Household Budgets and Income Distribution over the Longer Term: Evidence for Australia

Abstract

The completion of the recent SPRC budget standards study represents the latest in a long line of Australian budget studies. Although the modern research on budget standards is more sophisticated than budget analyses conducted earlier this century, there is considerable similarity in the underlying concepts and methods. The first half of this paper reviews the budget standards research undertaken in the 1920 Royal Commission on the Basic Wage and as part of a study of household income and saving undertaken at the University of Melbourne in the 1940s. The concepts developed in these two studies relate to the modest but adequate and low cost standards, respectively, that have been developed and costed in the 1990s research. The concepts themselves can be traced back to ideas developed in the US Department of Labour in 1919 and revised since then in the 1940s and 1980s. When the Australian budgets for 1920 and 1942-43 are updated by movements in prices and by the growth in real incomes to 1997, there are some remarkable similarities with the new SPRC estimates, particularly at the modest but adequate standard. The second half of the paper presents an update of previous research analysing changes in the Australian income distribution between 1942-43 and the 1990s. Using data from the 1995-96 Survey of Income and Housing Costs, the analysis confirms the earlier finding that there appears to be very little change in the distribution of gross income among individuals in Australia over this period.