Tag: ABS

Income inequality ticks down as the rich see their incomes fall: ABS

From The Conversation.

Income inequality has dropped slightly in Australia, largely driven by a fall in incomes for the richest 20% of the population, according to the latest Australian Bureau of Statistics (ABS) Survey of Household Income and Wealth.

The richest 20% of the population have seen their real disposable incomes (adjusted for the number of people living in the household) fall by nearly 5%, or close to A$100 per week. Most other households have seen no real increase in their incomes over the two years since the previous survey was released.

Our recent public debate over whether inequality is rising or falling ran into the problem that the two most important sources of data were showing different trends. The ABS survey continues to show a higher level of income inequality than the HILDA survey, but the latest trends now look more similar.

Possibly the best characterisation of the latest ABS figures is that they show inequality remains higher than at any period before 2007-08, but in the short term it is unclear what to expect.

As you can see in the following chart, there has been a slight fall in income inequality between 2013-14 and 2015-16, with the Gini coefficient for “Equivalised Disposable Household Income” falling from 0.333 to 0.323. The Gini coefficient is a measure between zero (where all households have the same income) and one (where only one household claims all the income).Equivalised Disposable Household Income is the total income of the household from all sources including social security payments, minus direct taxes, and then adjusted for the number of people living in the household. For example, a household of a couple with two children under the age of 15 is assumed to need 2.1 times the income of a household of a single adult to achieve the same standard of living.

So what explains these most recent trends? At this stage, it’s difficult to be definitive. It should also be borne in mind that it has only been two years since the last survey, the overall change is not large, and so we should be cautious in unpacking the trends.

But it is worth noting that this small reduction in income inequality has come at the same time as a small fall in both median and mean disposable incomes for Australian households.

The average taxes paid by households have also risen slightly in real terms (adjusted for inflation) since 2013-14, while the average social security benefits have stayed the same in real terms. This masks a significant drop in the real level of family payments (such as the family tax benefit) received by households, and increases in age pensions and “other payments” (overseas pensions and benefits, partner allowance, sickness allowance, special benefit, war widow pension (DVA), widow allowance, and wife pensions etc.).

However, where there does appear to be large changes are in the sources of income for households. If we compare incomes between the 2013-14 and 2015-16 surveys, we find that the only group that has enjoyed real increases in incomes are those whose main source of income is social security benefits. But these have risen by only A$6 per week, or about 1.3%, and they remain by far the lowest income households in Australia, with their average incomes remaining less than half of all other household groups.

Households who mainly rely on wages and salaries have seen their average real disposable incomes fall by about A$17 per week, or about 1.4%.

The biggest declines are among those who mainly rely on self-employment income from unincorporated businesses – usually a small business which has not incorporated as a registered company – and people whose main source of income is “other”.

“Other” includes many things, such as income received as a result of ownership of financial assets (interest, dividends), and of non-financial assets (rent, royalties), as well as from sources such as incorporated business income (i.e. companies), superannuation, child support, workers’ compensation and scholarships.

This group is fairly small – about 8% of households, but they are both the group with the highest and most unequal incomes and by far the highest level of net worth (assets minus liabilities). Their average incomes have fallen by around A$93 a week in real terms, or around 8%, but their median real incomes rose by around A$11 per week, suggesting that the loss in income was concentrated among higher income households in this group.

This group in 2013-14 had by far the highest level of income inequality with a Gini coefficient of 0.474. This has fallen to 0.423 in 2015-16. But because a lot of this income comes from the stockmarket, we can expect it to be more volatile.

The group who appear to have lost by far the most, however, are households whose main source of income is unincorporated business income. This is an even smaller group – around 4.6% of all households in 2015-16. Their real average incomes have fallen by more than A$160 per week, or around 16%. They also have a high level of inequality within their group, with a Gini coefficient of 0.353 in 2015-16, down from 0.389 two years previously.

But the overall change in income inequality is not large, and it does not significantly change Australia’s international ranking.

Writing in the Australian yesterday, Nick Cater of the Menzies Research Centre asserted that Australia is “one of the most equal and socially mobile nations on earth”. But even with the slight reduction in inequality, we are slightly above the OECD average, and there are around 20 OECD countries who are likely to have lower levels of income inequality than Australia.

Overall, the data shows a relatively small change in incomes for employee households and for households whose main source of income is social security payments. Together, these account for 87% of all households in Australia.

