3. Trends and characteristics
3.1 Economic and social context
3.2 Changes in social assistance over time
3.3 Characteristics of income support recipients
3.4 Participation and private resources
3.1 Economic and social context
The social security system works in a complex demographic, economic and social environment. The community expects it to respond to new needs arising from demographic, economic and social change. By changing incentives and providing options, the system also affects each of these dimensions. This section outlines briefly the key demographic, economic and social trends that have affected the social security system in the medium to long term.
3.1.1 Demographic
Australia's population is changing and its structure is dynamic. Over the past 25 years the population has increased by nearly 40 per cent. The population is ageing: in 1975 only nine per cent of Australians were aged 65 years and over but today it is 13 per cent, and this proportion is projected in the second Intergenerational Report to increase to 25 per cent by 2047.
Demographic trends will play a significant role in the sustainability of the social security system into the future through their impact on the aggregate level of income support payments and the number of people in the workforce who will support these payments through the tax system. The ageing of Australia's population, coupled with higher life expectancies, is projected to drive a net increase in payments to individuals from 6.7 per cent to 7.1 per cent of GDP over the next 40 years.
The population aged 65 years and over is also changing. New generations of retirees, such as the baby boomers, are different from earlier generations born before the Second World War, and Generations X and Y will differ again. The differences between these cohorts mean that there can be quite marked shifts in the characteristics, size and expectations of segments of the population over quite short periods. Pressures to improve assistance or defray costs can therefore develop quite quickly in the income support system.
3.1.2 Economic
Labour market participation is a critical element of the linkage between the economy and individual and community wellbeing. Female participation has shown marked increases over the last 40 years.
With changes in social values and labour market conditions, many older women have returned to work after their children have grown, while younger women, having entered the labour force in their twenties, are maintaining their participation across their lifetime with shorter periods of withdrawal associated with family formation. Notwithstanding this strong growth, the employment rate for women in Australia remains some six-and-a-half or seven percentage points below the high participation countries of the OECD. Australia has the ninth highest rate of employment of mothers with children aged six years and over in the OECD but the eighth lowest rate for those with younger children. Single mothers, who in Australia have an employment rate 9.4 percentage points lower than partnered mothers, have the second lowest rate of employment in the OECD.
Labour force participation rates for men aged 15 years and over are currently around 73 per cent, below the rates of 80 per cent and higher recorded in the 1960s but above the low of around 71 per cent in the early 2000s.
The greater availability of part-time employment and relatively low rates of unemployment have increased the opportunity for many on income support to re-enter the workforce, including those who are unable to take up full-time work. This is reflected by the increasing levels of overall participation (including by second earners and students). Rising wages across the economy also have impacts on the social security system. For pensioners, changes in earnings directly affect the rate of assistance through the 25 per cent of MTAWE benchmark (see Section 1.2.3 for rates of payment). More generally, changes in overall levels of wellbeing in the community act as one of the reference points that people use to judge the adequacy of income support payments. With increasing earnings dispersion, these judgments can become increasingly varied. There has also been a shift in the relative role of earnings and transfers in the incomes of low-income working families with children.
3.1.3 Social
Australian households are much smaller than they used to be and, with the ageing of the population, are increasingly composed of older couples and singles rather than couple families with dependent children. Single parenthood, which increased almost continuously between the 1980s to 2000s—from 12.2 per cent of families with children in 1980 to 23.1 per cent in 2004—appears to have stabilised. Within families, the increasing rate of labour force participation by women has resulted in a marked increase in two-income households and a decline in the traditional single breadwinner household.
Changing social attitudes and aspirations are also critical to judgements about the role of the transfer systems and what it should deliver.
3.2 Changes in social assistance over time
The effect of these trends on the social support system is complex: as noted above there are new needs (such as child care), cost pressures (for example, the demographic impact on Age Pension) and changes to expectations (including different judgments about what is an adequate household income, including in retirement). Governments have responded to these pressures in various ways, including by funding additional services, increasing payments, expanding coverage of payments and introducing stronger obligations to increase self provision for some groups.
3.2.1 Trends in income support
Over most of the 20th century an increasing proportion of the population received transfer payments. Many of the initial changes reflected the increasing role of social protection through the welfare state, as well as changing population structures. By the end of the 1960s and early 1970s, 12 per cent of the population aged 15 years and over received transfer payments and this increased rapidly during the 1970s to 23.5 per cent in 1979. It peaked in 1996 at 33.1 per cent and has now declined to 27.2 per cent.
Chart 16. Proportion of the population aged 15 years and over on income support, 1901–2008
Chart 16 shows the trend over time of the percentage of the population receiving income support (family payments and child care are not included).
