family data relative price index · 2011-10-18 · cost of living in tasmania companion report 1 -...

Cost of Living in Tasmania COMPANION REPORT 1 - THE DATA

OCTOBER 2011

cumulative impact single parents pressures pensioners

workers with income support disadvantage lone person aged and disability

unemployed couples medium families small family data essential

services

relative price index carers disproportionate

distribution of price expenditure safety net Government pensions and allowances contribution of income support to household

income cost of living measuring price movement defining the pressures low

expenditure and low income poverty line

household distribution and population communities

TABLE OF CONTENTS

INTRODUCTION .......................................................................................................... 2

Costs – prices and expenditure ..................................................................... 3

The CPI: measuring inflation and cost of living? ..................................... 5

The Analytical Living Cost Indexes for Selected Australian

Household Types ................................................................................................... 6

Price .............................................................................................................................. 7

Expenditure ............................................................................................................ 11

RELATIVE PRICE INDEX ........................................................................................ 14

Introduction ..................................................................................................................... 14

Disproportionate impacts of price ...................................................................... 15

Utilities ...................................................................................................................... 16

Food ........................................................................................................................... 20

Housing .................................................................................................................... 21

Rent ............................................................................................................................ 23

Health ........................................................................................................................ 25

Transport ................................................................................................................. 26

Urban Transport Fares ..................................................................................... 27

Education ................................................................................................................. 28

Recreation ............................................................................................................... 30

Alcohol and Tobacco ....................................................................................... 31

Cumulative impact of cost of living ..................................................................... 33

Income modelling ......................................................................................................... 36

Households at risk ........................................................................................................ 42

The distribution of at-risk households ............................................................... 46

CONCLUSION ............................................................................................................ 49

2

Introduction Social and economic commentary on cost of living often focuses on consumption, referring to

the rate of inflation, how this is used to set official interest rates, the rate of increase of incomes

and costs, unemployment and workforce participation levels.

While useful as macro-economic indicators, their application to understanding micro-economic

effects, at the household or local level, becomes problematic due to particular household

characteristics being lost in aggregated data.

Cost of living is also a difficult concept to define and measure as it includes consideration of

prices, income and economic resources, expenditure, financial stress and assumptions about

standards of living.

Quantitative data on these measures provides an indication of overall trends, but it has

limitations. Some datasets provide data only at the national level, making it difficult to draw

conclusions about cost of living pressures specific to Tasmania. Also some of the data is dated

and, as a result, may not fully capture the situation as it exists in 20111.

The aim in examining cost of living pressures in Tasmania was broken down into investigation

of:

cost, made up of price and expenditure;

the Consumer Price Index (CPI) and its reference and use as a cost of living measure;

household cost pressures and differences between Tasmania and Australia;

cumulative impacts of multiple cost pressures;

the financial resources available to Tasmanians and at-risk households; and

the distribution of at-risk households in Tasmania.

This required analyses at the most disaggregated household level possible for Tasmania. Two

analytical methods were used for the investigation and are covered in this report, these were:

1) data from the Relative Price Index (RPI) model, developed by Dufty and Macmillan2,

and the Stinmod and SpatialMSM model, developed by the National Centre for Social

and Economic Modelling (NATSEM)

2) publically available data from the Australian Bureau of Statistics (ABS) contained in

Appendix 1.

Although data from both methods are referenced in A Cost of Living Strategy for Tasmania, the

Cost of Living Issues section of the Strategy relies on the first method, as it was designed to

1 The ABS has a number of surveys that were released in 2011. Initial results from these surveys were included in A Cost of

Living Strategy for Tasmania. However, this data was not available in time for complete analysis and inclusion in the 2011

Tasmanian Cost of Living Strategy. 2 Dufty, G & MacMillan, I. 2011, The Relative Price Index, The CPI and the implications of changing cost pressures on various

household groups.

3

provide household expenditure and financial indicators at a disaggregated level, therefore

meeting the aim of the analysis.

Importantly, the data points to households and places that face greater cost pressures than

others, signposting where policy work needs to be directed. Although the analysis highlights

that low income households face greater cost pressures, the data does not indicate why

expenditure levels are higher for some households. The value of the analysis is to connect the

data with other information sources of hardship, such as community sector reports, so the full

picture is built on the impact of cost pressures on households. This qualitative analysis is

covered in Companion Report 2 – Impacts and responses.

COSTS – PRICES AND EXPENDITURE

When broken down, household costs are made up of the amount or quantity of goods and

services that a household purchases, multiplied by its price. Three main datasets that contribute

to understanding costs are the ABS’ CPI and Household Expenditure Survey (HES), and

indexes that combine these two together, such as the ABS’ Analytical Living Cost Indexes for

Selected Australian Household Types3 (ALCI), and the RPI.

Prices

To measure prices of any item, charges per unit of sale need to be measured, and what

constitutes a charge and a unit. For example, to measure the price of electricity to a consumer,

it needs to be established whether or not to include the cost of generation, delivery, and retail

overheads, along an established position on a unit of electricity (usually a kilowatt hour – KWh).

Other factors that can contribute to understanding a price for a service include charges for

dis/connection, late payment fees and fixed charges to cover costs such as meters.

To compare actual prices across all the goods and services that households commonly

consume is beyond the scope of this analysis. Therefore, this analysis looks at price-change

through the CPI, focussing on the main price groups of the CPI basket and some sub-groups.

This includes food and the major areas that governments have an oversight role in or directly

deliver – housing, health, transportation and education. These five price groups are referred to

as essential services. Within the CPI basket there are eleven price groups and many sub-groups,

which are explained further below.

CPI Price groups, sub-groups and expenditure classes

The ABS uses a hierarchical classification method for grouping items within the CPI. The

hierarchy starts with the ‘All groups’, which represents the complete ‘basket’ of goods and

services that are sampled for price change each quarter and which represents the overall CPI.

The categories of prices the ABS uses increases in detail and size as it is disaggregated into price

groups, sub-groups, expenditure classes, elementary aggregates and finally prices.

3 Australian Bureau of Statistics, 2011, Analytical Living Cost Indexes for Selected Australian Household Types, Dec 2010 (cat.

no. 6463.0)

4

Table 1 outlines the ABS CPI price categories for price groups, sub-groups and expenditure

class levels.

Table 1: CPI classifications

Price group / Sub group Expenditure class

1. Food

1.1. Dairy and related products Milk, Cheese, Ice cream and other dairy products

1.2. Bread and cereal products Bread, Cakes and biscuits, Breakfast cereals, Other cereal products

1.3. Meat and seafoods

Beef and veal, Lamb and mutton, Pork, Poultry, Bacon and ham,

Other fresh and processed meat, Fish and other seafood

1.4. Fruit and vegetables Fruit, Vegetables

1.5. Non-alcoholic drinks and

snack food Soft drinks, waters and juices, Snacks and confectionery

1.6. Meals out and take away

foods Restaurant meals, Take away and fast foods

1.7. Other food

Eggs, Jams, honey and sandwich spreads, Tea, coffee and food

drinks, Food additives and condiments, Fats and oils, Food n.e.c.

2. Alcohol and tobacco

2.1. Alcoholic drinks Beer, Wine, Spirits

2.2. Tobacco

3. Clothing and footwear

3.1. Men's clothing Men's outerwear, Men's underwear, nightwear and socks

3.2. Women's clothing Women's outerwear, Women's underwear, nightwear and hosiery

3.3. Children's and infants'

clothing Children's and infants' clothing

3.4. Footwear Men's footwear, Women's footwear, Children's footwear

3.5. Accessories and clothing

services Accessories, Clothing services and shoe repair

4. Housing

4.1. Rents Rents

4.2. Utilities Electricity, Gas and other household fuels, Water and sewerage

4.3. Other housing

House purchase, Property rates and charges, House repairs and

maintenance

5. Household contents and

services

5.1. Furniture and furnishings Furniture, Floor and window coverings, Towels and linen

5.2. Household appliances,

utensils and tools

Major household appliances, Small electric household appliances,

Glassware, tableware and household utensils, Tools

5.3. Household supplies

Household cleaning agents, Toiletries and personal care products,

Other household supplies

5.4. Household services

Child care, Hairdressing and personal care services, Other

household services

6. Health

6.1. Health services Hospital and medical services, Optical services, Dental services

6.2. Pharmaceuticals Pharmaceuticals

7. Transportation

7.1. Private motoring

Motor vehicles, Automotive fuel, Motor vehicle repair and servicing,

Motor vehicle parts and accessories, Other motoring charges

7.2. Urban transport fares Urban transport fares

8. Communication Postal, Telecommunication

5

9. Recreation

9.1. Audio, visual and computing

Audio, visual and computing equipment, Audio, visual and

computing media and services

9.2. Books, newspapers and

magazines Books, Newspapers and magazines

9.3. Sport and other recreation

Sports and recreational equipment, Toys, games and hobbies,

Sports participation, Pets, pet foods and supplies, Pet services

including veterinary, Other recreational activities

9.4. Holiday travel and

accommodation

Domestic holiday travel and accommodation, Overseas holiday

travel and accommodation

10. Education

Preschool and primary education, Secondary education, Tertiary

education

11. Financial and insurance services

11.1. Financial services Deposit and loan facilities, Other financial services

11.2. Insurance services Insurance services

THE CPI: MEASURING INFLATION AND COST OF LIVING?

The CPI provides a general measure of the change in prices of goods and services purchased by

Australian households and therefore the rate of inflation.

The CPI is regarded as Australia’s key measure of inflation. It measures the price inflation

experienced by households and informs the community about changes to the real purchasing

power of consumers' incomes4.

Quarterly surveys for the CPI are conducted in capital cities to monitor inflation across the

basket of goods and services. The CPI aims to represent the average expenditure, therefore it

has to keep constant the composition of the basket as well as the quantities of the goods and

services purchased. This is to ensure the CPI represents price and its movement over time as

accurately as possible. The quantity weights are updated after each HES, through a CPI series

update. The quantity weights are used to multiply the quarterly CPI price data to build price

indexes for specific items, which in turn contribute to the overall Australian CPI.

The capital city indexes that contribute to the CPI measure price movements over time in each

city individually and do not measure differences in retail price levels between cities.

Additionally, there is currently no measure to capture price changes for rural or regional areas

of Australia.

Although a detailed description of the limitations of the CPI as a cost of living index is provided

in Appendix 1, the following points are relevant in summary of the limitations of the CPI.

The CPI is built to reflect national and capital city price movements, for this purpose it:

is an average of prices across Australian capital cities;

does not have representation from regional cities and towns;

has a bias in sample size towards the largest capital cities; and

sets variation in the quantity component of the expenditure equation and applies these

as averages for all of Australia, when consumption will vary by household and location.

