Why Australia’s old-age poverty rates are far lower than you might think - Grattan Institute

Why Australia’s old-age poverty rates are far lower than you might think - Grattan Institute



Why Australia’s old-age poverty rates are far lower than you might think

by Brendan Coates, Tony Chen
10.04.2019Blog
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The conventional wisdom is that Australia has an especially high rate of poverty among the elderly. Advocates of increasing the Age Pension point to OECD research which shows that in 2014, 26 per cent of Australians aged 65 and over suffered income poverty, compared to 13 per cent across all OECD countries.

But the conventional wisdom is wrong. Traditional estimates of old-age poverty are deeply flawed. We need a better way to measure poverty among older Australians.

In this post, we show why the OECD’s approach to poverty rates for older Australians misses the mark, and present our alternative that accounts for high-rates of home ownership among the elderly.
The OECD’s measure is deeply flawed

As the OECD explains, its definition of poverty is relative – the proportion of households with disposable incomes (meaning after income tax is paid and income support payments are received) that are less than half of the median disposable income of all Australians.

But there are a number of issues with the OECD measure. Small changes in reality produce apparently very different outcomes, calculation of the benchmark rests on arbitrary definitions of equivalisation, it does not take into account drawdowns on savings outside superannuation, and it does not adequately account for housing costs.

The OECD poverty rate measure for older Australians is volatile from year to year, even with very small changes, because the full Age Pension is close to the OECD benchmark, and so a large number of Australian retirees cluster close to the benchmark. For example, a recent report by the Australian Council of Social Service (ACOSS) found that old-age poverty in Australia apparently fell sharply from 22 per cent in 2011 to 13 per cent in 2016. But the big apparent shift merely reflected the maximum rate of the Age Pension (including related supplements) oscillating around the benchmark of 50 per cent of median incomes.

This clustering close to the benchmark also means that outcomes on the measure depend a lot on somewhat arbitrary definitions. For example, the poverty rate among over-65s varies from 12 per cent to 23 per cent depending on how households with different family sizes are compared. According to the ABS-preferred definition of equivalisation, previously used by the OECD, households are ‘equivalent’ if they expend 0.5 times more for every extra adult and 0.3 times more for every child under 15 than a single household. According to the new OECD definition, households are ‘equivalent’ if a household of n members expends the square root of n times as much as a single household. The choice of benchmark relative to median incomes is also arbitrary, but the most commonly used benchmark is 50 per cent of equivalised median disposable income.
Traditional old-age poverty metrics ignore housing costs

Most importantly, a relative poverty measure based on disposable incomes tends to overstate poverty in old age because it ignores the differences in housing costs due to high levels of home ownership among older Australians. Four in five Australian households over the age of 65 own their own homes. Even among the lowest income quintile of seniors, home-ownership rates are above 70 per cent.

Home ownership provides them with big benefits: they have somewhere to live without paying rent, and they are insulated from rising housing costs. The benefits that a house provides to its owner-occupier – which economists call imputed rents – are worth more than $23,000 a year to the average household aged 65 or over, roughly the same value as the maximum-rate Age Pension.
Grattan Institute’s new estimates

Our latest estimates of poverty rates confirm that fewer retirees are in poverty than previously thought. After taking account of the benefits of homeownership, by treating imputed rents as disposable income, the percentage of Australians over 65 in poverty under the OECD’s square root scale more than halves – from around 20 per cent to 9 per cent.

Under this new metric, Australian retiree poverty rates are more in line with the other comparable OECD countries, albeit still on the higher end.

And even though changing the definition of poverty has a material impact on old-age poverty, adjusting for housing costs still has the same effect under different definitions. Using the ABS poverty definition, adjusting for housing costs also significantly reduces Australian old-age poverty – from around 13 per cent to 8 per cent.