Age Pension has been a feature of the Australian income support system for the last 100 years. The proportion of the population receiving Age Pension has grown over time as the population has aged and the level of payment has increased. The proportion of working age people receiving income support has grown in the last 30 years. Some of this growth is due to increases in real rates of assistance (such as extensions of Rent Assistance to allowees) that, combined with reductions in income test taper rates, has made more people eligible for a part-rate of income support.
Much of the growth, however, reflects social and economic factors. As well as cyclical economic conditions, periods of high unemployment and structural change have created cohorts with very high income support durations. Other labour market changes, such as increased part-time work, especially in association with increases to income test cut-outs, have extended income support into the working population. Social changes, such as increased levels of family break-up and later workforce entry as a result of longer periods in education, have also played a role.
Particularly marked in the chart are more recent declines in rates of receipt as economic conditions have improved.
3.2.2 Rates of assistance
Changes to the real value of basic income support
Both pensions and allowances are indexed by the CPI to maintain their purchasing power in the face of price increases. In addition, pensions are benchmarked to earnings, as measured by the MTAWE, so recipients who are not able or expected to participate in the labour market can benefit from growing productivity.
As shown in Chart 17, there has been considerable divergence in trends in the rates at which various payments are made as a result of these settings.
Chart 17. Real rates of selected pensions and allowances, 1970–2008
In effect, while pensions have increased in real value over most of the period since 1970, more recently allowances have simply maintained their real value because they are only indexed to the CPI.
A consequence of this is that over the period 20 March 2008 to 19 September 2008 allowee couples and singles on the higher rate of allowance receive 86 per cent of the couple and single rates of pension, and singles on the lower rate of allowance receive 80 per cent of the single pension rate. The rates at which pensions and allowances are paid will continue to diverge with growth in productivity and real wages.
These rates reflected the different policy contexts for pensions and allowances noted in Chapter 1: pensions were intended to provide long-term support to those who were unable to support themselves, while allowances were intended primarily for short-term support and to have strong incentives to take up work.
3.2.3 Expenditure
In 2006–07, Australian Government expenditure on transfer payments was $71.6 billion, or around 6.8 per cent of GDP. The trends over time are in Chart 18.
Chart 18. Australian Government expenditure on transfer payments, 1910–2008
The pattern of expenditure reflects many factors, changes in economic conditions, the development of the Commonwealth role in income support including the take-over of various state payments, increases in the real level of assistance and relaxed means testing arrangements, and expansions in coverage as a result of policy change, for example the recognition of single parents, carers and expanded definitions of disability.
While expenditure has generally trended upwards it has fallen as a share of GDP at various stages as a result of sustained economic growth.
3.3 Characteristics of income support recipients
This section provides an overview of the characteristics of those who receive income support, including gender, age, duration, transitions and living arrangements. What emerges is the complexity of how people interact with the system. While we are used to thinking about people through the lens of discrete categories (Age Pensioners, Carer Payment recipients or Disability Support Pensioners) the reality is different. For example, there are as many people with disability on the Age Pension as there are on Disability Support Pension.
3.3.1 Gender
In June 2007 around 58 per cent of all income support recipients were women, with 2,694,200 receiving a payment compared to 1,906,900 men.
As Chart 19 shows, gender balance varies between payments with women constituting 58.3 per cent of all Age Pensioners, 42.1 per cent of Disability Support Pensioners and 67.3 per cent of Carer Payment recipients. Of the major payments, Newstart Allowance had the highest proportion of male recipients at 62.9 per cent.
Chart 19. Main income support payments by gender, June 2007
While roughly equal numbers of males receive income support8 as a single person as they do as a member of a couple, a much higher proportion of women are single. Indeed, around two-thirds of women receive income support as a single person, compared with around one-third as a member of a couple. The main reasons for this are that women have a longer life expectancy and are outliving their partners, and that women are more likely to be single parents. (As discussed in Section 2.3.4, the number of partnered males and females do not match because many couples have only one person receiving income support.)
3.3.2 Age
The median age of income support recipients is 62 years, comprising a median age of 74 years for those on the Age Pension and 39 years for others. There is considerable variation in the rate of receipt by age, with similarities and differences in the patterns of the ages of men and women (see Chart 20).
For women and men, there is an early peak reflecting the age group receiving income support for students. For both sexes, Disability Support Pension and Carer Payment receipt increases with age. However, the number of women who are single parents and the associated lower labour force participation is a key driver of the fact that women have higher rates of income support receipt at almost every age than men.
Chart 20 also shows the substantial increase in the proportion of the population receiving income support payments after the age of 65. It also illustrates how the significant proportion of the population who receive Age Pension transfer from another payment, with rates of income support receipt increasing rapidly in the population aged over 55 years. This issue is explored in more detail in the section dealing with duration of income support receipt.