4 Australian Bureau of Statistics, 2006, A Guide to the Consumer Price Index, 15th Series, 2005 (cat. no. 6440.0)

6

As the CPI measures average consumption for a notional household, it does not reflect how

changes in prices impact differently on specific households, such as various income groups and

family composition households, resulting from different patterns of consumption. Importantly, it

does not reflect the disproportionate effect of the price rise in essentials on low income

consumers. For different households in different stages of the lifecycle, these cost pressures can

be considerable.

The CPI is often used as an indexation reference for various Commonwealth and State income

support payments5 and concessions. As discussed, inflation and cost of living indicators are two

separate constructs, and the former does not match the impact that price and expenditure has

on households and which income support and concession payments aim to assist.

The Commonwealth’s compensation package for the carbon price will also be indexed to the

CPI. The Commonwealth notes that the impact of the carbon price is based on estimates for

the average household, and that actual expenditure may vary depending on “household size,

composition, expenditure preferences and energy sources”6. This analysis highlights the extent

that indexation to the CPI will not meet expenditure for specific households.

THE ANALYTICAL LIVING COST INDEXES FOR SELECTED AUSTRALIAN

HOUSEHOLD TYPES

The ALCIs7 are specifically designed to measure changes in living costs for four selected

population subgroups:

Employee households8;

Age pensioner households9;

Other government transfer recipient households10; and

Self-funded retiree households11.

Main conceptual differences between CPI and ALCI

A living cost index reflects changes over time in the purchasing power of the after-tax incomes

of households. It measures the impact of changes in prices on the out-of-pocket expenses

incurred by households to gain access to a fixed basket of consumer goods and services.

5 Information from http://www.centrelink.gov.au/internet/internet.nsf/payments/pay_cpi.htm, accessed on 25 February 2011:

“Most payments are adjusted in line with the Consumer Price Index (CPI) but other payments are adjusted by changes in

legislation. At the same time the maximum rate of payment is changed, the single rate of pension payments is also checked. If

necessary, the single payment rate is increased to make sure it does not fall below 27.7% of the Male Total Average Weekly

Earnings (MTAWE) figure.“ 6 http://www.cleanenergyfuture.gov.au/clean-energy-future/securing-a-clean-energy-future/#content05. Accessed on 6 September 2011.

7 Australian Bureau of Statistics, 2011, Analytical Living Cost Indexes for Selected Australian Household Types, Dec 2010. Cat.

no. 6463.0. 8 Employee households are those households whose principal source of income is from wages and salaries.

9 Age pensioner households are those households whose principal source of income is the age pension or Veterans Affairs

pension. 10

Other government transfer recipient households are those households whose principal source of income is a government

pension or benefit other than the age pension or Veterans Affairs pension. 11

Self-funded retiree households are those households whose principal source of income is superannuation or property

income and where the household Expenditure Survey (HES) defined reference person is ‘retired’ (not in the labour force and

over 55 years of age.

http://www.cleanenergyfuture.gov.au/clean-energy-future/securing-a-clean-energy-future/#content05

7

The CPI, on the other hand, is designed to measure price inflation for the household sector as

a whole and is not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households.

CPI estimates are calculated separately for each of the eight capital cities. While whole of

population subgroup estimates for the ALCI can only be calculated at the national level, due to the small sample size.

The CPI uses an acquisitions approach, while the ALCIs use an outlays approach. In practice,

for most goods and services purchased by the reference population, outlays and acquisition

occur within a relatively short space of time. There are three areas of expenditure in which these conceptual approaches provide significantly different results12:

purchase of dwellings

purchase of durable items

financial services and the use of credit.

Although the ALCIs are further detailed in Appendix 1, some of the main differences in item

coverage are highlighted in Table 2 below.

Table2: Differences from CPI and ALCI

Item coverage CPI ALCI

Net purchase of housing and the increase in volume

of housing due to renovations and extensions

Included Not included

Interest paid on mortgages Not included Included

Maintenance costs and council rates Included Included

Consumer credit charges Not included Included

Insurance premiums paid by households less the

amounts reimbursed by way of claims

Included Not included

Gross value of insurance premiums paid by

households

Not included Included

PRICE

Jurisdictional price comparisons

Although jurisdictional comparisons for changes in price are covered in Appendix 1, some

comparisons and explanation of CPI methodology is warranted.

The following uses electricity as an example of what constitutes a price and a unit for sale. The

ABS obtains electricity charges quarterly from energy authorities, and both concessional and

standard rates are priced. Current charges are applied to estimates of annual consumption to

derive the annual payment in the current quarter's prices. Connection fees, delivery and similar

12

For a discussion of the relationship between the ALCIs and CPI, see Australian Bureau of Statistics 2011, Analytical Living

Cost Indexes for Selected Australian Household Types, Mar 2011; Explanatory Notes (cat. no. 6463.0).

8

charges are included as part of the price13. Therefore a calculation takes place to alter average

annualised consumption of electricity and its price into quarters. The term ‘CPI price of

electricity’ is therefore not strictly price, as would be seen on an Aurora bill, which indicates per

unit charges for the different tariffs a customer uses.

Tasmania has the highest average consumption of electricity per capita, which would contribute

to placing it as the highest in a jurisdiction comparison, as seen in Figure 1. Tasmania, along with

other jurisdictions, has had large price changes in recent years. Most capital cities, except

Darwin and Perth, have had increasing price movement in the last ten years that is substantially

above the CPI. Hobart was no exception, and in 2010 and 2011 experienced a continued

increase when other capital cities, such as Adelaide and Melbourne declined.

Figure 1: Inter-jurisdictional comparison of movement in electricity prices

Another example of the difficulty of measuring prices is seen with hospital and medical

expenses, an expenditure class of the Health price group. Once price and units of medical

services are established, the issue of subsidies is examined. The ABS examines the medical

services that are subject to subsidies under the Medicare Benefits Schedule, measured using

administrative data and a sample of services seen as representative of the consumption of the

population. Again, data is obtained quarterly and includes pricing data for services provided,

bulk billing and rebates for services, so that net prices are shown14. Figure 2 indicates inter-

jurisdictional price movements for hospital and medical services.

13

Information Paper, Consumer Price Index: Concepts, Sources and Methods Australia, ABS, 2009 Cat. 6461.0. Page 61. 14

Information Paper, Consumer Price Index: Concepts, Sources and Methods Australia, ABS, 2009 Cat. 6461.0. Page 66.

9

Figure 2: Inter-jurisdictional comparison of movement in hospital and medical prices

Goods such as food present their own issues when considering the need to maintain the

quality of goods within the CPI, as the CPI represents a ‘fixed-basket’ of goods and services.

The term ‘fixed-basket’ is used as the ABS aims to keep the contents of the basket fixed, so

that prices of group, such as food, is relative to the same group of food throughout the life of

the index. For example, a brand of sauce may come and go over the life of the food index, but

the sauce type needs to be replaced when it does, so the price contribution of sauce to the

index can be maintained. Figure 3 compares food price changes between jurisdictions.

Figure 3: Inter-jurisdictional comparison of movement in food prices

10

Tasmanian price movements

Over the past five years, the prices of some items in the CPI basket of goods and services have

been flat or falling, while others have been rising. Due to factors such market demand being

met through low-cost imports and Australia’s foreign exchange rate, some items such as new

cars, furniture, electronic goods, TVs and computers, and clothing have either decreased or

increased less in price than the overall inflation rate.

Figure 4 shows the difference in percentage between essential services and the Hobart CPI15.

Housing has been disaggregated to show its sub-components of rents and utilities (which

includes electricity, gas and other household fuels, and water and sewerage). Many essential

services have increased above the CPI over the last five years (from the March 2006 to March

2011 quarters), with utilities increasing the most.

Figure 4: Difference in price change between the CPI and essential services

When viewing other prices, high price increases for essential services are offset by prices in

other areas that are below the CPI. This balances out the notional ‘average household cost’

represented by the CPI.

15

Percentage change of the CPI deducted from the change in the price group.

11

Figure 5: Difference in price change between the CPI and other price groups

EXPENDITURE

Households have varying expenditure patterns and varying capacities to absorb price increases.

Households have different expenditure patterns based on the life cycle of its occupants,

number of household members, location and financial resources. In order to maintain their

standard of living, people change their spending habits when confronted with difficult cost

choices. They ration or substitute, or sometimes go without. Australia has no true cost-of-

living index that takes such actions into account.

The discourse on poverty, deprivation and cost of living includes the subjectivity on what is

considered essential and therefore non-discretionary and discretionary spending. Community

expectations have helped define what is acceptable for a modern standard of living. For

example, while the CPI price groups of communications and recreation may be considered

non-essential and therefore linked to discretionary spending, the internet (CPI group -

communications) is important for accessing the increasing number of public and private services

online and a holiday (CPI group - recreation) once a year is considered important in balancing

work/life commitments and avoiding deprivation16.

Figure 6 indicates expenditure patterns for the all-households group across the CPI price

groups for Australia. The term all-households is used for expenditure data that has not been

disaggregated into particular household types and it is the household type that represents the

average expenditure.

16

Just over 60% of those surveyed considered a one week holiday away from home a year as important in Saunders’ et al

study on deprivation. See Saunders, P., Naidoo, Y., and Griffiths, M., Towards New Indicators of Disadvantage: Deprivation and Social

Exclusion in Australia, Social Policy Research Centre, November 2007.

12

Figure 6: Australian all-households expenditure

When examining the housing sub-groups for Australian expenditure, Figure 7 shows the

expenditure amounts as a percentage for the items constituting housing, which are, rents

(4.8%), utilities (2.8%) and other housing (13.2%).

Figure 7 also shows the utilities sub-group for Australian expenditure. The expenditure

percentages for the items constituting utilities are, electricity (1.6%), gas and other household

fuels (0.5%), and water and sewerage (0.7%).

Figure 7: Australian expenditure, housing sub-groups and utilities expenditure classes

13

Figure 8 indicates expenditure patterns for the all-households group for Tasmania, which

represents the average expenditure, across the CPI price groups.

Figure 8: Tasmanian all-households expenditure

When examining the housing sub-groups for Tasmanian expenditure, Figure 9 shows the

expenditure amounts as a percentage for the items constituting housing, which are, rents

(3.4%), utilities (3.4%) and other housing (13.8%).

Figure 9 also shows that the utilities sub-group for Tasmanian expenditure is constituted from

electricity (2.8%), gas and other household fuels (0.4%), and water and sewerage (0.1%).

