I thought this was quite an interesting breakdown of household income in Australia. It looks at the net income of households and the sources of that income and then divides households into 'quintiles' based on the average disposable income.
It talks in terms of averages so obviously there will be exceptions and households at the upper and lower ends of the quintiles, however, it gives a better perspective on the state of household income than just a straight comparison of gross income.
THE Budget will be announced tomorrow and so we are bracing ourselves for a whole lot of talk about "struggling families", "middle class welfare" and the "super wealthy" over the next few days.
But what do those labels actually mean? And where do you sit in relation to everyone else?
Australia has never had a class system in the same way the British historically have (although those class definitions have changed over time).
Social researcher Mark McCrindle says that in Australia the idea of "class" is based around earnings rather than cultural pursuits or educational backgrounds.
"Money doesn't follow profession, it follows skills shortages," said Mr McCrindle, director of McCrindle Research.
"The highest average salaries are found in industries like mining, construction and utilities."
Mr McCrindle added that as a nation we are not as wealthy as we might think, and what is actually the "middle ground" for earners in Australia does not line up with the traditional image of the middle class – full of two parent families with kids and a mortgage.
The most recent Australian Bureau of Statistics figures on the net income (amount people are paid after tax) of Australian households ranks houses in to five groups, or quintiles.
"It's better to measure this disposable income, it's sort of irrelevant to talk about gross earnings because people don't get that," Mr McCrindle said.
"Whether someone in a household is earning $130,000 or not is irrelevant because no one gets that $130,000 to take home."
So what do these five quintiles look like? And which one do you belong to?
Average disposable income $16,328 per year, average net worth $434,686
Mr McCrindle said much of this quintile is made up of retirees living on the pension - 42.9 per cent of the quintile is made up of lone-person households.
But the data, taken from the ABS's household income and income distribution 2009-10 statistics, shows 46.1 per cent live in a home that they own with a fully-paid mortgage.
"The pensioners are clearly asset-endowed but cash-flow tight," he said.
"The problem is they have little liquidity, little flexibility in their expenses, so they might have on paper a fair bit of money in assets but they really are tight on a day-to-day basis."
The rest of the people in this group are those who are on "Struggle Street", Mr McCrindle says.
"They have neither the earnings to have a decent quality of life and they have such a poor asset base that they have no secure for the future," he said.
"They're in a permanent state of housing stress, bill stress and even some of them are in food stress and rely on charities and social institutions."
Average disposable income $27,248 per year, average net worth $513,750
For most people in this quintile (51.7 per cent) their main income comes from wages and salary.
But for more than a third their main source of income is government pensions and allowances.
"These are the struggling working families, the working poor," Mr McCrindle said.
Just over 40 per cent of these households have dependent children living in them, and this quintile is under mortgage stress or renting stress.
"While for most families the water bill or power bill is just an expense, for this quintile it becomes a significant issue for them, those quarterly bills," Mr McCrindle said.
"Because more than half their income comes from earnings, because assets are poor, they're in quite a financially insecure position.
"If someone loses their job or they get cutbacks and can't get the overtime those in that quintile are going to struggle."
Average disposable income $37,492 per year, average net worth $555,448
Being middle income quintile, this group makes up the statistical "middle class".
Households in this group have the highest likelihood of being a home with depending children (42 per cent) and for four out of five households the main source of income is wages or salary. Just 4 per cent list their main source of income as government allowances.
"This is the group that's doing it for themselves and contributing a lot to [the tax base]," Mr McCrindle said.
"They're not getting a leg up from the government - they are the backbone of government revenue coffers."
And the average disposable income is just $37,000.
"Does that make them average? Turns out from an after-tax perspective it does," he said.
"It's way down on what people would think."
Mr McCrindle added that this group was strongly affected by government policy changes.
"Only little things, like a change to Family Tax or Parenting Payment eligibility, that's when they get hit," he said.
Average disposable income $50,700 per year, average net worth $705,314
The overwhelming majority of this quintile's main source of income comes from wages.
This group also has a low likelihood of being a single parent family (just 2.8 per cent), compared to 9.7 per cent, 10.7 per cent and 7.1 per cent for the first, second and third quintiles respectively.
And when you look at their living situation almost half of households are paying off a mortgage.
"That puts them right in the traditional middle class ‘achieving the Aussie dream' role," Mr McCrindle said.
"They're not at all dependent on government pensions, not at all a drain, and they're big contributors to the revenues and at the stage where they're wanting to accumulate wealth or pay down the mortgage.
"I guess what we're saying here is the benchmark for middle class has crept up a bit."
Average disposable income $88,608 per year, average net worth $1,396,342
All the households in this quintile have private income.
"Think about them as the professional class, but the entrepreneurial class as well," Mr McCrindle said.
"This quintile has the highest portion that own their own business."
The group also has the highest likelihood of being a couple-only household (35 per cent).
The so-called super wealthy do fall in this top quintile, so the average sits a bit higher than it otherwise would, Mr McCrindle said.
"But they are hardly the super wealthy – the highest fifth of households are not super wealthy," he said.
"Earning after tax $88,000 - that is not wealthy."
Mr McCrindle said this was highlighted by the proportion of this group that have a mortgage (52.4 per cent).
"This is the home that they occupy, so clearly, if someone's got a mortgage on the house they live in, it might be a nicer house than most but they're still paying it off."
And of the top quintile, the average household net worth of is $1.396 million.
"This means they've probably got a million dollars net worth in a house," he said.
"What does a million get you? In about 250 suburbs across Australia it's the average price of a home."
Read more: http://www.news.com.au/money/federal...#ixzz2T9JuMH00