Chart 20. Levels and rates of receipt of income support by age and gender, June 2008
In total, 16.9 per cent of working age people (aged 16 to 64 years) receive an income support payment. Of these, 15.9 per cent are students or on other youth payments, 6.0 per cent are carers, 30.8 per cent are people with disability on Disability Support Pension, 5.9 per cent are on retirement related payments and the remaining 26.1 per cent are on other working age payments, including Parenting Payment and Newstart Allowance. Of the entire working age income support population, only around one in six are either required to seek work as a condition of payment or are already meeting their participation requirements through work.
Changes in age specific rates of receipt
The impact of economic and social change on the rates of income support receipt by age over time can be illustrated by comparing age specific dependency rates at various points in time. Chart 21 shows the net effect of changes in age specific dependency rates over the last decade. It does so by comparing the percentage of men and women receiving income support by age for 1997 and 2007.
Chart 21. Age specific rates of receipt to age 65, June 1997 and June 2007
The past decade has seen a general fall in most age specific rates of receipt across the working age population for men and women, largely driven by improving labour market conditions. The fall has been largest amongst the youngest and the oldest age groups, for men the change was smallest in the 45 to 50 year age range and for women in the range from 40 to 45 years.
The strong fall among young people is likely to have been a result of support for this group being more likely to be received today through parental receipt of FTB rather than individual support through Youth Allowance. This in part reflects the increased generosity of assistance for children in the FTB system relative to Youth Allowance.
Notwithstanding the generalised falls in rates of age specific receipt between June 1997 and June 2007 there was:
- a 395 per cent increase in the number of people receiving Carer Payment
- a 35 per cent increase in the numbers of Disability Support Pensioners.
At June 2007 around 77 per cent of the Australian population aged 65 and over was in receipt of an income support payment, down from about 82 per cent in 1997. This figure is expected to increase to around 78 per cent for June 2008, partly due to the relaxation of the pension assets test taper that occurred in September 2007.
3.3.3 Duration and patterns of income support receipt
The decrease in the proportion of the population receiving income support is important, but again it does not capture the full complexity of the way that the system works for pensioners and allowees.
Many income support recipients receive a pension or allowance for an extended period. As noted in Chapters 1 and 2, people who rely on income support for long periods, especially if they have low levels of private income and assets, are particularly dependent on pension rates to achieve a basic acceptable standard of living. People with disability and older people on the Age Pension have particularly long durations on income support. However, long durations are also recorded for many others. In addition, there is a significant group who are largely reliant on income support for an extended period and they move as much between payments as they move in and out of the system.
| Persons | Average time spent on income support (years): | 'Total' (b) duration (years) to date: | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In past 5 (a) years | In past 10 (a) years | Median | Average | |||||||||
| This pay-ment | All pay-ments | This pay-ment | All pay-ments | This pay-ment | All pay-ments | This pay-ment | All pay-ments | |||||
| Age Pension | 1,996,900 | 4.6 | 5.0 | 7.5 | 8.9 | 9.4 | 12.4 | 11.3 | 13.1 | |||
| DSP | 731,100 | 4.3 | 4.8 | 6.6 | 8.2 | 7.1 | 10.9 | 8.7 | 10.8 | |||
| Carer | 117,300 | 2.9 | 4.3 | 3.6 | 6.8 | 2.8 | 7.9 | 3.6 | 7.6 | |||
| Parenting Payment Single |
446,800 | 3.7 | 4.2 | 5.0 | 6.8 | 4.9 | 7.6 | 5.0 | 7.4 | |||
Table 6 shows that current recipients of the four major pension payments have spent between 6.8 and 8.9 of the past 10 years on payment, with the largest amount of time recorded by Age Pensioners and a smaller amount of time recorded for carers and those on Parenting Payment Single. Over a shorter five-year period, the average time on payments ranges from 4.2 to five years.
The data show not only the long period of receipt, but also the extent to which there is considerable movement between payments over time. For all payments types, the average period spent on the current payment represents only part of the total average time recipients have been in receipt of income support. This is most clearly seen with those currently receiving Carer Payment. While this group has spent an average of 3.6 of the past 10 years on this payment, they have also spent an average of 3.2 years on other income support payments either before moving onto Carer Payment or when they were not providing care.
More detailed data indicate that some 55 per cent of those on Carer Payment in 2007 were also on income support in 1998; however, only 15.7 per cent of people on Carer Payment in 2007 were on Carer Payment in 1998. The largest group (29.7 per cent) were on Newstart Allowance, followed by Parenting Payment. Looking at this from the perspective of those on Carer Payment in 1998, it can be seen that 73.3 per cent were still on income support in 2007, although only 25.7 per cent were still on Carer Payment, with the balance moving to other payments—in particular, the Age Pension, Disability Support Pension and Newstart Allowance.
