Ideas@TheCentre
The fall in Australian poverty
This week is Anti-Poverty Week, and the media repeated the welfare lobby’s line that there were 2.2 million Australians living below the poverty line, and that the proportion of people in poverty rose by ‘approximately one third of a percentage point from 2003 to 2010.’
What they didn’t bother to report was that according to the ACOSS report Poverty in Australia, the proportion of Australians living below the poverty line actually declined from 14.5% of the population in 2007 to 12.3% in 2010 (see pp. 32–33).
The fall in poverty was largely a result of the global financial crisis reducing growth in median incomes, combined with increased government expenditure on payments to pensioners, which pushed some people above the 50% median income threshold. As a result, welfare payments grew faster than income, and poverty fell.
If you think something is wrong with the picture of poverty in Australia since 2003, then you would be right. Commonsense suggests poverty should decrease when the economy is growing (2003–07) and increase when the economy is in trouble (2007–10). However, commonsense doesn’t seem to apply to poverty.
The problem lies in the definition of poverty as 50% of median income (about $358 per week for a single person). It is an arbitrary line that measures inequality, not poverty, and does not consider the numerous other benefits and subsidies (public housing and education) received by those on welfare.
Because the measurement of poverty is flawed, the proposed policy solution of increasing welfare payments like Newstart is equally flawed. It is telling that more than 50% of the 2.2 million people identified by ACOSS to be in poverty aren’t in the workforce at all. Less than 20% of those 2.2 million in poverty are in full-time work and more than 60% receive most of their income from welfare payments.
However, more money for welfare recipients will not address the causes of poverty. It would be better to focus resources on encouraging people capable of working into the workforce and tackling unemployment instead of spending increasing amounts of taxpayer money on welfare payments.
Andrew Baker is a Policy Analyst at The Centre for Independent Studies. Poverty in Australia: Beyond the Rhetoric (2002) by Peter Saunders and Kayoko Tsumori is available on the CIS website.