The reduction in overall income inequality in this period is therefore explained by the falls in income for the self-employed and for the “other” group – the group with the highest incomes and wealth.

Understanding what exactly has been happening for these groups and why will require further time and analysis. The volatility of the income sources for these groups is another reason to be cautious about projecting future trends.

Author: Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

Households Spending More On Basics

The ABS has released their 2015-16 Household Expenditure Survey (HES).

More than half the money Australian households spend on goods and services per week goes on basics – on average, $846 out of $1,425 spent.

Australian household spending on goods and services increased by 15% between 2009-10 and 2015-16, going from an average of $1,236 per week to $1,425.

Housing costs have accelerated significantly.

The data shows that more households now have a mortgage, while less are mortgage free. Rental rates remain reasonably stable, despite a rise in private landlords.

The goods and services that Australian households were spending the most on in 2015-16 were current housing costs ($279 per week), food and non-alcoholic beverages ($237 per week) and transport ($207 per week).

Average weekly spending on goods and services was highest in the Northern Territory and Australian Capital Territory ($1,700 and $1,670) and lowest in Tasmania and South Australia ($1,141 and $1,192).

“We can broadly think about household spending as either being for ‘basics’ or for ‘discretionary’ purchases – with basics covering essentials such as housing, food, energy, health care and transport,” ABS Chief Economist, Bruce Hockman said.

Today’s release shows that a growing portion of weekly outlays is spent on basics. Spending on basics accounted for 56 per cent of weekly household spending in 1984, growing to 59 per cent in 2015-16.

“The survey also shows that since 1984, the pattern of household spending has changed considerably,” explained Mr Hockman.

“In 1984, the largest contributors to household spending were food (20 per cent), then transport (16 per cent) and housing (13 per cent).”

“Jump forward to 2015-16, and housing is now the largest contributor (20 per cent), followed by food (17 per cent), and transport costs (15 per cent).”

More recently, since the last survey in 2009-10, the biggest increases in spending on goods and services by households have been in education (44 per cent), household services and operations, such as cleaning products and pest control services (30 per cent), energy (26 per cent), health care (26 per cent) and housing (25 per cent).

On the other hand, spending on alcohol, tobacco, clothing and footwear and household furnishings have not changed significantly from six years ago.

Mr Hockman added that, in 2015-16, 1.3 million Australian households (15 per cent) reported 4 or more markers of financial stress, down from 16 per cent in 2009-10. In addition, the proportion of Australian households who did not report experiencing any markers of financial stress has steadily increased, from 54 per cent in 2009-10, to 59 per cent in 2015-16.

 

  • ‘Housing’ includes expenditure on rent, interest payments on mortgages, rates, home and content insurance and repairs and maintenance. Principle repayments on mortgages are reported separately.
  • ‘Food’ also includes expenditure on non-alcoholic beverages and meals out. Expenditure on alcoholic beverages are reported separately.
  • ‘Energy’ includes domestic fuel and power costs such as gas and electricity.
  • ‘Health care’ includes expenditure on health practitioner’s fees, accident and health insurance, and medicines, pharmaceutical produces and therapeutic appliances.
  • ‘Transport’ includes vehicle purchases and their ongoing running costs, public transport, taxi and ride sharing fares.
  • Proportions of spending are based on total goods and services expenditure. This excludes items which increase household wealth (such as the principal component of mortgage repayments).
  • Financial stress indicators include a range of items, such as not being able to raise emergency funds.
  • Estimates are for people who reside in private dwellings in Australia, excluding Very Remote areas.

Green Shoots Of Business Investment – Maybe!

The latest data from the ABS: Lending Finance to end July 2017, is the final piece on the monthly data releases which is the story of finance. Most striking is the rise in commercial lending, other than for investment home investment, up 2%, while lending for property investment fell as a proportion of all lending, and of lending for residential housing. This included significant falls in NSW where it appears investors may be changing their tune.

So, finally some green shoots of business investment perhaps. We really need this to come on strong to drive the growth we need to stimulate wages. The upswing is there, but quite small, so we need to watch the trajectory over the next few months.  Overall lending grew 0.64% in the month, (which would be 7.8% on an annualised basis), way stronger than wages or cpi.

The total value of owner occupied housing lending excluding alterations and additions rose 0.7% in trend terms. The trend series for the value of total personal finance commitments fell 0.5% within which fixed lending commitments fell 0.6% and revolving credit commitments fell 0.4%.

