Australia's changing profile: fewer divorces, higher incomes, more rental stress

Divorce rates are on the decline in Australia, people are marrying and having children later in life, and more of us live alone, according to a new report by the Australian Institute of Health and Welfare.

We’re also better educated, with more adults participating in the workforce than a decade ago. But many of us are in mortgage debt and experiencing rental stress.

Released today, the biennial report card on Australia’s welfare shows the increased number of Australians above retirement age may have added to Australia’s welfare expenditure, with a rise of 2.6% recorded annually between 2003 and 2013. But this increase was slower than the growth of Australia’s economy. Gross domestic product (GDP) grew at 2.9% in the same period.

Overall, labour force participation rates for people between 15 and 64 rose in the past 20 years from 73% in 1992 to 76% in 2014. Women drove much of the change with female workforce participation rising from 62% to 71% over the same period.

Australian Institute of Health and Welfare, CC BY

On average, Australians are earning more. In 2011, the average disposable household income for people living in private housing was A$918 per week, compared with A$894 in 2009.

But some Australians aren’t reaping the same rewards. Youth unemployment is on the rise and Indigenous Australians are over-represented in welfare payments.

The report also found:

• In 2012, nearly 50% of Indigenous Australians reported government payments as their principal source of income. This was more than three times the rate for non-Indigenous people (16%). However, the proportion is lower than in 2002, when it was 63% for Indigenous people.
• Indigenous children are more than twice as likely as non-Indigenous to be assessed as developmentally vulnerable when they enter their first year of schooling. But this decreased from 47% in 2009 to 43% in 2012.
• In 2013–14 Indigenous children were receiving child protection services at seven times the rate of non-Indigenous children.

The Conversation’s experts dig deeper into the report’s findings on changing family structures, welfare expenditure and home ownership.

Welfare spending

Nicholas Biddle, Quantitative Social Scientist at Australian National University

Although welfare expenditure has increased as a share of tax revenue, the AIHW reports that: “welfare expenditure fell from 9.5% of GDP in 2003–04 to 9.0% in 2012–13”.

On the one hand, this is good news. We are spending less on income support, which allows us to spend more on education, health, leisure and other things that make life worth living.

There are important caveats to this story though, particularly when you drill down into the data. First, welfare spending has increased as a share of taxation revenue, from 32.8% in 2003-04 to 34% in 2012-13.

More importantly though, many would only consider the fall as a percentage of GDP as a good news story if it was the result of people no longer needing the support. Here the data is less positive. More people are working but more people are also struggling to find work.

In June 2004, the unemployment rate was 5.5%. In June 2013 it was 5.7% and it is now 6.1%. And the youth labour force participation has declined from 71% in 2008 to 67% in 2014. And we all know the population is ageing so the number of people of pension age is also increasing.

Australian Institute of Health and Welfare 2015, CC BY

How are we spending less on welfare when more people are looking for work and more are of retirement age? Well, simply, the payment rate for many benefits has not kept up with income growth.

This raises a different policy discussion to the one we often have. Welfare isn’t “blowing out” as some have claimed. Rather, Australia has a highly targeted welfare system with a very high share of spending devoted to the poor.

The policy question is whether we are spending enough on those who really need it.

Home ownership

Kate Shaw, Future Fellow in Urban Geography and Planning at the University of Melbourne

Australia performs well on many measures – we are well educated and living longer than before, as should be expected in one of the wealthiest countries in the world. But fewer Australians own their home outright (from 42% in 1995 to 31% in 2011), more have a mortgage (from 30% in 1994 to 37% in 2011), more are renting, more are in mortgage and rental stress, and more of us are homeless.

Australian Institute of Health and Welfare, CC BY

An unaffordable housing market is not a natural consequence of Australia’s wealth. It is a direct result of policy decisions over the last two decades that have favoured property owners over renters and caused house prices to outstrip wages. A median-priced house in Melbourne or Sydney now requires up to ten times the median income. This situation entrenches privilege and exacerbates income inequality.

Even the International Monetary Fund (IMF) now admits that “when the rich get richer, benefits do not trickle down”. The IMF advocates increasing the income share of the poor and the middle class as the most effective way to increase economic growth. This IMF report says the best way to tackle inequality is to “focus on raising human capital and skills and making tax systems more progressive”.

To raise human capital, we need to ensure a range of secure, affordable housing types and invest in training and job creation programs.

To make Australia’s tax system more progressive, we need (at least) to phase out negative gearing and the discount on capital gains tax on investment properties (and not increase the GST).

Removing tax incentives for investment properties would not only provide billions of dollars for public, community and other non-profit housing initiatives, it would dampen the investor frenzy pushing prices well beyond the reach of first home-buyers.

But the government knows all this.

Family structure

Nick Parr, Associate Professor in Demography at Macquarie University

Australia’s growing and ageing population, as well as the increase in the percentage of people born overseas, are interconnected trends.

Between 2004 and 2014, Australia’s overseas-born population grew from 4.8 to 6.6 million. As well as immediately increasing the numbers born overseas, immigration contributes to Australia’s population growth by adding to birth numbers. But the numbers of children per migrant are now smaller than those of Australian-born people.

Overall, these factors are expected to result in huge increases to the Australian population.

The report also shows people marrying later and more living alone. In 2012, nearly one quarter (23%) of all households had one resident. This is compared to just 11% in 1961.

Australian Institute of Health and Welfare, CC BY

Factors contributing to this include increasing numbers of people whose relationship or marriage has ended, or who have not partnered; and older people who are widowed.

Australia’s divorce rate dropped from 2.7 per 1,000 people in 2003 to 2.1 per 1,000 in 2013. Declining divorce rates since 2001 among those under the age of 45 may be linked to the postponement of marriage and the greater financial resources of those who are married.

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.