Figure 9: Tasmanian expenditure, housing sub-groups and utilities expenditure classes

14

RELATIVE PRICE INDEX

INTRODUCTION

The RPI model utilises HES expenditure data by various income, family composition and tenure

types, for Australia or Tasmania where HES sampling was sufficient for the ABS to supply

expenditure data at its most disaggregated form17.

The benefit of the model is that when used with CPI derived expenditure weights, the average

expenditure of the RPI aligns to the CPI as a proof of concept. When the quantities are

modified by HES expenditure data for particular households, the model provides indicative

indexes of expenditure across the CPI basket for particular household types. Analysis of this

expenditure provides a method for understanding cost of living pressures.

Unlike the Strategy, this report contains all RPI household types analysed for cost of living

impacts. The strategy contains a reduced set of the full RPI households to provide a sample of

household types across income source and level, tenure and family composition. The sample

was also chosen to reduce the likelihood of representing the same or similar population cohort,

as the households are not mutually exclusive.

There are six main groups of households used in this report, from which samples were used for

the Strategy. Attachment 1 contains further detail on the household groups, their definitions

and use in the Strategy. In summary, the groups are:

The All-households type. This household represents the average expenditure for the specified region (Tasmania or Australia).

Contribution of government pensions and allowances (GPA) to income group. The

GPA household types include household expenditure divided into four categories,

defined by the percentage that GPA’s contribute to the household’s income. The ranges are 1-20%, 20-50%, 50-90% and 90-100%. These households have a limit to the

incomes they receive, for example the GPA, 90-100% household receives at least 90%

of its income from pensions and allowances, which is means-tested by the

Commonwealth to meet eligibility requirements.

Income quintile and decile group. The quintile group has five household types within it,

defined by income ranges (or quintiles). The lowest income range is the first quintile household, followed by the second, third, fourth and highest (fifth) quintile.

The decile group has ten households within it, which are also defined by income ranges.

There are ten income ranges (or deciles), with the lowest income household being the

first decile. This analysis does not use any of the individual decile households, it uses

expenditure data for the combination of the second and third decile households, as this

is accepted by the ABS to be the most accurate representation of low income

households.

17

A range of the RPI households use Australian expenditure weights multiplied by Tasmanian prices to determine household

costs, due to limitations in the Tasmanian sample sizes in the HES.

15

The income source group. This group is defined by the source of income. This includes,

households receiving different types of government pensions and allowances, income

from a business, wages and salaries and other income sources, which includes

superannuation. Again, households such those receiving government pensions and allowances would have limited income due to the eligibility requirements set by the

Commonwealth.

The family composition group. This group is defined by the family composition and includes couple and single families with or without dependent children.

The tenure type group. This group is defined by the tenure of the household, which includes households that own or are purchasing their home, with and without a

mortgage, and those households renting.

DISPROPORTIONATE IMPACTS OF PRICE

The following information explains household expenditure modelled through the RPI. As the

RPI utilises CPI price data and HES expenditure data, the CPI price indexes and expenditure

data are further explained below.

Price Groups

General observation of the CPI price groups show that:

The Australian economy has seen long term general growth, therefore it is an inflationary, not deflationary economy. This means that many price indexes are

increasing and the purchasing power of money is being de-valued. The rate of growth is

an important economic indicator and is often measured as an annual percent change,

which is an economic indicator referred to as the annual rate of inflation.

According to Reserve Bank objectives, the desirable annual rate of inflation should be

between 2% and 3%. Average annual movements in the CPI for both Hobart and for Australia have been broadly in line with this aim over the past five years . Inflation can

impose additional cost burdens on households. Rises in inflation can reduce the

purchasing power of money and put pressure on wages18.

The rate of change in an index is critical to understanding cost pressures. This is

reflected in a price group’s rate of change over time, where a steady increase can strain

household budgets. Volatility seen through jumps in price within a short period of time are price shocks, where a dramatic increase in price impacts on a household’s ability to

cash flow costs during a short period of income. When price shocks are combined with

any strain already underway, households with low financial resources are left with little

to no capacity to absorb price movements, leading to financial crisis.

The introduction of the Goods and Services Tax in June 2000 generated price increases across most groups.

Indexes for regulated prices often appear stepped, as pricing policy is implemented from

the beginning of the financial or calendar year. Other stepped price increases are due to the sampling of the CPI survey process, where annual prices are determined then

divided into quarterly amounts to determine their contribution to a quarterly index.

18

Australian Bureau of Statistics 2010, Measures of Australia’s Progress, Sep 2010: Inflation (cat. no.1370.0)

16

Notwithstanding the role of regulators, price change for essential services is often above

the CPI for Australia.

Although price groups sampled in the analysis are above the CPI, other price groups are

below, generating the average that is the CPI.

To explain some of these points, the price movement for the housing sub-group of utilities is

detailed below.

UTILITIES

Figure 10: Utilities CPI index, Hobart

When looking at CPI time series data for Hobart from the March 1990 to March 2011 quarter

(Figure 10) there are a number of general observations:

The ABS collects electricity, gas, water and sewerage charges quarterly from the energy

authorities and local councils, and both concessional and standard rates are priced.

Connection fees, delivery and similar charges are included as part of the price of the

utility service19. Current charges are applied to estimates of annual consumption of

electricity, gas and water, which is then divided by four to determine a quarterly price.

The dividing of the annual price into a quarterly price often gives the effect of a stepped approach to price increases for the indexes, as the same price is recorded for all

quarters of a year.

The gas and other household fuels expenditure class includes natural and LPG gas and firewood. There has been occasional price volatility throughout the index. Some of the

volatility may have been influenced by regulation change (Commonwealth Government deregulating the wholesale price of LPG in Australia in January 1991), and increased

19

ABS, Consumer Price Index, Concepts, Sources and Methods, CAT 6461.0, 2009.

17

demand for natural gas through distribution to households during the roll-out of stage

two of the natural gas project in 2007.

The magnitude of price increases varies by energy source, which will disproportionately

impact households. For example, in the last 12 months, gas and other household fuels has increased in price by 2.1%, whereas electricity has increase by 15.9%. Those

households that use firewood as an energy source for heating (combustion heaters) are

impacted less than those consuming electricity as a heating energy source.

Two of the largest price rises for electricity occurred in the March 2008 quarter (12.2% increase from the previous March quarter) and from the beginning of the 2010-11

financial year to March 2011 quarter (9.3%).

There is still change in utility prices to be expected in Tasmania due to structural

reform. For example, full price determination for water and sewerage (which will be determined by the Office of The Tasmanian Economic Regulator - OTTER) is due to

commence on 1 July 2012, when, prior to this (the transition period), maximum

increases were set by the Tasmanian Government through an interim price order.

OTTER expects that full cost recovery will not be achieved for the three water corporations by the end of the transition period and prices may rise20.

Expenditure

The household types are not necessarily mutually exclusive between income source,

income level and tenure and family composition households. Expenditure data for households in an income category could come from households of all types of family

composition and tenure type. Similarly, households defined by family composition

contain varying income levels and tenure type. Finally, tenure households contain all income levels and family composition types.

There may also be crossover within households defined by income type. For example,

due to the level of income, the expenditure of the household type Contribution of GPAs

to Income-50% to less than 90% may also include expenditure data from Income quintile

of household-Second and third deciles households.

As there was a focus in the analysis on lower income households, the various household compositions were chosen to provide disaggregated views of household expenditure

for analysis.

The household that constitute the group of Contribution to GPAs to income…

households are mutually exclusive within their own group. The quintile range of

households represents expenditure data modelled for the full Tasmanian population, and are therefore exclusive by the income ranges that define them.

To explain some of these observations, the household expenditure patterns on utilities is

detailed below. The analysis splits the households into income source/level and family

composition/tenure. The following tables show expenditure patterns by household types from

highest to lowest, with the sample sorted to include only those households expending more

than the Tasmanian average, in this case, the average is 3.4% for utilities.

20

“Relative to the previous 10 per cent annual price caps, the five per cent caps and Government assistance, which ceases on

30 June 2012, has the effect of increasing pressure for price increases after that time and/or prolonging the period in which full

cost recovery can be achieved.” OTTER News, Office of the Tasmanian Economic Regulator, March 2011, page 2.

18

The tables show expenditure as a percentage of the total expenditure of the household,

referred to as expenditure weights. They also show expenditure in dollar terms as average

weekly household expenditure (AWHE)21, which approximates dollars spent on the referenced

item.

Table 3: Expenditure on utilities by income source and level household types

Household type

Expenditure

weights

AWHE –

March 2011

Contribution of GPAs to Income-90% and over 5.9% $36.6

Income quintile of household-Second and third deciles 5.0% $40.8

Income quintile of household-Lowest quintile 5.0% $38.9

Contribution of GPAs to Income-50% to less than 90% 4.8% $42.3

Government pensions and allowances-Unemployment/

sickness/ education allowance 4.6% $35.8

Government pensions and allowances-Age/disability

pension 4.6% $31.0

Income quintile of household-Second quintile 4.0% $43.6

Government pensions and allowances-Other 4.0% $37.1


Income quintile of household-Third quintile 3.6% $44.2

All households - Tasmania 3.4% $43.6

All households - Australia 2.8% $45.3

Table 3 shows that the household Income quintile of household-Second and third deciles has 5.0%

of its total weekly expenditure on utilities. This is 2.2% above the average expenditure for

Australia. Although this household is second highest for expenditure weight, it spends more in

dollar terms ($40.8) than the highest expenditure weight household, Contribution of GPAs to

Income-90% and over ($36.6). This reflects differences in economic resources between

households. The difference is not just influenced by incomes, the eligibility and take-up rate of

subsidies and concessions can influence household economic resources. The implication of this

is that low expenditure in dollars, does not necessarily mean that some households manage to

find cheaper goods and services, but that major social interventions such as concessions, or in

the health group, Medicare, are making important contributions to lowering costs.

Table 4 shows expenditure on utilities by family composition and housing tenure. Single parent

families have higher expenditure weights than the average for Australian and marginally higher

than the average for Tasmania. House owners without mortgages are the only tenure type to

be expending above the average for Tasmania and Australia.

21

The Average Weekly Household Expenditure (AWHE) indicates in nominal dollar terms the amount that the households

would spend per week if prices were inflated to March 2011 CPI quarter prices. These are approximate and were calculated

through inflating expenditure dollars from 2005 HES data (concorded to CPI price groups) by the change in the relevant CPI

price indexes.

