The release of the annual Household, Income and Labour Dynamics in Australia (HILDA) report last week apparently told us something that we may not already know – we’re getting richer.
However, despite average household incomes growing by $18,000 between 2001 and 2014, expectations of ‘essential items’ may be making us feel poorer. Medical treatment is, quite rightly, considered an essential by 99.7 per cent of the 17,000 people whose data is collated. What you may find surprising is that 56 per cent consider a car essential and 45 per cent believe a television is required to live a comfortable lifestyle.
A telephone, either mobile or landline is considered essential by 84 per cent, and 79 per cent believe a washing machine makes life bearable.
Perhaps, as YourLifeChoices reported last week, this is partly why homeownership in Australia decreased by 3.5 per cent during the same period. What is interesting to note is that Australian couples over 65 who own their own home have experienced the greatest increase in net wealth – almost 70 per cent – over the 13-year period.
So, while on paper it may seem as though we’re getting richer, the reality is that we’re more likely to live pay to pay and a growing number of households can’t cover the real essentials. When it comes to having savings of $500 to cover emergencies, 12 per cent don’t, eight per cent can’t afford to insure the contents of their homes, and five per cent can’t afford dental treatment when needed.
On a plus note, the introduction of compulsory superannuation has finally started to have a positive effect on the long-term wealth of households, with 85 per cent reported as having a super fund, which is considered the second-most important asset, after the family home.
The one major plus point of the data collected for the HILDA report is that it has tracked the same 17,000 people over the 13 years, but does it really reflect what’s going on in households across the land?
The one figure that I note with interest in the HILDA data is that relative poverty – where people lack the minimum amount of annual income to maintain an average standard of living – is $22,752 (as at 2014). Assuming a small increase over the last two years, rounding it up to $23,000, this is more than the single full Age Pension of $22,721.
This $22,721 is all that many retirees have to live on – that’s food, health, transport, household expenses, utilities, communication, insurance and all the other bills and expenses that need to be covered. According to the Association of Superannuation funds of Australia (ASFA) Retirement Standard, covering the essentials for someone who is considered to be living a ‘modest lifestyle’ in retirement would take $23,651. That’s $930 more than a full Age Pension and $651 over our assumed poverty line.
But there are two problems with benchmarking our household income and expenditure to either of these figures – the assumption that people own their own homes and have no debt and that you can actually secure the services quoted in the ASFA Retirement Standard for the rates provided.
A survey by ING Direct in 2015 found that thousands of Australians aged between 65 and 80 owed an average of $158,500 on their mortgages. The ASFA Retirement Standard makes no allowance for repaying a mortgage or covering credit card debt. And can anyone honestly say that they are able to contain health costs, including health insurance and medicines to $33.53 per week?
Obviously many of the studies, surveys and standards we refer to work in averages and there are certain assumptions that must be made. But the reality remains – living on the Age Pension is nigh on impossible.
What about you? Do you feel richer? Are you managing on a full Age Pension? Do you find yourself struggling to make ends meet? Do you think studies such as HILDA have any value?