The pattern of movement between payments is also seen in persons entering Age Pension. Of the males who took up the maximum pension (just over half of new male entrants) at the qualifying age of 65 years in 2006–07, 82.9 per cent came from another income support payment. Of those who moved onto a part pension, 40.6 per cent did so from another payment. The main payments these men moved from were Disability Support Pension (64.3 per cent), Mature Age Allowance (21.1 per cent) and Newstart Allowance (9.4 per cent).
Of the women who entered Age Pension at qualifying age, a slightly higher proportion (56 per cent) moved onto the maximum rate of payment. Of these, 89.6 per cent came from another income support payment—the single main payment was Disability Support Pension (39 per cent). Of the balance, the majority transferred from Partner and Widow Allowances, and Widow and Wife Pensions.
Similar patterns can be seen with regard to Disability Support Pension, with 50.7 per cent coming from another payment. Most of these movements were from Newstart Allowance, followed by Parenting Payment Single. Each year around 7,000 young people aged under 18 years move onto this payment. The majority of people leaving Disability Support Pension move to the Age Pension.
3.3.4 Housing and living arrangements
There is considerable diversity in the housing and living arrangements of income support recipients. As well as mirroring community diversity, this reflects the life histories of income support recipients and the circumstances that have led them to seek assistance.
Housing tenure
Most income support recipients find their housing through the market—in particular, through home ownership and the private rental market (Table 7).
| Main transfer payment | No rent paid |
Funded aged care |
Public housing |
Private rent— No RA |
Private rent— RA |
Home owner / purchaser |
Total |
|---|---|---|---|---|---|---|---|
| Couples | |||||||
| Age Pension | 4.0 | 1.5 | 2.8 | 1.3 | 7.5 | 82.9 | 100.0 |
| Carer Payment | 5.4 | 0.0 | 8.2 | 3.2 | 17.6 | 65.6 | 100.0 |
| Disability Support Pension | 5.3 | 0.3 | 10.7 | 3.1 | 17.5 | 63.2 | 100.0 |
| Family Tax Benefit (only) | 7.6 | 0.0 | 1.5 | 10.8 | 20.6 | 59.5 | 100.0 |
| Newstart Allowance | 10.6 | 0.0 | 9.8 | 8.6 | 35.2 | 35.9 | 100.0 |
| Parenting Payment Partnered | 8.5 | 0.0 | 4.6 | 7.3 | 36.9 | 42.7 | 100.0 |
| Youth Allowance | 22.3 | 0.0 | 3.8 | 19.7 | 51.8 | 2.4 | 100.0 |
| Other | 7.8 | 0.1 | 4.2 | 8.7 | 26.0 | 53.2 | 100.0 |
| All | 6.0 | 0.7 | 4.2 | 5.3 | 16.5 | 67.3 | 100.0 |
| Singles | |||||||
| Age Pension | 9.1 | 9.8 | 9.0 | 3.2 | 15.4 | 53.4 | 100.0 |
| Carer Payment | 20.6 | 0.0 | 16.5 | 14.9 | 23.7 | 24.2 | 100.0 |
| Disability Support Pension | 15.6 | 1.1 | 19.3 | 14.6 | 32.2 | 17.2 | 100.0 |
| Family Tax Benefit (only) | 8.8 | 0.0 | 3.2 | 18.5 | 29.9 | 39.5 | 100.0 |
| Newstart Allowance | 20.4 | 0.0 | 8.8 | 22.1 | 37.6 | 11.0 | 100.0 |
| Parenting Payment Partnered | 16.7 | 0.0 | 13.3 | 6.7 | 30.0 | 33.3 | 100.0 |
| Parenting Payment Single | 10.4 | 0.0 | 14.3 | 11.4 | 45.3 | 18.5 | 100.0 |
| Youth Allowance | 7.2 | 0.0 | 0.7 | 71.6 | 20.1 | 0.4 | 100.0 |
| Other | 10.0 | 0.3 | 8.8 | 19.3 | 29.5 | 32.2 | 100.0 |
| All | 11.9 | 3.6 | 10.6 | 17.9 | 27.3 | 28.6 | 100.0 |
Some two-thirds of income support recipients who are members of a couple and just over a quarter of single income support recipients are homeowners or purchasers. This tenure is particularly important for Age Pensioners: 82.9 per cent of Age Pensioner couples and 53.4 per cent of singles are homeowners or purchasers. Public housing plays a very important role for single recipients of Disability Support Pension, with 19.3 per cent renting from state or territory housing authorities. Public housing is also used at a relative disproportionate rate by single Carer Payment recipients and single parents. Funded aged care facilities provide accommodation for 9.8 per cent of single Age Pensioners. In contrast, other groups have a very high reliance on the private rental market and on the additional support provided through Rent Assistance. This includes single parents—of whom 45.3 per cent receive Rent Assistance in the private market—and singles and couples on Newstart Allowance.