19

Table 4: Expenditure on utilities by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

June 2011

One parent, one family households with two dependent child only 3.8% $42.3

Lone person household 3.7% $29.9

One parent, one family households with one dependent

child only 3.6% $36.4

Tenure Type-Owner without a mortgage 3.5% $40.6



Electricity is an expenditure class of the utilities sub-group. Although the analysis was conducted

at the price group and sub-group level, some prices at the expenditure classes were included

due to high price movements or their fundamental requirement as an essential. The

expenditure class of electricity falls into this category. The example continues in Table 5, which

has been sorted to include only those households expending more than the Tasmanian average

on electricity, at 2.8%. The households with highest expenditure weights are low income

households, lead by Contribution of GPAs to Income-90% and over. 60% of Tasmanian households

expend above the average, represented in the lowest, second and third quintiles.

Table 5: Expenditure on electricity by income level and source household types

Household type

Expenditure

weights

AWHE -

March 2011


Income quintile of household-Second and third

deciles 4.1% $34.4


Contribution of GPAs to Income-50% to less than

90% 3.9% $35.2



50% 3.2% $43.7




The following analysis continues the explanation of price movement and household

expenditure levels across the essential services and concludes with recreation and alcohol and

tobacco. In policy discussions on deprivation, recreation is often seen as essential, particularly as

computers are required to online services and information sources. Alcohol and tobacco is

included as it is a relevant public health issue in Tasmania.

20

FOOD

Price

Figure 11 shows that the Hobart fresh food index has moved away from the Australian CPI

since 2002, and at close to 20 points above by 2011. Food prices are market driven, and one of

the most exposed groups to price volatility due to climate events. This is seen in the fresh food

index with high fluctuations in price during 2006-2007 when drought, floods and cyclone Larry

impacted on food production.

Figure 11: Fresh food CPI index – Hobart

Expenditure

Food is one of the main contributors to the CPI and RPI indices, seen through the high

expenditure weight across both Tasmanian and Australian all-households groups in Table 6.

The average Tasmanian expenditure is higher than that for Australia, with a 2.4% difference.

The lowest, second, third and fourth quintiles (80% of the population) all expend marginally

higher than the average on food. The top five households in the table are all low income

households. The high expenditure on food for low income households, and the high volatility in

price means the food group could be one of the hardest household costs to manage.

Table 6: Expenditure on food by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011





21


pension 19.0% $107.9






Income quintile of household-Fourth quintile 16.9% $240.9




When looking at expenditure on food by family composition and tenure type (Table 7), the

only composition based household expending above the Tasmanian average is One parent, one

family households with two dependent child only.

Table 7: Expenditure on food by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011



Tenure Type-Renter 16.6% $151.1



HOUSING

Price

Figure 12 shows the price group of housing, which includes rents, utilities (covered already) and

other housing. Although the utilities index is substantially higher than the housing index, the

latter closely follows one of its sub-group items, the other housing index. This indicates other

housing has the largest contribution to the housing price group, as seen in figures 7 and 9.

22

Figure 12: Housing CPI index – Hobart

Expenditure

The Income quintile of household-Second quintile household proportions nearly a third (30.6%) of

its total expenditure on housing. A range of low to middle income households have

expenditure weights above the average for Tasmania. As the sub-group ‘other housing’ is a

large contributor to the housing group, and other housing includes house purchase, property

rates and charges and repairs and maintenance, these households are likely to be house

purchasers.

Table 8: Expenditure on housing by income level and source household types

Household type

Expenditure

weights

AWHE -

March 2011



Government pensions and allowances-

Unemployment/ sickness/ education allowance 25.3% $169.5




50% 22.6% $259.1


Income source of household-Wage and salary 21.7% $353.9


pension 21.3% $124.0

23


90% 21.1% $160.6

Income source of household-Own unincorporated business income 20.9% $314.1



Table 9 shows that Lone person households are expending over 6% more than the national and

State averages, with single and couple families around 4-5% more. The high expenditure in

dollar terms for Couple with three or more dependent children only ($520) is likely due to larger

houses to accommodate family size, therefore leading to higher housing costs.

Table 9: Expenditure on housing by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011



child only 25.9% $225.0

Couple with three or more dependent children only 24.8% $520.0

One parent, one family households with two dependent

child only 23.7% $227.0

Tenure Type-Owner with a mortgage 23.5% $381.8


Couple with one dependent child only 21.3% $350.5



RENT

The price index for rent is shown in Figure 12. The rent index includes both public and private

rent costs, therefore price comparison between these two is not possible.

Expenditure

The average expenditure on rent for Tasmania is lower than that of Australia. Although rent

expenditures are up to 7% higher for some low income households, it is difficult to gauge the

actual impact of rent as all of the households in Table 10 would include various tenure types,

including house owners.

24

Table 10: Expenditure on rent by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011

Government pensions and allowances-Unemployment/ sickness/ education allowance 10.8% $72.4





pension 5.9% $34.5


50% 5.1% $58.5



90% 4.4% $33.2


Income source of household-Own unincorporated

business income 3.5% $53.5



Table 11 gives the closest measure of the impact of rent on a household’s budget, as it includes

the tenure type renters, which by definition, does not incur costs for house ownership.

Similar to income defined households above, the other family composition households would

also have varying expenditures on rent due to mixed tenure types influencing expenditure

levels.

Table 11: Expenditure on rent by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011


One parent, one family households with one dependent child only 13.9% $121.6

One parent, one family households with two

dependent child only 11.7% $112.2





25

HEALTH

Price

Figure 13 shows that the index for health is influenced upwards by the high increase and

contribution of health services to the total health price, while pharmaceuticals continues to

cycle close to the CPI. The ‘jagged-tooth’ appearance of pharmaceuticals is likely caused by the

sampling of data throughout the calendar year. Prices decrease during this period due to

subsidisation through the Pharmaceutical Benefits Scheme, as thresholds for expenditure on

pharmaceuticals are reached. The health index includes both public and private health costs,

therefore price comparison between these two is not possible.

Figure 13: Health CPI index – Hobart

Expenditure

On average, Tasmanian households have health expenditure weights at 1.4% higher than the

average for Australia. Table 12 indicates that the mixed income household of Contribution of

GPAs to Income-20% to less than 50% has the highest expenditure at 3.6 above the Australian

average and the highest dollar expenditure. The difference between the high expenditure in

weight and dollar terms for households Government pensions and allowances-Age/disability

pension and Income quintile of household-Third quintile likely points to the need to spend high for

the former, due to declining health through age, and the capability to spend high for the latter,

due to higher financial resources.

Table 12: Expenditure on health by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011


Government pensions and allowances-Age/disability 6.1% $34.7

26

pension





business income 4.8% $69.9




Table 13 indicates that home owners have a higher proportion of expenditure on health. Couples without dependants also tend to have a higher expenditure on health, likely due to

financial capacity, while lone person households spend high and have low financial capacity (see

table 24).

Table 13: Expenditure on health by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011


Couple only 5.7% $72.3





TRANSPORT

Price

The index for transport has closely followed the prices for private motoring, as the latter is the

major contributor in expenditure (92%) to the overall Transport index. Notwithstanding this,

the sub-price group of urban transport fares, which consists of buses and taxis in Tasmania, is

subject to Government price regulation and exceeds other indices by nearly 100%.

27

Figure 14: Transport CPI index – Hobart

Expenditure

Table 14 indicates that when all compositions are combined, there are only three household

types expending above the Tasmanian average for transport. Private motoring and urban

transport fares have been included to indicate the proportions they contribute to the total

expenditure weight of Transport. Private motoring includes car purchase, therefore it is

unsurprising that Income quintile of household-Fourth quintile – a middle to high income bracket

household, is leading transport expenditure.

Table 14: Expenditure on transportation by all household types

Transportation Private motoring

Urban transport fares

Household type Weights

AWHE

- March

2011 Weights

AWHE

- March

2011

Weights

AWHE

- March

2011

Income quintile of household-

Fourth quintile 19.5% $244.9 19.2% $240.5 0.3% $3.6

Income quintile of household-Lowest quintile 14.2% $82.5 14.0% $81.0 0.2% $1.3

Tenure Type-Owner without a

mortgage 14.2% $124.0 13.9% $121.4 0.2% $2.3

All households - Tasmania 12.7% $123.0 12.4% $119.8 0.3% $3.0

All households - Australia 12.6% $142.4 12.2% $137.5 0.4% $4.8

URBAN TRANSPORT FARES

Table 15 shows that there is a marginal difference in expenditure between most households

and the Tasmania average, although it should be noted that Government pensions and

28

allowances-Unemployment/sickness/education allowance is expending over twice the amount.

Expenditure in dollar terms indicates that wage and salary earners are likely to be travelling

longer distances when spending on fares, and a likely influence of subsidises for Government

pensions and allowances-Age/disability pension.

Table 15: Expenditure on transport fares by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011





pension 0.4% $2.4

Income quintile of household-Highest quintile 0.4% $7.3


Income source of household-Other income 0.4% $5.3



Table 16 shows that Lone person households, likely to be constituted of older people (see

commentary for Table 24), expends the most on fares, followed by households with

dependent children.

Table 16: Expenditure on transport fares by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011











EDUCATION

Price

Figure 15 shows that the price index for education in Tasmania has steadily outpaced the CPI

for Australia since 1990 (an additional 77.9%). The price indexes for the education sub-groups

29

are lower than the CPI as their reference base is June 2000. The stepped nature of the

education index reflects that fees are set at the beginning of the calendar year. The price for education includes both public and private education costs, therefore price comparison

between these two is not possible.

Figure 15: Education CPI index – Hobart

Expenditure

Table 17 shows that when looking at expenditure weights, Tasmania is very close to the

Australian average (all households are within 1%). The dollar expenditures also closely aligned

to the weights, indicating that household expenditure in weight and dollar terms are similarly

proportioned. The exception is the highest household by expenditure weight – Income source

of household-Wage and salary, which expends slightly lower in dollar terms than Income quintile

of household-Highest quintile. All of these households would not be considered as low income

households (Income decile of household-Second and third deciles has an expenditure weight of

0.2%, reflecting subsidisation of costs to low income households).

Table 17: Expenditure on education by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011




Income source of household-Own unincorporated business income 2.0% $29.0




30

Table 18 shows the degree that larger families have higher education costs. The household

Couple with three or more dependents has over double the expenditure in dollar terms than

other households. The fact that households defined by composition, including types such as

One parent, one family households with two dependent child only have higher expenditures than

income based households, may be reflecting that the eligibility requirements of the Student

Assistance Scheme includes an income test and does not factor household size (households

defined by family composition and tenure include all income levels).

Table 18: Expenditure on education by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011









RECREATION

Price

Figure 16 outlines the various price groups that contribute to the recreation index for Hobart.

Although the index for books, newspapers and magazines is 40.2 points higher than the Hobart

CPI, most price items contributing to the recreation index are below the Hobart CPI by

approximately 46 points. Audio visual and computing is the one index that has decreased

dramatically over the reference period, reflecting the continuing trend for increasing quality and

decreasing price for technology goods.

