Median household income in Australia and New Zealand
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Highlights
- Most people (90%) live in a state where the median household income is US$38,000.
- Income growth has generally been strong through the 2001-2006 census period.
- Median household incomes are now only 21% lower than in the U.S.
- The government is well positioned to protect incomes from an economic crisis.
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[edit] Introduction
Median household income is commonly used to measure the relative prosperity of populations in different geographical locations. It divides households into two equal segments with the first half of households earning less than the median household income and the other half earning more.
New Zealand and Australia are gradually being economically integrated through a process known as “Closer Economic Relations (CER)”. Their citizens are free to travel, live and work in either country. Information about their relative median household incomes is of interest, especially for those considering migration.
[edit] Median household income in 2006
Income data for each state (or territory) has been converted to US dollars using Purchasing Power Parity (obtained from the OECD).[1] This is done because the real purchasing power of the Australian and New Zealand currencies is actually lower than the market exchange rate. For example Australia's median household income at the current market exchange rate is US$48,000 (1.11), but is only US$38,000 using purchasing power parity (1.41).
Median household incomes in Australia and New Zealand have improved and are now only 21% lower than in the United States ($48,200 [1]). Incomes in Australian Capital Territory are similar to Utah [2], while South Australian incomes are comparable to those in Mississippi [3].
| Population | Median household income (local currency) | Median household income (PPP US$) | |
|---|---|---|---|
| Australian Capital Territory | 324,034 | AUS$78,468 | $55,651 |
| Northern Territory | 192,898 | AUS$61,984 | $43,960 |
| Other territories | 48,000 | AUS$60,008 | $42,559 |
| Western Australia | 1,959,088 | AUS$55,432 | $39,313 |
| New Zealand | 4,100,000 | NZ $58,708 [2] | $38,623 |
| New South Wales | 6,549,177 | AUS$53,872 | $38,207 |
| Queensland | 3,904,532 | AUS$53,716 | $38,096 |
| Australia | 19,855,328 | AUS$53,404 | $37,875 |
| Victoria | 4,932,422 | AUS$53,144 | $37,670 |
| South Australia | 1,514,377 | AUS$46,124 | $32,712 |
| Tasmania | 476,481 | AUS$41,652 | $29,540 |
Main source: Australian Bureau of Statistcs, 2006 Census Quickstats.[3]
Note: GDP per capita cannot be used to predict median household income (See median household income).
[edit] Equally prosperous states
In Australia and New Zealand there is little variation in household income between states:
- 90% of people live in the five most populated states, where the median household is approximately US$38,000 ($37,670 - $39,313).
- 2% of people live in a territory where household incomes are greater than US$42,000.
- 8% of people live in a state where household incomes are less than US$33,000.
The lack of variation is unusual when compared to other advanced economies such as the EU or the USA. For example, in the US, 90% of the population live in a state where the median household income is between $38,000 and $58,000.
[edit] Income security
Household incomes are very sensitive to economic conditions and real incomes will normally decrease by up to 10% during a recession. The 10% loss isn't applied evenly to all households. Some households are not harmed. For most households, their cost of living rises faster than their incomes. The worst affected households may lose their income (unemployment) and drop below the poverty line.
Figure 1 shows how US incomes have changed since 1970. The periodic decreases were all caused by economic recession. The last recession was the early 2000s recession and was started with the bursting of the dot-com bubble. This recession affected most advanced economies. Fortunately Australia and New Zealand were unaffected.
Most governments normally try to minimize the damage caused by a recession, otherwise a recession could turn into a full blown depression. Governments minimize recessions by increasing money supply though:
- Deficit spending (tax breaks and increased public spending)
- Lowering interest rates
During the last recession many European governments ran deficits that were so large that they violated the deficit rules for Monetary Union (e.g. Italy, France, Germany). The US also protected its citizens with deficit spending and low interest rates. After the recession is over it is important to reduce the public debt [4] and normalize interest rates again.
Eventually trouble in the global economy will cause a recession in Australia and New Zealand. Fortunately the government is well positioned to deal with it. Australia and New Zealand have been reducing public debt levels for many years and now have minimal debt. This means that they can easily increase money supply through deficit spending. There is also a lot of scope to increase money supply by lowering interest rates.
| Public debt (% of GDP) [5] | Central bank rate (%) [6] | |
|---|---|---|
| Australia | 15.2 | 7.25 |
| New Zealand | 18.3 | 8.25 |
| United States | 36.8 | 2.00 |
| United Kingdom | 43.3 | 5.00 |
| Canada | 64.0 | 3.00 |
| Germany | 65.3 | 4.00 |
| France | 66.6 | 4.00 |
| Italy | 105.6 | 4.00 |
| Japan | 194.4 | 0.50 |
Note: Japan's government is in debt to the Japanese citizens, so the debt is not as risky as it may appear. Though it still means that Japan would be vulnerable in a crisis.
[edit] Household income growth since 2000
Achieving real (inflation adjusted) growth in household income is very difficult. US household incomes have grown only 15% over 26 years (1980-2006, Figure 1) and yet they rank amongst the most successful in the world. During the 1980-2006 period the US economy (GDP/C) grew by 67% [7], so strong economic growth does not necessarily translate into strong growth in median household income.
In the period 2000-2006 American households were adversely affected by the recession. Since then incomes have recovered slightly and in 2006 were only 2% below the 2000 value[4]. Sydney's 2001-2006 income growth (0.6%) has been criticized by the media [8], but should be seen as a neutral result, rather than a bad result. A bad result would be a 10% decrease (see Figure 3). Melbourne has made steady progress with 4.7% growth. Growth rates were good in Brisbane, Perth and New Zealand.
Table 3. Real growth in median household income (selected examples)
| Period | 2006 Median household income (PPP US$) | Real growth (%) | Growth performance | |
|---|---|---|---|---|
| United States | 2000-2006 | $48,200 [9] | - 2.0[4] | Disappointing |
| Sydney | 2001-2006 | $42,559[3] | +0.6[5] | Neutral |
| Melbourne | 2001-2006 | $39,793[3] | +4.7[5] | Satisfactory |
| Australia | 2001-2006 | $37,875[3] | +13.2[6] [7] | Good |
| Brisbane | 2001-2006 | $40,973 [3] | +16.1[5] | Good |
| Perth | 2001-2006 | $40,051[3] | +16.2[5] | Good |
| New Zealand | 2000-2007 | $38,623[2] | +24.2[8][9] | Good |
[edit] See also
[edit] References
- ^ OECD, PPP conversion rates. Retrieved on 2008-02-15.
- ^ a b 2006 New Zealand income survey showing median household income. Retrieved on 2007-10-15.
- ^ a b c d e f Australian Bureau of Statistcs, 2006 Census Quickstats.. Retrieved on 2007-10-15.
- ^ a b Factsheet from the joint Senate economic committee on median household income. Retrieved on 2007-10-15.
- ^ a b c d News item about median household income. Retrieved on 2007-10-15.
- ^ 2001&2006 median household income for Australia. Retrieved on 2007-10-17.
- ^ Australia consumer price index. Retrieved on 2007-10-17.
- ^ New Zealand income surveys 2000-2007 showing median household income. Retrieved on 2007-10-15.
- ^ New Zealand consumer price index. Retrieved on 2007-10-15.