Living arrangements—couples
While we tend to segment the population as couples or singles, it should not be assumed that all couples share the same payments (indeed, since both members of a couple must qualify for income support in their own right, a substantial number of partnered people do not have a partner on income support). Of the 775,9049 couples where both members receive income support, 80 per cent have both members on a pension, 10.9 per cent have one member on a pension and one on an allowance, and the balance of 9.1 per cent have both members on an allowance.
The main combinations of payments are in Table 8 and Table 9. The most common arrangement is where both members receive the Age Pension (63.9 per cent of couples) followed by 6.3 per cent of couples where one member is on Disability Support Pension and one on an allowance, and 6.0 per cent of couples where one receives Disability Support Pension and the other is on Carer Payment.
| Partner | ||||||
|---|---|---|---|---|---|---|
| Age Pension | DSP | Carer payment | Other pension | Allowance | ||
| Person | ||||||
| Age Pension | 63.9% | |||||
| DSP | 4.1% | 3.7% | ||||
| Carer Payment | 1.9% | 6.0% | 0.1% | |||
| Other Pension | 1.9% | 2.8% | 0.0% | 0.0% | ||
| Allowance | 4.3% | 6.3% | 0.9% | 0.0% | 4.2% | |
| % Paid as a single | % Paid at couple rate |
Total | Of those with a partner on income support: partner payment type | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Partner not on payment | Partner on payment | Age Pension | DSP | Carer Pay-ment | Other pension | Allow-ance | Total | ||||
| Age Pension | 43.8 | 3.3 | 52.9 | 100.0 | 91.3 | 2.9 | 1.3 | 1.3 | 3.1 | 100.0 | |
| DSP | 65.4 | 6.7 | 27.9 | 100.0 | 15.4 | 28.1 | 22.6 | 10.4 | 23.6 | 100.0 | |
| Carer Payment | 35.2 | 9.5 | 55.3 | 100.0 | 20.8 | 66.7 | 2.1 | 0.0 | 10.3 | 100.0 | |
| Other Pension | 92.0 | 0.0 | 8.0 | 100.0 | 40.5 | 59.5 | 0.0 | 0.0 | 0.0 | 100.0 | |
| Allowance | 67.5 | 10.4 | 22.1 | 100.0 | 21.5 | 31.6 | 4.7 | 0.0 | 42.2 | 100.0 | |
In many cases different payment combinations make little financial difference. However, the increasing diversity of income support packages noted in Section 1.2.3 means there can be marked differences in the packages available for different households.
Eligibility for Carer Payment, uniquely, depends on a commitment by the recipient to maintain a relationship with at least one other person—in this case, in a caring role. Detailed analysis of the relationships between carers and care receivers shows:
- 85 per cent of recipients care for a direct relative (42 per cent for partners, 25 per cent for children and 18 per cent for parents)
- 88 per cent of those cared for also receive an income support payment
- 12 per cent of carer/care receiver circumstances involve a 55- to 64-year-old caring for a 55- to 64-year-old Disability Support Pensioner (typically a partner looking after their spouse), followed by 7 per cent where a 55- to 64-year-old is caring for an Age Pensioner over 75 years (typically a child looking after an aged parent).
Living arrangements—single people
As noted earlier, 58 per cent of income support recipients receive income support as a single person. As noted in Chapter 1, singles are paid at a higher rate than each member of a couple in recognition of the fact that single people living alone may not have the same household economies of sharing expenses as those experienced by a couple. However, being paid as a single person is not synonymous with living alone. Single recipients may live in many different household arrangements—children living with their parents, or older relatives living in extended families or sharing housing with other people.
Data on living arrangements is not easily available from administrative sources, but an insight can be obtained from household survey data produced by the Australian Bureau of Statistics (ABS) and presented in Table 10.10
| Proportion single | Proportion of singles living by themselves | |
|---|---|---|
| Age Pension and related | 41.9% | 73.7% |
| DSP | 52.5% | 45.8% |
| Carer Payment | 33.1% | 4.6% |
| NSA and working age | 36.4% | 38.3% |
| Austudy/Abstudy/YA | 45.1% | 11.4% |
| Other | 31.9% | 56.6% |
When compared with administrative data, the ABS reports smaller proportions of people receiving income support as a single person; however, of interest here is the living arrangements of those identified as single. Single recipients of Carer Payment are the least likely to be living by themselves (just 4.6 per cent). In contrast, 73.7 per cent of single Age Pensioners live alone.
The difference in the concept of 'single' for the purposes of income support payments and actual living arrangements is important because different living arrangements have different implications for living costs. While in most cases single people living with others do not achieve the same economies as an individual living as a member of a couple does, they are likely to have lower costs than a person living by themselves.