The trend series for the value of total commercial finance lending rose 0.8% of which fixed lending commitments rose 1.0% and revolving credit commitments rose 0.1%, while the value of total lease finance commitments fell 4.1% in July 2017.

The ABS made a series of revisions in prior months – without explanation: Commercial Finance for the month of June 2017, Personal Finance for the periods between April 2017 to June 2017 and Investment housing finance for the month of June 2017.

 

There’s No Stopping The Housing Train

The latest data from the ABS, Housing Finance to July 2017, confirms what we knew. Owner occupied purchases are steaming ahead, while investment lending is stagnating. A clear reflection of the tightening in investor lending regulation, and the availability of new incentives and grants for first time buyers, alongside the attractor loan rates for new borrowers.

We saw first time buyers more active in NSW and VIC, two states where new concessions started in July.

A small but important rise, which is still well below the pre-GFC peak of 30%.

Importantly, owner occupied lending is still rising stronger than inflation or incomes, so the burden of household debt is set to rise further. Some revisions to earlier months data were made, and the RBA already highlighted that $1.4 billion of loans were reclassified between investment and owner occupied loans in the month.

In July, the trend lending flows were $33 billion, up 0.1%, with owner occupied lending up $20.8 billion or 0.7%, and Investment lending down 1% to $12.1 billion.  The number of owner occupied transaction rose 0.6%, construction of dwellings rose 2%, new dwellings, 2% and the purchase of established dwellings 0.3%.

The owner occupied lending trends highlight the rise in loans for construction and new building, as well as a rise in refinanced loans.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 16.6% in July 2017 from 14.9% in June 2017. The absolute number of loans also rose.

The number of first time buyer investors fell (using data from our surveys) showing a clear movement towards owner occupied first time buyer purchase.

The number, and proportion of first time buyers rose, and there was a rise in the proportion of loans on a fixed rate, reflecting attractive offers, and concerns about future rate rises.

As a result, in original terms, the total pool of loan stock rose more than $6 billion in the month,  to another record of $1.61 trillion.

  The bulk of the rise was in the owner occupied sector.

So the good news for banks is their loan portfolios are still growing, and their margins are now quite healthy. The longer term social impact of households saddled with massive debt will work out over a generation, but it highlights how exposed the nation is to any potential rise in interest rates.

 

 

 

Retail turnover relatively unchanged in July

Further evidence of household financial pressure.

Australian retail turnover was a relatively unchanged 0.0 per cent in July 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.

This follows a rise of 0.2 per cent in June 2017.

In seasonally adjusted terms, there were falls in household goods retailing (-1.7 per cent), department stores (-2.8 per cent) and clothing, footwear and personal accessory retailing (-0.2 per cent). There were rises in food retailing (0.7 per cent), other retailing (1.3 per cent), and cafes, restaurants and takeaway food services (0.2 per cent) in July 2017.

“The falls in household goods retailing and department stores come after strong rises during the June quarter,” said Ben James, Director of Quarterly Economy Wide surveys for the ABS.

In seasonally adjusted terms, there were falls in New South Wales (-0.4 per cent), South Australia (-0.8 per cent), Tasmania (-0.9 per cent) and the Northern Territory (-0.1 per cent). There were rises in Victoria (0.4 per cent), Western Australia (0.6 per cent), Queensland (0.2 per cent) and the Australian Capital Territory (0.1 per cent).

The trend estimate for Australian retail turnover rose 0.3 per cent in July 2017 following a 0.4 per cent rise in June 2017. Compared to July 2016, the trend estimate rose 3.5 per cent.

Online retail turnover contributed 4.3 per cent to total retail turnover in original terms.

Economy grows 0.8 per cent in June quarter

Data from the Australian Bureau of Statistics (ABS) shows the Australian economy grew by 0.8 per cent in seasonally adjusted chain volume terms during the June quarter. This is below expectations. Household consumption figure was pretty solid, but at the expense of the household savings ratio dipped which dipped to 4.6%, (5.3% in March). As a result, the current savings ratio is lowest since 2008, thanks to weak, very weak, wages growth.

Domestic spending increased 1.0 per cent for the quarter, driven by a 0.7 per cent growth in household consumption, with expenditure on food, clothing and household furnishings increasing. Dwelling construction grew a moderate 0.2 per cent with growth being observed in New South Wales and Queensland.

