week) 76
Table 5.5 Budget Standard for a Couple with a 6 Year-Old Girl and a 10 Year-Old Boy ($/
week) 77
Table 5.6 Budget Standard for a Sole Parent with a 6 Year-Old Girl ($/week) 77
Table 5.7 Gender-Neutral Budget Standard for a Single Person ($/week) 83
Table 5.8 Weekly Expenditure on Rent and Sample Sizes of Working-Age (25-44), Private
Renter Households, 2009-10 86
Table 5.9 House and Other Dwelling (Unit) Rents in NSW and Victoria in the March
Quarter 2016 ($ per week) 87
Table 5.10 Assigning Dwellings and Locations to Family Types 88
Table 5.11 Weekly Rents for Selected Dwelling Types, March Quarter 2016 ($ per week) 89
Table 5.12 Comparing the Housing Cost (Rent) Estimates Produced by the Spending
Replication and Rental Threshold Approaches ($ per week) 89
Table 5.13 Grossed-up Budget Standards Including Housing Costs based on the
Housing Affordability Approach for Low-Paid and Unemployed Families, June Quarter
2016 ($ per week) 92
Table 5.14 Grossed-up Budgets Including Housing Costs based on the Rental Threshold
Approach for Low-paid and Unemployed Families, June Quarter 2016 ($ per week) 93
Table 5.15 Budget Standards Estimates of the Cost of Children in Couple Families ($ per
week) 98
Table 5.16 Comparing the Grossed-up Budget Standards with Existing Poverty Lines,
June Quarter 2016 ($/week) 101
Table 5.17 Comparisons of the Grossed-up Budget Standards with Existing Safety Net
Incomes ($ per week, June 2016) 103
Table 5.18 Income Level Limits Required to Satisfy the Housing Affordability Rule Given
the Assumed Rent Levels ($/week) 104
V
Table B.1 Budget Components Used by the ABS and in the SPRC Budget Standards
Studies 127
Table B.2 Updating of the New Budgets to the June Quarter 2016 128
Table B.3 Original Modest But Adequate and Low Cost Budget Standards Updated to
June Quarter 2016 and New Healthy Living Budgets: Single Female ($/week) 129
Table B.4 Original Modest But Adequate and Low Cost Budget Standards Updated to
June Quarter 2016 and New Healthy Living Budgets: Couple with No Children ($/week) 129
Table B.5 Original Modest But Adequate and Low Cost Budget Standards Updated to
June Quarter 2016 and New Healthy Living Budgets: Couple with One Child ($/week) 130
Table B.6 Original Modest But Adequate and Low Cost Budget Standards Updated to
June Quarter 2016 and New Healthy Living Budgets: Couple with Two Children ($/week) 130
Table B.7 Original Modest But Adequate and Low Cost Budget Standards Updated to
June Quarter 2016 and New Healthy Living Budgets: Sole Parent with One Child
($/week) 131
Table C.1 Sample Size by Household Characteristics, 2009-10 134
Table C.2 Updated HES Expenditures, Single Female and Sole Parent with One Child 134
Table C.3 Updated HES Expenditures, Couples with 0, 1 and 2 Children 135
VI
List of Figures
Figure 1.1 Movements in Alternative Income Series ($ per week in current prices) 8
Figure 5.1 Budget Standards for Low-Paid Families ($/week, June Quarter 2016) 78
Figure 5.2 Budget Standards for Unemployed Families ($/week, June Quarter 2016) 78
Figure 5.3 Budget Standard Shares for Low-Paid Families 79
Figure 5.4 Budget Standard Shares for Unemployed Families 80
Figure 5.5 Grossed-up Budget Standards Including Housing Costs for Low-paid Families,
June Quarter 2016 ($ per week) 94
Figure 5.6 Grossed-up Budget Standards Including Housing Costs for Unemployed Families,
June Quarter 2016 ($ per week) 94
Figure 5.7 Grossed-up Budget Shares for Low-Paid Families 95
Figure 5.8 Grossed-up Budget Shares for Unemployed Families 96
VII
Executive Summary
Executive Summary
Background
• A budget standard indicates how much income a particular family living in a particular
place at a particular time needs to achieve a particular standard of living. It is derived
by specifying every item that is needed by the family, pricing each item and summing
to produce the overall budget.
• The budget standards method itself is over a hundred years old, having been frst used
in Australia to set the basic wage in the 1907 ‘Harvester Judgement’.
• The enduring value of the budget standards approach refects its common-sense
approach to how to set an income level that is adequate to meet individual and family
needs.
• Budget standards estimates are used in Australia to help guide the setting of the
minimum wage and to assess the adequacy of social security payments.
• Most applications rely on updates of the estimates produced by the Social Policy
Research Centre (SPRC) in the 1990s, but these estimates are out-dated because of
changes in social practices and community norms and advances in budget standards
research.
• The aim of this study is to review and refne the earlier SPRC estimates to produce a
new set of budget standards for low-paid and unemployed families that are relevant to
contemporary Australian conditions.
Recent Research Developments
• Recent budget standards research developments have been led from the UK and from
within the EU more generally.
• The UK Minimum Income Standard (MIS) is the product of a major programme of work
reporting regularly on how much income households need to afford an acceptable
standard of living. The estimates are used frequently in policy debates and by some
charities to target fnancial support.
• The recent Reference Budgets study commissioned by the European Commission and
conducted by a research team at the University of Antwerp has added new depth and
quality to research in the feld and provided a template for future developments.
• The standard to which the new budgets apply is the Minimum Income for Healthy
Living (MIHL) standard developed in the UK public health literature. The MIHL standard
is designed to ensure that all individuals are able to lead healthy lives and participate in
society.
1