Living arrangements—dependent children
At June 2007 around 640,100 or 35 per cent of FTB Part A customers were in receipt of an income support payment (excluding DVA income support). The largest group of income support recipients were on Parenting Payment Single (398,800) or Parenting Payment Partnered (130,700), and 42,100 FTB Part A recipients were on Disability Support Pension, 20,800 on Carer Payment and 4,800 on Age Pension.
For the pension payments under consideration as part of this review, 17.8 per cent of Carer Payment, 5.9 per cent of Disability Support Pension and 2.5 per cent of Age Pension recipients receive family payments.
3.3.5 Caring and disability
This section summarises ABS 2003 Survey of Disability, Ageing and Carers (SDAC) data on caring and disability, and patterns of caring and disability across the income support system. These data show that there are carers and people with disability across all payment types, not just in the Carer Payment and Disability Support Pension populations. However, the data is not necessarily indicative of eligibility for a particular income support payment type as it uses classifications that are not consistent with the eligibility criteria for payments.
According to the ABS SDAC data from 2003, around 35.3 per cent of primary carers who provided more than 20 hours of care per week and who received some income support (or Carer Allowance) were on Carer Payment, with a further 30.2 per cent on the Age Pension or related DVA payments. Another group of carers is on Newstart Allowance and related working age payments. Table 11 cross-references the incidence of caring and disability according to ABS SDAC data with income support status as reported in the survey.
| % who are carers (a) | % of carers | %with a core disability (b) | % of those with a core disability | ||
|---|---|---|---|---|---|
| Age and related | 2.4% | 23.7% | 49.3% | 50.4% | |
| Age and related plus Carer Allowance (CA) | 58.8% | 6.5% | 57.0% | 0.7% | |
| Carer Payment | 80.7% | 26.3% | 27.2% | 0.9% | |
| Carer Payment plus CA | 94.1% | 9.0% | 20.5% | 0.2% | |
| Disability Support Pension (DSP) | 1.8% | 4.6% | 84.6% | 22.2% | |
| DSP plus CA | 36.8% | 0.7% | 100.0% | 0.2% | |
| Parenting Payment Single | 1.6% | 2.3% | 12.3% | 1.9% | |
| Parenting Payment Single plus CA | 39.5% | 1.8% | 4.6% | 0.0% | |
| Newstart Allowance and related | 2.0% | 9.1% | 17.6% | 8.6% | |
| Other income support | 1.4% | 4.3% | 11.0% | 3.5% | |
| Other plus CA | 38.8% | 2.6% | 14.2% | 0.1% | |
| CA only | 36.1% | 9.0% | 17.4% | 0.5% | |
| Under 15 | 0.0% | 0.0% | 5.7% | 10.9% |
This type of pattern is even more marked with incidence of disability. The majority who report having a disability are in receipt of the Age Pension, reflecting the increasing incidence of disability with age. There is also a marked concentration among those on Newstart Allowance and related payments. Also of note is the coincidence of both caring and having a disability amongst recipients of Carer Payment. Again, the definitions used by the ABS for survey purposes are not consistent with the eligibility criteria for income support payments.
Chart 22 provides information on Disability Support Pensioners by category of disability. Chart 23 outlines the first listed medical condition for care receivers (mapped to the current version of the International Classification of Diseases (ICD-10), as reported by Carer Allowance recipients. Carer Allowance (child) is paid to carers of a child aged under 16 years, and a different assessment process is used compared with Carer Allowance (adult). The first listed medical condition does not necessarily correspond with the main type of disability of the care receiver.
Chart 22. Disability Support Pensioners by medical category
The four major medical categories for people on Disability Support Pension have remained unchanged between 2006 and 2008. Comparisons between the 2008 data and data from 2006 show that the proportion of people with musculo-skeletal and connective tissue conditions has declined slightly and the number of people with psychological/psychiatric illnesses and intellectual and learning disabilities has increased.
Chart 23. Medical condition of carees of Carer Allowance recipients
The category of mental and behavioural disorders formed the largest proportion of all first-listed medical conditions for Carer Allowance care receivers.
While the four main categories of disability are consistent across both genders in each of the adult and child populations, there is a difference in the proportion of males and females with specific conditions. In the Carer Allowance (adult) care receiver population, fewer women than men have a mental and behavioural disorder but more women have a musculo-skeletal or connective tissue disorder. For children, around 71 per cent of male Carer Allowance (child) care receivers have a mental and behavioural disorder compared with just over 51 per cent of females, although more girls have a congenital malformation or chromosomal abnormality than boys.
3.4 Participation and private resources
The structure of income support payments encourages participation in employment and accumulation and use of savings. The interaction of the income support system with the labour market and the broader retirement income system is a crucial part of the way it supports the wellbeing of Australians. Access to private income, particularly through work and savings—especially superannuation—provides many Australians with a higher standard of living than could be achieved by the income support system alone. Conversely, those with no or low levels of private savings must rely solely on the income support system to provide them with a basic acceptable standard of living.