Growth was also observed in industries providing services to business. Professional, Scientific and Technical Services, Financial and Insurance Services, and Information, Media and Telecommunications all recorded above trend growth. The Manufacturing industry grew 1.8 per cent.

Falling prices for key export commodities impacted the terms of trade in the June quarter, declining 6.0 per cent. This has impacted GDP in current prices, which fell 0.1 per cent as lower coal and iron ore prices contributed to more subdued company profits. Gross operating surplus from businesses declined 2.6 per cent for the quarter.

GDP growth for the 2016 -17 financial year was 1.9 per cent.

Chief Economist for the ABS, Bruce Hockman said: “Recent swings in coal and iron ore prices have had significant effects on the Australian economy in terms of export revenues and real incomes, though export volumes continued to grow in the June quarter. Dwelling construction remains at elevated levels, although new residential building approvals are on the decline. ”

Mr Hockman said: “Recent indicators showing increased business confidence appear to be reflected by the 3.2 per cent quarterly increase in purchases of new machinery and equipment as well as increases in the previously published June quarter employment and hours worked estimates.”

The increases in hours worked resulted in an increase in Compensation of Employees (COE) of 0.7 per cent despite the subdued wage pressures in the economy. This moderate increase in COE coupled with the strong increase in household spending saw the percentage of income which households are saving fall to 4.6 per cent.

Current account deficit increases to $9.6 billion

Lower export commodity prices contributed to the widening of the current account deficit in the June quarter 2017, according to latest figures from the Australian Bureau of Statistics (ABS).

The seasonally adjusted current account deficit rose $4,808 million to $9,562 million in the June quarter 2017. In seasonally adjusted terms, the balance on goods and services surplus in the June quarter 2017 was $3,070 million. Exports of goods and services fell $2,693 million (3 per cent) and imports of goods and services rose $1,640 million (2 per cent). The primary income deficit widened $499 million.

In volume terms, exports grew faster than imports this quarter and as a result international trade is expected to contribute 0.3 percentage points to growth in the June quarter 2017 Gross Domestic Product. In seasonally adjusted chain volume terms, the balance on goods and services deficit decreased $1,363 million to a deficit of $196 million.

Australia’s net international investment position was a liability of $1,000.3b at 30 June 2017, a decrease of $24.4 billion (2 per cent) on the revised 31 March 2017 position of $1,024.6 billion.

Australia’s net foreign debt liability decreased $21.2 billion (2 per cent) to a net liability position of $990.6 billion. Australia’s net foreign equity liability decreased $3.2 billion (25 per cent) to a net liability position of $9.7 billion at 30 June 2017.

Building Approvals Rose In July

The number of dwellings approved rose 0.7 per cent in July 2017, in trend terms, and has risen for three months, according to data released by the Australian Bureau of Statistics (ABS) today.

Dwelling approvals increased in July in the Australian Capital Territory (8.8 per cent), Victoria (1.0 per cent), Western Australia (0.8 per cent), South Australia (0.8 per cent), New South Wales (0.4 per cent) and Queensland (0.2 per cent), but decreased in the Northern Territory (9.7 per cent) and Tasmania (1.0 per cent) in trend terms.

In trend terms, approvals for private sector houses rose 1.0 per cent in July. Private sector house approvals rose in Queensland (1.5 per cent), Victoria (1.1 per cent), South Australia (0.9 per cent) and New South Wales (0.8 per cent), but fell in Western Australia (0.1 per cent).

In seasonally adjusted terms, dwelling approvals decreased by 1.7 per cent in July, driven by a fall in private dwellings excluding houses (6.7 per cent), while private house approvals were flat.

The value of total building approved rose 1.3 per cent in July, in trend terms, and has risen for six months. The value of non-residential building rose 3.1 per cent while residential building was flat.

“The value of non-residential building approvals have risen for the past six months, in trend terms, reaching a record high in July 2017,” said Daniel Rossi, Director of Construction Statistics at the ABS.

“The strength in non-residential building has been driven by approvals in New South Wales and Victoria, where a number of office and education buildings have been approved in recent months.”

Commenting on the figures, the HIA said:

“Today’s building approval figures show that the detached house building sector has plateaued at a high level while the building of multi-unit projects is sliding, was confirmed by ABS data today,” stated Tim Reardon, HIA’s Principal Economist.

The ABS released July Building Approval data today which shows that the paths of detached and multiunit residential building continue to diverge as the industry’s contribution to GDP is set to fall.