Poverty among over-65s in Australia is still higher than in many other OECD countries after accounting for housing costs, but only marginally so. The 8 per cent of older Australians in poverty after housing are likely to be maximum-rate pensioners in the private rental market.
Other evidence suggests most pensioners aren’t struggling unless they rent

Our results accord with other evidence that most Australian retirees are keeping their heads above water. Retirees today are more likely than working-age households to say they feel financially comfortable. Across the income distribution, people typically have enough money to sustain the same, or a higher, living standard in retirement as when working. Many retirees are net savers, and current retirees often leave a legacy almost as large as their nest egg on the day they retired.

Of course, there are older Australians living in poverty. The evidence suggests pensioners who are really struggling predominately don’t own their own homes.

About 14 per cent of pensioners who don’t own their home say they have suffered financial hardship – they skipped meals, did not heat their home, failed to pay utility bills on time, or failed to pay their car registration on time. The comparable figure for home-owning pensioners is only 4 per cent.

Rental stress among pensioners in the private rental market has worsened for a number of reasons.

First, Commonwealth Rent Assistance, which provides financial support to low-income renters, is indexed to CPI. But rents have been growing faster than CPI for a long time. Between June 2003 and June 2016, CPI increased by about 38 per cent, while average rents increased by about 62 per cent.

Second, rents paid by low-income earners grew faster than average rents and low-income households are spending more of their incomes on rent.

Third, the stock of lower-rent social housing has not kept pace with population growth. In the past, more than half of retirees who rented did so from housing authorities. In recent years that proportion has fallen to less than 40 per cent. Public housing provides a much greater average level of assistance than Rent Assistance.
Many working-age Australians are struggling more

Pensioners are not the only group likely to face hardship in Australia today. In fact, they are on the whole less likely to suffer financial stress than working-age Australians.

About 8 per cent of working-age homeowners with no welfare payments report experiencing financial stress, a rate about two times higher than pensioners who own their own homes. And 20 per cent of working-age renters with no welfare say they suffer financial stress, higher than the rate reported by renting pensioners.

Neither of these groups is struggling, however, compared to the levels of financial stress reported by the most disadvantaged people in Australia today – working-age households surviving on income support payments such as Newstart. More than 40 per cent of working-age Australians who receive income support payments and don’t own their own home – and 15 per cent of homeowners receiving income support – report experiencing financial stress.



It is not surprising to find higher rates of financial stress among working-age Australians than among pensioners. Pension payments are indexed to grow with full-time wages, whereas allowance payments only grow with CPI. Over the past two decades the maximum rate of the Age Pension has consistently risen faster than both minimum and average wages, and much faster than income support payments to working-age Australians, such as Newstart. For singles the maximum rate of Newstart has fallen from 89 per cent of the base Age Pension in 2000 to just 66 per cent today.

Any moves to alleviate poverty in Australia must start by boosting payments to working-age income-support recipients, not pensioners.

The policy priority for retirees should be to boost the maximum rate of Commonwealth Rent Assistance by 40 per cent, or roughly $1,400 a year for singles or $1300 for couples. Such an increase would cost $1.2 billion a year, but it would do much more to reduce financial hardship in old age than lifting the Age Pension.

And the next Australian Government should take a close look at lifting Newstart too.

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두 그라프를 보고 이상하다고 생각하는 한국인을 위하여 한글로 호주의 노인 빈곤이 한국과 어떻게 다른가 설명해주세요.

두 그래프를 보고 놀란 한국인을 위한 설명

안녕하세요. 올리신 두 그래프를 보고 한국의 노인 빈곤율이 압도적으로 높은데, 호주도 노인 빈곤율이 생각보다 높아서 의아해하실 수 있습니다. 이 현상을 제대로 이해하려면 '빈곤'을 측정하는 기준과 각 나라의 사회 구조적 차이를 알아야 합니다.

결론부터 말씀드리면, 호주 노인과 한국 노인의 '빈곤'은 그 의미와 실질적인 삶의 질에서 큰 차이가 있습니다.