3.4.1 Participation
A significant number of income support recipients participate in the workforce. As illustrated in Chart 24, the level of participation varies by payment type. (Comparisons between payments need to be made with care because of the different means testing and other conditions of payment, which would result, for example, in a low-income, full-time worker still being eligible for most pension payments but precluded from most allowances.)
Chart 24. Employment of income support recipients, 2005–06
Low levels of participation are recorded amongst Age Pensioners, where 1.2 per cent report working full-time and 3.1 per cent part-time. Amongst recipients of Carer Payment there is a higher level of participation of 11.1 per cent. This employment is all part-time. The eligibility rules for Carer Payment preclude full-time work on the basis that the carer must be providing constant care.
The participation rate of Disability Support Pension recipients is a little higher at 11.9 per cent, with a small number reporting full-time employment. Although it is not generally possible to work full-time for award wages while receiving Disability Support Pension, it would be possible in some circumstances if the person was legally blind or had an intermittent disability. It is also possible for a Disability Support Pensioner to be working full-time in a business service, or while in receipt of a Supported Wage subsidy.
In relation to carers, the ABS' Survey of Disability, Ageing and Carers (2003) indicates that fewer than 40 per cent moved from employment into caring, although some were caring before giving up employment. Amongst this group, one-third reported they gave up employment because there were no alternative care arrangements; one-third did so because they felt they could provide better care; one-sixth did so because they felt an emotional obligation to provide care; and the balancing one-sixth gave other reasons.
3.4.2 Income
Income support recipients often have private income from a range of sources, such as paid work and earnings on investments, including superannuation. The effects of private income on the total support of a household can be diverse because income may be assessed in different ways for different payments (for example, all superannuation and rollover investments are disregarded for income and assets test purposes for those under Age Pension age while in the accumulation phase).
It is important to note that most income support recipients have low levels of private income. Just over one-third of income support recipients (35.5 per cent) have no private income and a further 22.3 per cent have private income of less than $20 per week.
More than half of the people on Disability Support Pension, other working age payments and youth support report having no private income, as do 48 per cent of carers. The two groups with the most significant levels of private income are the aged and those on Parenting Payment Single.
Among the aged, while only 13.3 per cent report no private income a further 28.2 per cent have only small amounts of private income (of up to $20 per week). Overall, 25 per cent of those on age-related payments have private income of over $100 per week. The income pattern of single parents is somewhat different, with 59.0 per cent on incomes of below $10 per week and many of the rest on quite high private incomes (30 per cent on over $200 per week and 15 per cent on over $450 per week). This reflects the high level of employment amongst this group.
When comparing the relative incomes of people on different payments it is important to note, as mentioned above, that there is also interaction between the means testing of particular payments and the apparent level of income. For example, pensioners can earn levels of income that would disqualify an allowee and will hence show as having some people on higher income than the allowance data.
Chart 25 and Chart 26 look at the level of private income received by income support recipients in two ways. Chart 25 shows the percentages of income support recipients with various levels of private income. Chart 26 shows the cumulative distribution of pension recipients by private income, highlighting the different private income levels of people on different payments.
Chart 25. Private weekly income by income support payment type, September 2007
Chart 26. Cumulative private income by income support payment, September 2007
Those income support recipients who do have significant levels of private income are able to achieve living standards well above the base rate of pension. While rewarding people who have private income is important to the way the income support system operates (as noted in Chapter 1), it also results in considerable variations in the living standards of recipients of transfer payments. This is shown in Chart 27, which shows the pension and non-pension income of Age Pensioners, ranked by their total income, as a multiple of the base rate of pension.
Chart 27. Total income of Age Pensioners as a proportion of pension, September 2007
This chart also shows the distribution of private income and its effect on total income and pension income:
- as private income increases, the total income increases
- as private income increases, pension income decreases.
The slow withdrawal rate of the Age Pension as private income increases (the income test taper) means there is a small but significant group of people receiving Age Pension who have household income over one-and-a-half times the Age Pension rate. Some four per cent receive incomes more than double the Age Pension rate.
The proportion of Age Pensioners with significant levels of private income is expected to grow in the future as the Superannuation Guarantee matures.
There will still be some pensioners, however, with little private income or assets. These pensioners may have spent considerable parts of their working life out of the workforce and/or much of their working life pre-dated the Superannuation Guarantee arrangements. Others may have withdrawn some or all of their superannuation savings under hardship and compassionate grounds.
These factors restrict the capacity to accumulate savings. They also mean that, with the growing proportion of Age Pensioners who have substantial private resources, there will be increased diversity in the income and assets holdings of Age Pensioners.