“Multi-unit sector approvals fell by 3.3 per cent to be 27.5 per cent lower than twelve months ago while detached house building approvals remained constant over the year.

“Detached home approvals were 2.4 per cent better in July this year than compared with July 2016.

“The slowdown in the multi-unit sector is also showing up in the amount of work done on all residential sites has fallen by 3.2 per cent in the first half of this year, based on the construction data also released by ABS today.

“This slowdown in on-site activity is likely to see residential building have a negative impact on GDP growth for the June quarter.

“There is also significant variation in residential building conditions around the country.

“Compared with a year ago multi-unit approvals in July were down by 20 per cent or more in all the eastern states while movements in detached home approvals included a 9.6 per cent increase in South Australia to a fall of 8.7 per cent in Western Australia.

“The significant variation in industry conditions between the multi-unit sector and detached homes and around the states is likely to continue for some time consistent with HIA’s latest forecasts”, Mr Reardon concluded.

Employment Remains A Mixed Picture

The ABS reported their monthly employment data today, showing that trend full-time employment increased for the 10th straight month in July 2017 but both the trend unemployment rate in Australia was steady at 5.6 per cent in July 2017, and the labour force participation rate remained at 65.0 per cent.

Let’s be clear 5.6% hardly a great result as The New Daily highlights, bearing in mind the unemployment rate in the US, is 4.3%, 4.5% in the UK, 3.9% in Germany and 2.8% in Japan.  Note also that wages are depressed in these countries too. We should not get deflected by the rising number of jobs, which is where the Government would like us to look.  We should be doing better. This does not reflect “full employment”.

Full-time employment grew by a further 29,000 persons, while part-time employment decreased by 3,000 persons, underpinning a total increase in employment of 26,000 persons. The trend monthly hours worked increased by 5.2 million hours (0.3 per cent) to 1,696.4 million hours in July 2017.

Over the past year, trend employment increased by 259,000 persons (or 2.2 per cent), which is above the average year-on-year growth over the past 20 years (1.9 per cent).

The rate of employment growth (2.2 per cent) was greater than the growth in the population aged 15 years and over (1.6 per cent), which was reflected in an increase in the employment to population ratio (which is a measure of how employed the population is). This ratio increased by 0.4 percentage points since July 2016, up to 61.4 per cent, the highest it has been since April 2013.

“Full-time employment has now increased by around 220,000 persons since September 2016, and makes up the majority of the 250,000 person increase in employment over the period,” Chief Economist for the ABS, Bruce Hockman, said.

Over the past year the three states and territories with the strongest growth in employment were Tasmania (4.0 per cent), Victoria (3.1 per cent) and Queensland (2.7 per cent).

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 28,000 in July 2017. The seasonally adjusted unemployment rate was 5.6 per cent and the labour force participation rate was 65.1 per cent.

Income Growth Stagnant

The latest data from the ABS shows that income growth remains in the doldrums, putting more pressure on households who are experiencing rising costs (including mortgages), as our Household Finance Confidence Index shows. Given where inflation sits (1.9% on the official figures, but understated we think), many continue to go backwards. This also kills the Treasury budget assumptions. We do not see any reversal of this trend, despite recent positive business lending.

The seasonally adjusted Wage Price Index (WPI) rose 0.5 per cent in June quarter 2017 and 1.9 per cent over the year, according to figures released today by the Australian Bureau of Statistics (ABS).

The WPI, seasonally adjusted, has recorded quarterly wages growth in the range of 0.4 to 0.6 per cent for the last 12 quarters (from September quarter 2014).

ABS Chief Economist Bruce Hockman noted: “Low wages growth continued in the June quarter 2017, with annual wages growth continuing to hover around 2 per cent. This low wages growth reflects, in part, ongoing spare capacity in the labour market. Underemployment, in particular, is an indicator of labour market spare capacity and a key contributor to ongoing low wages growth.”

The annual trend is clear to see. Public servants are doing a little better than the private sector.

Seasonally adjusted, private sector wages rose 1.8 per cent and public sector wages grew 2.4 per cent through the year to June quarter 2017.

In original terms, through the year wage growth to the June quarter 2017 ranged from 1.1 per cent for the Mining industry to 2.6 per cent for Health care and social assistance industries.

Western Australia recorded the lowest through the year wage growth of 1.4 per cent and South Australia and Northern Territory the highest of 2.1 per cent.