1. '상대적 빈곤'의 함정

빈곤율은 일반적으로 '상대적 빈곤율'로 측정합니다. 이것은 전체 인구의 중위 소득(딱 중간에 있는 사람의 소득)의 50% 미만을 버는 사람의 비율을 말합니다.

호주는 전체 국민의 소득 수준 자체가 매우 높습니다. 예를 들어, 호주 중위 소득이 100만 원이라면 빈곤선은 50만 원이 됩니다.

한국은 전체 국민의 소득 수준이 호주보다 낮습니다. 한국 중위 소득이 60만 원이라면 빈곤선은 30만 원이 됩니다.

따라서 호주에서 '가난하다'고 분류되는 노인의 소득이 한국에서 '가난하다'고 분류되는 노인의 소득보다 훨씬 높을 수 있습니다. 호주 빈곤선 아래의 노인이 한국으로 오면 중산층으로 분류될 수도 있다는 뜻입니다. 호주에서는 주택 임대료 등 생활비가 높기 때문에 '상대적 빈곤'에 시달리지만, 최소한의 의식주가 해결되지 않는 '절대적 빈곤'과는 거리가 멉니다.

2. 호주의 노인 빈곤: 주택 소유와 연금 시스템의 문제

호주 노인 빈곤율이 높은 이유는 다음과 같은 구조적 문제 때문입니다.

부족한 개인 연금 (슈퍼애뉴에이션): 호주는 한국의 국민연금과 비슷한 '고령 연금(Age Pension)'과 개인이 은퇴 자금을 쌓는 '슈퍼애뉴에이션(Superannuation)'이라는 두 가지 축으로 노후를 보장합니다. 하지만 현재 노인 세대는 슈퍼애뉴에이션 제도가 완전하게 정착되기 이전에 은퇴했거나, 충분한 기간 동안 납입하지 못했습니다. 따라서 고령 연금만으로는 생활이 팍팍한 노인이 많습니다.

높은 주거비: 호주 노인 복지 시스템은 '내 집을 소유하고 있다'는 전제하에 설계되었습니다. 하지만 최근 높은 주택 가격 때문에 집을 소유하지 못한 채 은퇴 후에도 월세를 내야 하는 노인이 늘어났고, 이들이 '빈곤층'으로 분류되는 경우가 많습니다.

즉, 호주 노인 빈곤은 '고령 연금만으로는 부족한데, 개인 연금도 충분치 않고, 무엇보다 주택이 없는 경우'에 집중되어 있습니다.

3. 한국의 노인 빈곤: 사회보장 제도의 미성숙

한국의 노인 빈곤율은 OECD 국가 중 압도적으로 1위이며, 이는 다른 선진국들과는 다른, 매우 심각한 사회적 문제입니다.

늦게 시작된 공적 연금: 한국은 선진국들에 비해 국민연금 제도가 매우 늦게 도입되었습니다. 지금의 노인 세대는 경제 발전의 주역이었지만, 정작 본인의 노후를 위한 공적 연금에 가입할 기회나 기간이 부족했습니다.

가족 부양 의식의 붕괴: 전통적으로 자녀가 부모를 부양하는 문화였으나, 핵가족화가 빠르게 진행되면서 노후 소득이 없는 노인들이 '빈곤'에 그대로 노출되었습니다.

저소득 일자리와 연금 수령액 부족: 현재 노인들이 일자리를 갖더라도 대부분 저임금의 불안정한 일자리입니다. 여기에 낮은 국민연금 수령액과 기초연금만으로는 빈곤에서 벗어나기 어려운 경우가 많습니다.

결론적으로, 호주의 노인 빈곤율은 '상대적으로 소득이 낮다'는 의미가 크지만, 한국의 노인 빈곤은 '절대적으로 생활이 어렵다'는 의미가 더 강합니다. 그래프의 숫자가 비슷해 보여도 그 숫자 뒤에 숨겨진 실질적인 삶의 어려움은 전혀 다릅니다.