Figure 16: Recreation CPI index – Hobart

31

Expenditure

Table 17 indicates that the households with medium to high incomes, are expending the most

on recreation in Tasmania, ranging from 0.3% below to 1.9% above the average for Australia. It

also shows that the Tasmanian average is marginally below the average for Australia.

Table 17: Expenditure on recreation by income source and level household types

Household type

Expenditure

weights

AWHE -

March 2011

Income source of household-Other income 14.1% $145.0






Table 18 indicates that couples, house owners and families with dependents all expend close to

the average, with Couples with three or more dependent children only expending the most in

dollar terms.

Table 18: Expenditure on recreation by family composition and tenure household types

Household type

Expenditure

weights

AWHE -

March 2011







ALCOHOL AND TOBACCO

Alcohol and tobacco are included below to indicate the households that expend proportionally

more than the average. Appendix 1, discusses alcohol and tobacco in price and expenditure

further.

Price

Figure 16 indicates that the alcohol and tobacco index has been above the CPI for most of the

reference period and that although tobacco contributes less to the combined index, it is 213%

above the Hobart CPI. Therefore consumption of both alcohol and tobacco will represent a

high cost to households expending above the average. Arguable by design, as both goods have

price regulation to deliver price signals to consumers.

32

Figure 16: Alcohol and tobacco CPI index – Hobart

Expenditure

Both income and composition/tenure households are combined in Table 19 due to low

numbers of households expending above the Tasmanian average. The average expenditure

weight for Tasmania is 0.6% higher than the Australian average. There is also a mix of low to

high income households within a close range of expenditure by weight. However, in dollar

terms, expenditure ranges from $30.1 – $109, indicating variation in the price of the goods

purchased.

Table 19: Expenditure on alcohol and tobacco by all household types

Household type

Expenditure

weights

AWHE -

March 2011











33

CUMULATIVE IMPACT OF COST OF LIVING

Low income households are particularly vulnerable to cost of living pressures, seen through

steady price squeezes and sudden shocks in essential services. While most people are affected

by cost of living changes, it is appropriate that policy attention focuses on the most vulnerable.

Price squeezes and sudden shocks often leave low income households left with little warning

and capacity to absorb price changes, leading to rationing and substitution.

When there are few options to substitute, households have to resort to rationing, at times

reducing consumption to below acceptable levels of living. When households cannot ration or

substitute any further, there is no capacity to absorb cost increases, and households require

assistance from extended networks and through the social safety net, including emergency relief

services.

The evidence in this report enables review of government income support, concessions and

regulated pricing regimes, to take into account that households are disproportionately impacted

by costs. This requires household based analysis by location to uncover the quantum of

hardship being faced in our communities and design appropriate policy responses.

The RPI research shows the households that are disproportionately impacted by high

expenditure and price across the essential services of food, housing, health, transport and

education22.

As seen previously, tables 20 and 21 splits households by income source/level family

composition/tenure, and provides expenditure as a percentage of total expenditure

(expenditure weight) and in dollar terms, as average weekly household expenditure (AWHE).

The top three expenditure weights are highlighted for reference using shaded squares, with the

darkest shade applied to the highest weight. Although an approximation, dollar figures are net

of tax and concessions, therefore represent actual expenses to households.

22

Households expending above the average was determined by comparing the total expenditure percentage across the essential services to

that of the average for Tasmania. Australian average (all households expenditure) figures are included for comparison, along with both Tasmanian and Australian CPI figures.

34

Table 20: Expenditure on essential services by RPI household types of income source and level

Food Housing Health Transportation Education Total

% $ % $ % $ % $ % $ % $

Income quintile of household-Second quintile 16.9 157.8 30.6 292.6 4.9 45.4 9.2 75.2 0.7 6.6 62.2 577.5

Contribution of GPAs to Income-1 to less than 20 15.6 224.9 27.5 408.0 4.0 58.2 12.4 158.0 2.1 30.1 61.6 879.2

Contribution of GPAs to Income-90 and over 21.3 112.0 24.1 130.0 3.7 19.6 10.7 49.5 0.1 0.6 60.1 311.7

Income quintile of household-Lowest quintile 17.5 115.8 23.3 158.2 3.9 26.0 14.2 82.5 1.0 6.9 59.9 389.4


Income decile of household-Second and third deciles 20.5 141.3 22.1 156.9 4.6 31.5 11.5 69.6 0.2 1.4 58.8 400.7


Government pensions and allowances-Age/disability pension 19.0 107.9 21.3 124.0 6.1 34.7 10.7 53.4 0.1 0.6 57.2 320.6

Government pensions and allowances-Other 19.3 153.4 22.6 184.4 3.3 26.3 10.8 75.3 1.1 9.1 57.2 448.5

Income quintile of household-Fourth quintile 16.9 240.9 15.0 220.1 4.3 61.3 19.5 244.9 1.4 20.8 57.1 787.9

Government pensions and allowances-Unemployment/ sickness/

education allowance 17.3 112.9 25.3 169.5 2.4 15.8 9.6 55.1 1.3 8.8 56.0 362.2

Income source of household-Own unincorporated business

income 15.7 230.4 20.9 314.1 4.8 69.9 12.5 161.4 2.0 29.0 55.8 804.8

Income source of household-Wage and salary 14.8 235.4 21.7 353.9 4.2 66.6 12.2 170.3 2.2 35.2 55.0 861.5

All households - Tasmania 16.0 176.3 20.5 231.9 4.3 47.5 12.7 123.0 1.4 15.3 55.0 594.0

All households - Australia 13.6 175.8 20.8 274.9 2.9 37.9 12.6 142.4 1.3 16.8 51.2 647.8

35

Table 21: Expenditure on essential services by RPI household types of family composition and tenure

Food Housing Health Transportation Education Total

% $ % $ % $ % $ % $ % $

Couple with three or more dependent children only 16.0 326.2 24.8 520.0 4.0 81.2 10.0 180.3 4.3 89.0 59.1 1,196.6

One parent, one family households with one dependent child

only 15.2 129.0 25.9 225.0 2.9 24.7 11.8 87.6 1.5 12.9 57.3 479.3

Lone person household 13.5 93.1 27.1 191.3 5.2 36.1 10.7 64.9 0.7 5.1 57.3 390.4

One parent, one family households with two dependent child

only 17.3 160.8 23.7 227.0 3.4 31.6 9.2 75.7 3.2 30.3 56.9 525.4

Tenure Type-Renter 16.6 151.1 23.1 215.4 3.0 27.7 11.9 95.2 1.4 12.4 55.9 501.9

Tenure Type-Owner with a mortgage 14.5 228.7 23.5 381.8 3.7 58.1 12.6 174.5 1.3 21.4 55.6 864.5

All households - Tasmania 16.0 176.3 20.5 231.9 4.3 47.5 12.7 123.0 1.4 15.3 55.0 594.0

All households - Australia 13.6 175.8 20.8 274.9 2.9 37.9 12.6 142.4 1.3 16.8 51.2 647.8

36

The average expenditure across essential services in Tasmania is 3.8% higher than the

Australian average. It is important to note that there are differing financial resources

available to the households, for example, the household Income quintile of household-Second

quintile has the highest expenditure weight across both tables (62.2%) and an expenditure in

dollar terms of $577.5. However, Couple with three or more dependent children only from

Table 21 leads in dollar terms, with a total AWHE of $1,196.6, and a weight of 59.1%.

High expenditure and high income households often have high household wealth, (including

savings, credit, home ownership, investments etc) that can be utilised in financial crisis. This

is not the case for low income households. It is also important to note that households

categorised by the receipt of Commonwealth Government pensions and allowances have

income support payments adjusted for all other income sources, therefore their financial

resources are a known quantity and limited. For example, the third highest household by

expenditure weight from Table 20, Contribution of GPAs to Income-90% and over, has the

lowest expenditure in dollar terms compared to all other households in both tables

($311.7). This household has the highest proportion of income from government pensions

and allowances, and has the least income capacity to respond to financial crisis. Other at-risk

households include Contribution of GPAs to Income-50% to less than 90%, which receives

most of its income (50 - 90%) from pensions and benefits, with remaining income from

other sources such as wages and salaries. This household has a weight of 59.1% and AWHE

of $430.8. Lone person households would similarly be at-risk, with a weight of 57.3% and

AWHE of $390.4.

In the case of household Contribution of GPAs to Income-50% to less than 90, due to limited

financial resources, price squeezes and shocks could move it towards emergency relief, with

the medium term option of increasing work hours to lift financial resources (if the

opportunity to do so exists) or lessening work hours to increase concessions. In the case of

Lone person households, due to Tasmania’s ageing population, it is likely that this household is

constituted by a large proportion of older people, which may not have the option of raising

income through employment.

The data shows that the cumulative impact of price squeezes and shocks are

disproportionately distributed across Tasmanian households. Particular households are at

risk of crisis, which are hidden in macro-economic debates on consumption and price rises

at the national and state levels.

INCOME MODELLING

The income, workforce participation and financial stress modelling undertaken by

NATSEM23 uses a range of data sources and benchmarks to guide the inflation of data to

2011 levels for Tasmanian households. NATSEM’s Cost of living indicators for Tasmania, Final

Report (Appendix 3) gives a description of the modelling undertaken for this work.

When comparing financial capacity for the Tasmanian average household, Tasmania leads

most of the headline indicators for the lowest median income, highest poverty rate and

lowest labour force participation, with South Australia second. However, the ‘State of usual

23

NATSEM research conducted for the Social Inclusion Unit, DPAC.

37

residence’ for the ACT and the NT has been combined by the ABS as ACT/NT to reduce

the level of detail and protect the confidentiality of survey respondents. This will have an

impact on Tasmania’s ranking in the comparative analysis where the NT (if isolated in the

data) may have more significant results across the indicators.

The following defines the financial indicators:

Median income: The numerical centre for equivalised disposable income. This figure is used instead of the average (mean), as averages are influenced by high and low

outlying results in a range of figures. It is also used to indicate the income figure that

is compared to the poverty rate.

Median income to Australian average: The median income as a percentage of the

Australian average.

Proportion of gross income from income support: The percent of households that

has income exclusively from income support payments.

EMTR, Effective Marginal Tax Rate: EMTR indicates the amount for every dollar

earned that is forgone through taxation or reduced income support payments.

EMTR can highlight the financial disincentives through the loss of income support payments as low income households transition to wage and salary income. It can

also highlight disincentives to increasing wage and salary income due to moving into

higher marginal tax rates.

Poverty rate: 50 percent of the household median equivalised disposable income

for Australia.