3.4.3 Wealth
As is the case with income, while most income support recipients have low levels of private wealth, particularly when the family house is excluded, some have substantial wealth or live in households with others who have considerable assets. The September 2007 relaxation of the assets test taper means pensioner couples can potentially have assessable assets from zero to $856,000 (in addition to the family home, which is exempt). Few income support recipients have the maximum allowable level of assets.
There are different ways of looking at wealth and income support receipt. In the next analysis total household wealth is considered using ABS data that incorporates all assets including items such as the family home, which is excluded from income support assets testing arrangements (and as such is not included in Centrelink administrative data) and household debt. Chart 28 examines the population as a whole divided into net wealth deciles and shows that, while income support recipients are most highly represented in the lowest wealth decile, they are also found in households across the wealth distribution. Of particular note is the concentration of Age Pensioners and related recipients in the upper end of the middle of the distribution and the number of Disability Support Pensioners who are more highly represented at the bottom.
Chart 28. Income support recipients by net household wealth, 2005–06
Income support payments play a much more important role in low-wealth households than they do in high-wealth households (Table 12). This indicates that 26.5 per cent of households relying on income support for 90 per cent or more of their household income are in the lowest wealth decile.
| Household wealth decile | Household reliance upon income support | |||
|---|---|---|---|---|
| Under 10% | 10–<50% | 50–90% | 90%+ | |
| 1 | 5.6 | 6.4 | 11.5 | 26.5 |
| 2 | 8.4 | 11.9 | 11.1 | 12.5 |
| 3 | 10.4 | 11.6 | 6.5 | 8.8 |
| 4 | 9.7 | 10.2 | 8.8 | 11.4 |
| 5 | 8.7 | 11.2 | 11.5 | 12.2 |
| 6 | 9.0 | 9.8 | 14.4 | 11.3 |
| 7 | 9.1 | 11.7 | 14.8 | 8.7 |
| 8 | 11.0 | 10.6 | 12.8 | 4.9 |
| 9 | 12.7 | 10.1 | 7.2 | 2.8 |
| 10 | 15.5 | 6.4 | 1.2 | 0.8 |
| Total | 100.0 | 100.0 | 100.0 | 100.0 |
A second snapshot looks at the wealth of a subset of the income support population living in households who mainly rely on income support. The distribution of net wealth11 (again in relation to all assets, including the family home) and debts, including consumer credit and Higher Education Contribution Scheme liabilities, in these households by main type of income support received is outlined in Chart 29. This chart ranks households receiving particular payments by wealth, from poorest to richest, and plots the cumulative proportion of households by level of net assets.
Chart 29. Transfer reliant households: distribution of net wealth, 2005–06
Again, most households have low levels of wealth, although there are considerable variations in wealth even among households that rely on income support for half or more of their income:
- some five per cent of households where the main sources of income support were the Disability Support Pension, Parenting Payment Single and other working age payments, as well as 15 per cent of those mainly receiving student assistance, had total assets of little more than $1,000
- the poorest five per cent of households with the Age Pension and related payments as their main source of income had assets up to $11,550, and fewer than 20 per cent had assets under $100,000
- more than 75 per cent of welfare dependent households with Parenting Payment Single as their main source of income had wealth below this point
- at the upper end of the distribution, more than 20 per cent of households reliant on the Age Pension and related payments had net assets of over half a million dollars, as do almost 15 per cent of those with Carer Payment as their main source of income and around 10 per cent of those with Disability Support Pension as their main source of income.
An important explanation for differing distributions is the different lifecycle points at which payments are made and the fact that assets usually accumulate over a long period.
Chart 28 and Chart 29 include the family home in the household's wealth. These recorded wealth levels therefore cannot easily be converted into cash to support living standards (although owner-occupied housing supports living standards in other ways).
A further insight into this is given by looking at the components of wealth. Chart 30 ranks households that rely upon income support payments for more than half their income into deciles of wealth. For all deciles the family home is the largest component of wealth. Of particular note are the relative low levels of superannuation assets. For some this may be because they have already drawn down this asset, but for most it reflects low levels of accumulation.
Chart 30. Transfer reliant households: composition of wealth, 2005–06
As noted, assessable assets—those taken into account in means testing payments—are a more limited subset of all assets. A non-homeowner aged couple can have assets of up to $981,000 and still gain a part-pension, and many Age Pensioners have significant levels of assessable assets. Of new entrants to the Age Pension in 2006-07, the average assessable assets of those transferring from another payment was $53,000, for those transferring from the Commonwealth Seniors Health Card it was $147,000 and for others it was $102,000. The majority of current Age Pensioners have assessable assets of under $50,000.
As with income, the average wealth holdings of Age Pensioners is expected to increase as the Superannuation Guarantee matures.