Labour participation rate: Percentage of the household type in Tasmania that is participating in the labour force.

House owner/purchaser to State total: the percentage of the household type that

owns or is purchasing their principal place of residence, compared to the State total

of households that are owned or being purchased.

The following focuses on those households with expenditure weights above the Tasmanian

average expenditure for essential services. This was done to examine those households that

have high expenditures, then compare income levels and sources, and financial participation

levels and barriers. The following tables provide data and commentary on the financial

indicators across jurisdictions, with a focus on Tasmania. Not all household types were

included due to data limitations24. The tables are constituted by households defined by

income level, source and family composition type. Each table has the most significant

indicator highlighted for reference25.

24

All tenure type and GPA households, and have been omitted due to insufficient data. The lowest quintile household has

been omitted due to the ABS preferring the second/third decile as representative of low income households. 25

Median income to Australian average is not highlighted as it is the median income in percentage terms.

38

Table 22: Financial capacity of Tasmanian income level households and all-households

All households TAS NSW VIC QLD SA WA

ACT/

NT Aus

Median income ($'s) 614.0 730.0 749.0 741.0 698.0 774.0 936.0 740.0

Median income to Australian

average (%) 83.0 98.6 101.2 100.1 94.3 104.6 126.5 100.0

Proportion of gross income

from income support (%) 15.7 9.9 10.2 10.0 12.5 7.9 4.3 9.9

EMTR (%) 26.7 28.4 27.0 27.7 26.7 29.2 30.1 27.9

Poverty rate (%) 10.7 6.9 7.5 6.5 8.5 5.6 4.3 7.0

Labour participation rate (%) 61.3 61.8 64.2 66.2 61.7 66.4 73.4 64.0

Income decile of household-Second and third deciles

Median income ($'s) 434.0 432.0 435.0 442.0 430.0 436.0 447.0 434.0


average (%) 58.6 58.4 58.8 59.7 58.1 58.9 60.4 58.6



EMTR (%) 17.1 17.2 14.5 16.2 17.0 19.8 16.9 16.6

Poverty rate (%) 6.4 9.5 8.3 8.6 8.8 6.5 11.0 8.7

Labour force participation

Rate (%) 28.7 31.3 29.7 27.5 25.4 35.7 41.2 30.2

House owner/purchaser to

State total (%) 20.7 21.5 19.8 19.1 21.7 20.7 6.6 20.2

Second Quintile

Median income ($'s) 521.0 516.0 514.0 517.0 514.0 505.0 519.0 515.0


average (%) 70.4 69.7 69.5 69.9 69.5 68.2 70.1 69.6


from income support (%)

41.4

42.2

37.9

41.5

45.8

36.8

31.3

40.5

EMTR (%) 30.5 27.2 28.1 28.7 31.7 31.3 29.5 28.6

Poverty rate (%) - - - - - - - -



State total (%) 21.5 18.2 20.2 16.7 18.9 17.9 7.9 18.3

Income quintile of household-Fourth quintile

Median income ($’s) 909.0 926.0 937.0 923.0 920.0 943.0 923.0 929.0


average (%) 122.8 125.1 126.6 124.7 124.3 127.4 124.7 125.5



1.5

1.8

2.1

1.9

1.5

1.2

1.4

1.8

EMTR (%) 39.7 39.4 31.8 32.8 33.6 32.6 32.5 34.6

Poverty rate (%) - - - - - - - -



State total (%) 20.1 20.0 22.1 20.8 19.4 23.0 24.8 21.1

Tasmania leads all indicators except EMTR for the all households group, which

represents the average of each jurisdiction. Tasmania has the lowest median income and highest proportion of gross income from income support. This figure differs

from that reported in the 2009-10 ABS Survey of Income and Housing (33.0%) as it

samples households receiving all gross income from income support. The

39

proportion of gross income from income support increases to 20% outside of

Hobart (see Appendix 3).

Although the Tasmanian median income for the Second and third decile households is the same as the national average, it receives a greater proportion of income from

income support. This household is in the middle range across a number of

indicators, except poverty rate, where it is the lowest. ACT/NT has the lowest house ownership levels, with a 12.5% difference between the ACT/NT and the

state with the highest level, Queensland.

Tasmania’s median income for the Second quintile household is higher than all other jurisdictions. This reflects that Tasmania’s income is distributed across the lower to

middle income ranges26, which is substantiated by Tasmania having the lowest income gini coefficient compared to other jurisdictions, therefore the least income

inequality (see Appendix 3, page 9).

For the second and fourth quintile households, Tasmania has the highest EMTR,

which when combined with a low income represents a barrier to increasing income.

Table 23: Financial capacity of Tasmanian income-source households Government pensions and

allowances-Age/disability

pension TAS NSW VIC QLD SA WA

ACT/

NT Aus

Median income ($’s) 418.0 411.0 419.0 423.0 414.0 423.0 381.0 417.0


average (%) 56.5 55.5 56.6 57.2 55.9 57.2 51.5 56.4



EMTR (%) 12.8 10.6 12.3 11.7 14.0 13.8 5.8 11.9

Poverty rate (%) 34.0 28.3 26.2 27.2 29.9 28.1 43.6 28.0



State total (%) 22.3 19.2 20.1 19.8 23.1 17.3 4.5 19.4

Government pensions and allowances-Unemployment/ sickness/ education allowance

Median income ($’s) 319.0 382.0 334.0 369.0 328.0 319.0 295.0 361.0


average (%) 43.1 51.6 45.1 49.9 44.3 43.1 39.9 48.8



84.3

76.6

87.2

77.4

90.1

82.5

72.6

81.2

EMTR (%) 15.0 16.4 11.8 20.5 11.1 17.8 10.8 15.3

Poverty rate (%) 64.3 35.7 49.9 47.0 60.7 44.0 59.9 46.1



State total (%) 2.1 1.0 0.7 1.1 1.0 1.5 1.1 1.0

Government pensions and allowance - Other

Median income ($’s) 442.0 454.0 438.0 455.0 437.0 465.0 439.0 451.0


average (%) 59.7 61.4 59.2 61.5 59.1 62.8 59.3 60.9



90.6

89.5

84.6

79.6

86.5

81.3

74.4

85.2

EMTR (%) 5.3 5.3 10.1 7.6 9.8 15.4 14.1 8.4

Poverty rate (%) 15.1 15.5 19.8 12.6 13.5 5.8 26.5 15.3

26

Tasmania’s median income is close to equal to all jurisdictions at the third quintile, before dropping off for the fourth

and highest quintile, indicating a general spread of income in the lower centre income ranges (second and third quintiles).

40

Continued TAS NSW VIC QLD SA WA

ACT/

NT Aus



State total (%) 1.1 1.0 1.9 0.7 1.9 0.7 0.4 1.2

Income source of household-Wage and salary

Median income ($’s) 815.0 926.0 916.0 894.0 903.0 931.0 1021.0 916.0


average (%) 110.1 125.1 123.8 120.8 122.0 125.8 138.0 123.8



1.53

0.97

1.86

0.96

0.33

0.87

0.44

1.13

EMTR (%) 32.6 35.6 32.4 33.6 33.3 33.9 34.4 33.9

Poverty rate (%) 1.5 1.0 1.9 1.0 0.3 0.9 0.4 1.1



State total (%) 53.5 57.3 57.9 57.5 52.8 59.1 70.3 57.5

Income source of household-Own unincorporated business income

Median income ($’s) 590.0 598.0 607.0 678.0 718.0 637.0 690.0 637.0


average (%) 79.7 80.8 82.0 91.6 97.0 86.1 93.2 86.1



10.97

9.78

10.73

2.83

10.74

7.12

4.62

7.95

EMTR (%) 27.5 28.6 29.4 29.3 28.6 33.7 33.7 29.6

Poverty rate (%) 11.0 9.8 10.7 2.8 10.7 7.1 4.6 8.0



State total (%) 10.5 8.0 6.9 8.8 8.6 10.4 4.7 8.2

For the Age/disability pension households, the ACT/NT is the most significant jurisdiction across most indicators. Tasmania has similar income and income support

levels to the Australian average. It has the highest labour force participation rate and

the highest poverty rate – indicating higher comparative distribution of the population in the household type. Tasmania has the second highest house

ownership level.

Tasmanian Unemployment/sickness/education allowance households have a lower median income than Australia, equal second with South Australia. The income

source of the household is likely to be lowering the EMTR, indicating flexibility to

earn income with lower loss of benefits than other household types. The household

has the lowest income across all households and highest percentage under the

poverty rate across all jurisdictions. This in part reflects the lower payments of this

beneficiary type when compared to households receiving pensions.

Households receiving other government pensions and allowances includes payments

for parenting payment, maternity payment and Family Tax Benefit. Tasmania has the highest proportion receiving income support and lowest labour participation rate,

correlating low levels of income and employment.

41

Table 24: Financial capacity of Tasmanian family composition households

Lone person household TAS NSW VIC QLD SA WA

ACT/

NT Aus

Median income ($’s) 454.0 478.0 492.0 558.0 484.0 518.0 812.0 506.0


average (%) 61.4 64.6 66.5 75.4 65.4 70.0 109.7 68.4



28.1

22.9

20.9

17.2

25.5

17.5

7.6

20.5

EMTR (%) 26.1 20.1 20.9 22.3 20.3 21.7 24.2 21.2

Poverty rate (%) 29.3 30.1 25.3 25.3 29.4 25.7 18.1 27.1



State total (%) 24.5 19.9 23.1 20.9 26.4 24.0 21.7 22.1

One parent, one family households with one dependent child only

Median income ($’s) 464.0 498.0 496.0 523.0 574.0 533.0 512.0 514.0


average (%) 62.7 67.3 67.0 70.7 77.6 72.0 69.2 69.5



41.3

35.2

39.2

33.4

28.9

54.1

19.0

36.7

EMTR (%) 21.9 17.7 18.1 18.8 20.6 14.8 25.6 18.2

Poverty rate (%) 7.2 11.8 23.1 11.0 12.5 4.5 30.3 13.3



State total (%) 0.8 1.2 1.5 1.3 1.9 1.2 1.9 1.4

One parent, one family households with two dependent child only

Median income ($’s) 414.0 471.0 442.0 479.0 451.0 512.0 555.0 467.0


average (%) 55.9 63.6 59.7 64.7 60.9 69.2 75.0 63.1



67.5

51.8

58.4

48.2

57.4

27.4

27.0

50.1

EMTR (%) 9.4 14.2 12.7 21.8 16.5 28.9 27.2 16.7

Poverty rate (%) 32.8 11.8 20.6 16.3 17.4 4.2 16.2 15.6



State total (%) 0.8 1.2 1.5 1.3 1.9 1.2 1.9 1.4

Couple with three or more dependent children only

Median income ($’s) 598.0 776.0 689.0 745.0 798.0 757.0 738.0 740.0


average (%) 80.8 104.9 93.1 100.7 107.8 102.3 99.7 100.0


from income support (%) 12.5 5.5

7.3

6.7

6.6

6.5

4.7

6.4

EMTR (%) 41.7 41.8 43.5 43.1 42.8 44.7 44.2 42.9

Poverty rate (%) 4.7 4.2 0.1 3.7 3.2 0.7 1.7 3.8



State total (%) 9.2 11.7 11.4 8.4 9.7 10.4 13.0 10.6

Incomes for lone person households are low, and the proportion of income from

income support is high. The comparatively high house ownership level highlights that

42

this household is likely dominated by older people in retirement, who have paid off

their homes.

Although single parents with one dependent have low incomes the poverty rate is low. This household is predominantly renting, as indicated by very low house

ownership levels across all jurisdictions.

One parent, one family households with two dependent child only households stand out

across all family composition households as the most at-risk to financial stress. The

household has low income and a high proportion of income from income support. The parent of the household is likely to be juggling work opportunities with child

care responsibilities27, which is reflected in the low labour force participation rate.

Couple with three or more dependent children only households have higher incomes

than other family compositions, although Tasmania has the lowest median income

compared to other jurisdictions. Low incomes influence other indicators, such as the

poverty rate and proportion of income from income support.

Since the modelling, the ABS has released its latest 2009-10 Survey of Income and Housing

data. Table 25 shows that Tasmania has the second lowest level of household wealth28

compared to other states and territories and the wealth of the average Tasmanian

household is 81.5% of the Australian average29.

Table 25: Inter-jurisdictional comparison of household wealth

Tas NSW Vic Qld SA WA NT ACT Australia

Mean

household

net worth

$ 586,276 721,278 779,266 651,694 585,197 822,149 621,642 843,369 719,561

% of

Australian

average 81.5 100.2 108.3 90.6 81.3 114.3 86.4 117.2 100.0

HOUSEHOLDS AT RISK

Table 26 allows a broad observation of the capacity of households to expend on essential

services30, and the level of available income on non-essential items.

All percentages greater than 100%, represent a higher expenditure than income.

Households have been sorted by the total expenditure on essential services, highest to

lowest, which is referred to in the column ‘essentials expenditure weights’. This column is

followed by expenditure in dollar terms (AWHE) at 2011, mean equivalised disposable

income, followed by the percent of income spent on essential services. Households that

have low expenditure and/or low income are highlighted as at-risk. Priority in determining

at-risk households was given primarily through expenditure levels, as although some

27

The proportion of working age parents in Tasmania with any dependent children is: age under 35 – 31.1% and age 35-

44 – 45.5%. Household Income and Income Distribution, Australia - Detailed tables, 2009-10. Cat 6523.0. 28

Net worth, often referred to as wealth, is the value of a household's assets less the value of its liabilities. Assets can take

many forms including, dwellings and their contents, vehicles, and machinery and equipment used in businesses owned by

households, computer software and artistic originals, business inventories of goods, land, bank deposits, shares,

superannuation account balances, and the outstanding value of loans made to other households or businesses. 29

Household Income and Income Distribution, Australia - Detailed tables, 2009-10, ABS (cat 6523.0 ). 30

It is also important to note that ABS data was used in the comparison and that it advises that comparing expenditure

and income data is problematic due to variations in the sampling and modelling of income across populations.

43

households, have lower incomes than expenditure, the expenditure is high, indicating high

financial capacity31.

Table 26: Expenditure on essential services as a percentage of income

Essentials

expenditure

weights

Essentials

AWHE -

March

2011

Mean

equivalised

disposable

income

2011

Expenditure

compared

to income

Household Type % $ $ %

Income quintile of household-Second quintile 62.2 577.5 517 111.7


20% 61.6 879.2 NA NA

Contribution of GPAs to Income-90% and over 60.1 311.7* NA NA

Income quintile of household-Lowest quintile 59.9 389.4 359 108.5

Couple with three or more dependent children

only 59.1 1,196.6 NA NA


90% 59.1 430.8* NA NA

Income decile of household-Second and third

deciles 58.8 400.7 435 92.1


50% 57.7 634.6 NA NA

One parent, one family households with one

dependent child only 57.3 479.3 539 88.9

Lone person household 57.3 390.4 569 68.6


Age/disability pension 57.2 320.6 430 74.6

Government pensions and allowances-Other 57.2 448.5 445 100.8

Income quintile of household-Fourth quintile 57.1 787.9 916 86.0

One parent, one family households with two

dependent child only 56.9 525.4 460 114.2


Unemployment/ sickness/ education allowance 56.0 362.2 312 116.1

Tenure Type-Renter 55.9 501.9 NA NA


business income 55.8 804.8 687 117.1

Tenure Type-Owner with a mortgage 55.6 864.5 NA NA

Income source of household-Wage and salary 55.0 861.5 851 101.2

All households - Tasmania 55.0 594.0 698 85.1

Income source of household-Other income 54.9 682.6 766 89.1

Tenure Type-Total home owners 54.7 680.1 NA NA

Couple with one dependent child only 54.6 862.3 913 94.5

Couple only 54.2 679.3 745 91.2

Income quintile of household-Third quintile 53.7 555.5 708 78.5

Tenure Type-Owner without a mortgage 53.5 519.5 NA NA

All households - Australia 51.2 647.8 825 79

Income quintile of household-Highest quintile 49.8 834.5 1,322 63.1

31

Results were excluded for those households with very high expenditure and comparatively low income. Highlighting

either a data inconsistency, or significant non-income financial resources. The only household of this type was Couple with

three or more dependent children only.

* These households receive most of their income from income support and are therefore likely to have low incomes.

They have been highlighted as at-risk, but are not analysed further due to insufficient data.

44

NA – Not applicable due to insufficient data.

Some households, such as Government pensions and allowances-Unemployment/sickness/

education allowance face higher expenditure than income, possibly causing household

financial stress. Households slightly above or below 100% are likely to be reducing

consumption of essential and non-essential services to manage budgets. It is important to

note that income is only one measure of financial capacity, as it does not include assets, and

that other support exists, such as concessions, emergency relief and other community

service support. These contribute to total resources available to households, although

dependency, particularly on emergency relief, could be a significant issue.

So far, micro-economic factors such as specific household expenditure patterns, price

changes across essential services and incomes have been analysed to build a picture of what

is occurring underneath macro-economic indicators such as the CPI.

It is clear that households spending more than the average face a greater cost pressure,

particularly when prices increase rapidly, and that this is a critical point of debate when

there are cost pressures for low income households across essential services.

It is worth returning to the CPI with the analysis, by comparing the CPI to household

expenditure across the complete basket of goods and services (all price groups), not just

essential services. This can be achieved by building separate price indexes for household

costs over time, which is the methodology used for the creation of the RPIs.

The annual change in the CPI is referred to as the rate of inflation, which shows the change

in price for purchasing a fixed basket of goods and services. The rate of inflation is a

reflection of the change in the value of money within Australia. For example, increases in

inflation reflect a decrease in the value of money, as more money is required to purchase

the same amount of goods and services. In general terms, the CPI shows changes in costs to

all households when purchasing the CPI basket of goods and services.

By comparison, the household based RPIs use the same basket of goods and services as the

CPI and the same price data for these goods and services. However, the RPI uses different

quantity levels for goods and services. Quantity data is taken for particular household types

and is not adjusted, as it is for the CPI, to keep the quantities of the basket constant over

the life of the index. This means the RPI incorporates current prices and reflects changes in

spending patterns (quantities) for different households as prices increase or decrease over

time. In general terms, the RPI shows costs and changes in costs for a specific household

when purchasing the CPI basket of goods and services (See Appendix 2 for more detail).

45

Figure 17 shows five income source/level households that have been identified through the

analysis so far as at-risk to cost pressures across the essential services.

Figure 17: Five income source/level households with the highest costs

All households are spending above the CPI levels for Tasmania and Australia, with some

households noticeably higher. For example, the following gives the difference in index points

between the households and the CPI for Australia:

Unemployment/sickness/education allowance: 2.2

Age/disability pension: 3.3

Second and third deciles: 6.9

Contribution of GPAs to Income-50% to less than 90%: 5.7

Contribution of GPAs to Income-90% and over: 6.2

The differences to the CPI are important as the Commonwealth adjusts most pensions and

allowances, and the carbon price compensation, to its rate of increase32. Therefore,

households earning within the second and third deciles and which are in receipt of a

pension or allowance may be receiving income below expenditure levels.

Table 18 shows households by family composition and tenure type. Most households have

been experiencing higher costs than those indicated by the CPI for Australia and Tasmania.

32

When pensions and allowances are checked against the CPI, if necessary, the single pension payment rate is increased

to make sure it does not fall below 27.7% of the Male Total Average Weekly Earnings figure. The partnered payment rate

is also increased as a proportion of the single rate.

46

Figure 18: Five family composition/tenure type households with the highest costs

The household One parent, one family households with one dependent child only is the only

household with total spending below both the Tasmanian and Australian CPI. The following

gives the difference in index points between the households and the CPI for Australia:

Lone person household: 3.0

One parent, one family households with one dependent child only: -1.5

One parent, one family households with two dependent child only: 1.9

Renter: 2.4

Both tables indicate the growing gap between households experiencing higher than average

costs when compared to the CPI, and when sharp increases and decreases have placed

squeezes and price shocks on household budgets. For example, the increase in six quarters

across all indexes from March 2007 to September 2008 was approximately 12 points. This

rate of increase was higher when compared to the increase for eight quarters, from

September 2008 to September 2010, which increased approximately eight points across all

indexes.

THE DISTRIBUTION OF AT-RISK HOUSEHOLDS

Understanding cost pressures on different households in Tasmania is important, so is

understanding the distribution of at-risk households within Tasmania. Understanding where

households are that face the greatest cost pressures is important for both its communities

and for policy makers. For example, some households that expend high on transport are

particularly exposed to fuel and passenger transport price movements, which in turn

contributes to ‘access costs’ for services such as education and health. Similarly, households

in areas of poor supply of fresh fruit and vegetables and that spend high on food, and low

47

on health services, may highlight where policy effort should focus, and which households are

in most need to support food security.

The distribution of households has been modelled through population projections33

conducted by NATSEM for the Cost of Living Strategy. Table 27 shows the Local

Government Areas (LGAs) that have the highest level of households that spend the most

on essential services. The LGAs were determined using the following method:

the proportion each household contributes to the LGA population was calculated;

the highest five households that constituted the greatest proportion of the LGA

population were counted (colour-shaded) for 2011 and 2016; and

the LGAs that had two or more of the five households for 2011 were included in

the table.

33

ABS population data was used to model Tasmania’s population by household type for 2006, 2011 and 2016. A number of benchmarks

were used for the population modelling, including the projections of the Tasmanian Demographic Change Advisory Council (DCAC).

48

Table 27: Local government areas with the highest proportion of at-risk households

Second and third

deciles

Age/disability

pension

Unemployment/

sickness/ education

allowance

Other income

support

Lone person

household

One parent, one

family households

with one

dependent child

only

One parent, one

family households

with two

dependent child

only

No. 2011 2016 No. 2011 2016 No. 2011 2016 No. 2011 2016 No. 2011 2016 No. 2011 2016 No. 2011 2016

Break O'Day 942 32.8 31.3 1006 35.0 38.7 273 9.5 8.5 99 3.4 2.3 892 31.0 34.6 78 2.7 0.8 106 3.7 5.6

Brighton 1370 22.7 21.4 1241 20.6 21.6 480 8.0 6.3 321 5.3 6.5 1180 19.5 21.7 355 5.9 6.0 457 7.6 7.3

Burnie 2160 26.4 25.6 2043 24.9 26.4 643 7.8 9.2 373 4.6 3.4 2238 27.3 29.2 276 3.4 3.0 430 5.2 5.0

Central Coast 2484 28.5 29.9 2498 28.7 32.0 620 7.1 7.7 246 2.8 1.3 2238 25.7 28.7 205 2.4 2.1 327 3.8 3.2

Central

Highlands 273 28.8 27.5 278 29.3 31.9 59 6.2 5.9 15 1.6 1.3 278 29.3 34.2 40 4.2 2.1 21 2.2 2.8

Devonport 3032 29.0 28.4 2953 28.3 29.8 785 7.5 8.8 411 3.9 2.7 3018 28.9 31.6 292 2.8 2.3 507 4.9 4.6

George Town 762 28.2 28.1 708 26.2 29.9 270 10.0 11.3 132 4.9 3.2 699 25.9 28.9 88 3.3 2.8 127 4.7 5.2

Glenorchy 4725 24.4 22.1 4826 24.9 26.3 919 4.7 4.2 555 2.9 3.2 6603 34.1 35.6 890 4.6 4.3 741 3.8 3.7

Kentish 634 26.4 26.3 575 23.9 27.4 199 8.3 9.5 83 3.5 2.0 508 21.1 24.7 89 3.7 3.2 91 3.8 3.3

Launceston 7249 25.7 24.7 6991 24.8 26.0 1939 6.9 8.1 977 3.5 2.7 8941 31.7 33.9 855 3.0 2.4 1429 5.1 4.9

Sorell 1135 20.2 20.6 1028 18.3 20.7 342 6.1 5.5 212 3.8 4.2 1481 26.4 28.4 250 4.5 3.5 242 4.3 4.1

Tasman 277 27.5 34.5 307 30.5 37.4 87 8.6 9.9 28 2.8 1.7 282 28.0 34.5 37 3.7 4.4 15 1.5 1.2 No. – Number of households

2011 / 2016 – Percent of households as a proportion of total households for the LGA at 2011and 2016.

49

The modelling shows the proportion of at-risk households within the local government

areas. Table 28 shows the count (the colour shaded households) of the LGA’s that have

high proportions of at-risk households for 2011 and 2016.

Table 28: LGAs count of at-risk households for 2011 and 2016

LGA 2011 2016 LGA 2011 2016

Break O'Day 4 4 George Town 4 3

Brighton 4 3 Glenorchy 2 2

Burnie 2 3 Kentish 2 1

Central Coast 2 2 Launceston 2 1

Central Highlands 3 1 Sorell 2 2

Devonport 3 2 Tasman 2 5

The modelling indicates some LGAs will undergo demographic change between 2011 and

2016. The greatest change will be in Tasman, which has two high expenditure households in

2011 (Government pensions and allowances-Age/disability pension and Government pensions

and allowances-Unemployment/sickness/education allowance), is estimated to have five in

2016 (Second and third deciles, One parent, one family households with one dependent child

only, Lone person households, Government pensions and allowances-Age/disability pension and

Government pensions and allowances-Unemployment/sickness/education allowance).

Policy makers could examine data on household differences when considering regulated

prices, service delivery and concessions, to represent the interests of households close to,

or in crisis. The data used in this analysis could be used as a baseline to develop further

analysis.

Conclusion The aim of examining cost of living pressures in Tasmania was conducted by assessing the

application of existing measures, including the Relative price Index, Consumer Price Index

and the Analytical Living Cost Indexes. This included discussion of what constitutes

household costs and a summary of prices and expenditure by households across the

essential services of food, housing, health, transportation and education.

Some of the households with the highest cumulative cost pressures across essential services

are:

Contribution of GPAs to Income-90% and over

Contribution of GPAs to Income-50% to less than 90%

Income decile of household-Second and third deciles

One parent, one family households with one dependent child only

Lone person household

Government pensions and allowances-Age/disability pension

One parent, one family households with two dependent child only

50

Government pensions and allowances-Unemployment/ sickness/ education

allowance

This report explains why the use of the CPI as a cost of living indicator and for indexation

of pricing policy and pensions and allowances is deficient. It shows that household costs

often extend well above the CPI for essential services, and for some households, costs

across all price groups are also above the CPI.

The report provided detail on the financial resources available to at-risk households and

shows their distribution by local government area using income and population modelling

undertaken by NATSEM.

The information compiled for this report has application beyond cost of living analysis and

provides new data capability to assist policy makers across a range of policy settings. The

work enables understanding of how price movements in essential services are likely to

impact and vary by State and Territory, and by population group and place in Tasmania to

inform targeted government interventions.

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Attachment 1 – RPI Households

58

The table below shows the correlation between the households used in the Strategy and

those referred to in this report and defines each household.

Households referred to in the Strategy

Strategy

document RPI household Definition

Average

(Tasmanian

or Australian)

All households

(Tasmania or

Australia)

Expenditure aggregated to represent all expenditure

across all households. All-households represents the

average expenditure for the specified region. This

household includes all income ranges. It is important to

note that this group represents the average expenditure

of all households, not the expenditure of the average

household. The former is defined by the average

expenditure pattern, the latter could be defined by

dominant household characteristics, such as the average

family composition or average income source/type.

Not included

Contribution of

GPAs to Income-

1% to less than

20%

Households receiving Commonwealth Government

income support payments through pensions and

allowances totalling between 1% of household income

to less than 20% of household income.

Not included

Contribution of

GPAs to Income-

20% to less than

50%





Workers with

income

support

Contribution of

GPAs to Income-

50% to less than

90%





Not included

Contribution of

GPAs to Income-

90% and over




to 100% of household income.

Not included

Income quintile of

household-Lowest

quintile

The division of the total household expenditure into five

categories based on income ranges. The lowest or first

income quintile includes those with the lowest and

negative incomes. It does not necessarily represent all

low income households, as some high expenditure

patterns within this quintile indicate high financial

resources.

Not included

Income quintile of

household-Second

quintile


categories based on income ranges. If the middle quintile

is considered the median income quintile, ie it has an

even number of income categories above and below it,

then the second quintile represents expenditure from

households below the median quintile.

59

Not included

Income quintile of

household-Third

quintile


categories based on income ranges. The third quintile

represents expenditure from households at the centre

of the income distribution, or the median income

quintile.

Middle to

high incomes

Income quintile of

household-Fourth

quintile


categories based on income ranges. The fourth quintile

represents expenditure from households one quintile

higher than the median income quintile – the third

quintile.

High incomes

Income quintile of

household-Highest

quintile


categories based on income ranges. The fifth quintile

represents expenditure from households at the top fifth

or the highest income range.

Low incomes

Income decile of

household-Second

and third deciles

Households within the income ranges of the second and

third deciles for equivalised disposable income. The

second and third deciles are a combined income range

from ten income ranges (deciles) of the region. The ABS

recommends reference to the second and third deciles

for low income earners as the lowest household

incomes in the first decile often have business incomes

at negative or close to zero levels. Although incomes for

these households are very low, high expenditure levels

for some households indicate that the first decile does

not accurately reflect the actual financial resources

available.

Pensioners

Government

pensions and

allowances-

Age/disability

pension

Households in receipt of the Commonwealth

Government Age Pension and Disability Support

Pension. Income is limited by the eligibility requirements

of the specific pensions and allowances.

Unemployed

Government

pensions and

allowances-

Unemployment/

sickness/

education

allowance

Households in receipt of the Commonwealth

Government unemployment, sickness and education

allowances. This income is limited by the eligibility

requirements of the specific pensions and allowances.

Not included

Government

pensions and

allowances-Other

Households that receive family income support –

parenting payment, maternity payment and Family Tax

Benefit. This income is limited by the eligibility

requirements of the specific pensions and allowances.

60

Business

owners

Income source of

household-Own

unincorporated

business income

Households earning income from the business activities

of own, unincorporated businesses. This household

includes all income ranges.

Wage earners

Income source of

household-Wage

and salary

Households receiving income from wages and salaries.

This household includes all income ranges.

Not included

Income source of

household-Other

income

Households receiving income from superannuation or

other private income. This household includes all income

ranges.

Lone person

Lone person

household

Single family households where the principle person is

single. This household includes all income ranges.

Single parents

- small family

One parent, one

family households

with one

dependent child

only


single and has one dependent child. This household


Single parents

- medium

family

One parent, one

family households

with two

dependent child

only


single and has two dependent children. This household


Not included Couple only


part of a couple relationship. This household includes all

income ranges.

Couples -

small family

Couple with one

dependent child

only


part of a couple relationship, with one dependent child.


Couples -

large family

Couple with three

or more

dependent

children only


part of a couple, with three or more dependent children.


Not included

Tenure Type-

Owner without a

mortgage

Households that own their residence as a tenure type.


Not included

Tenure Type-

Owner with a

mortgage

Households that are purchasing their residence as a

tenure type. This household includes all income ranges.

Renters

Tenure Type-

Renter

Households that are renting as a tenure type. This

household includes all income ranges.

Appendices

61

1. Analysis of ABS cost of living data, 2011

2. Dufty and MacMillan, 2011, The Relative Price Index, The CPI and

the implications of changing cost pressures on various household

groups

3. NATSEM, 2011 Cost of living indicators for Tasmania

4. NATSEM, 2011 Estimating the Spatial Distribution and

Characteristics of Households in Tasmania

family data relative price index · 2011-10-18 · cost of living in tasmania companion report 1 -...

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