Poverty in Australia

A talk to the Canberra Writers’ Festival, 8 October 2005
Clive Hamilton

The poverty debate

In May this year the St Vincent de Paul Society published a paper arguing that income inequality has been increasing in Australia. It was a well-researched paper drawing on ABS statistics showing that by most measures income inequality has worsened since the advent of the Howard Government.

Peter Saunders, the research director at the libertarian Centre for Independent Studies, responded with a highly critical paper titled ‘A Headlong Dash into the Chasm of Hyperbole’ which asserted that the Vinnies’ claim that income inequality had worsened in Australia was grossly exaggerated based on unsupportable rhetoric and selective use of statistics.

Suggesting that the Vinnies report is more Marxist than Christian, Saunders argued that in reality the Federal Government is now making unprecedented levels of cash transfers to the poorest 30 per cent of Australians and that low-income households have enjoyed strong growth in private incomes under the Coalition Government. He reported ABS figures that appear to disprove Vinnies’ claim that there has been no substantial widening of income disparities in Australia over this period.

The criticism of the Vinnies report has been seized upon by ideological warriors friendly to the CIS and the Howard Government including Christopher Pearson and Frank Devine in the Murdoch press. As this suggests, the dispute over statistics between the St Vincent de Paul Society and the CIS is just shadow boxing. The real fight is over what sort of society Australia should be.

The authors of the Vinnies report regard wide disparities in incomes and the continued existence of poverty in Australia as a blight on society, one that arises because of structural factors that work against the interests of the poor and marginalised. The policies of the Howard Government (and perhaps the Labor Government beforehand) exacerbate and justify inequality and poverty.

The CIS believes that individuals make their own circumstances and must take responsibility for their situation. Free market economies provide maximum freedom for people to use their abilities and there are no structural reasons preventing them from doing so. With a few exceptions, it is not the task of government to bail out those who have not taken responsibility for themselves. On the other hand, people who have worked hard and done well should not be required to give up income in the form of taxes to support others who have not.

‘Behavioural poverty’

Those who have backed the CIS in this dispute may be more hesitant to defend the research of the CIS if they were familiar with earlier work by that organisation on the question of poverty and inequality.

In May 2000 the CIS published a report titled ‘Behavioural Poverty’ which argued that the only poor people in Australia are those who choose to be poor through their own ‘imprudent or irresponsible behaviour’. It argued that the welfare system itself creates poverty and that giving income support to parents of low-income households is just as likely to see the money spent on ‘cigarettes or heroin’ than toys for their ‘suffering children’.

The paper attempted to use statistics and various authorities to support its belief that our material circumstances are always our own responsibility and if anyone finds themselves destitute they have no-one to blame but themselves.

‘Behavioural Poverty’ is a mish-mash of unsupported, illogical and just plain silly prejudices about low-income households, seemingly arising from an imagined world of Hogarthian debauchery out there in the western suburbs.

Masquerading as an academic paper, the CIS attempted to give credibility to its pronouncements by reference to various authoritative sources, including the popular novel Angela’s Ashes (to prove how welfare-dependent drunken fathers destroy families) and a number of ABS publications that don’t exist.

Among the extraordinary claims of the CIS is that before 1975, which is somehow characterised as the start of ‘welfare’, ‘there was no youth homelessness …, no drug problem, low youth suicide and relatively little crime by minors’. The paper takes an especially harsh view of single mothers whose ‘behaviour’ has been corrupted by the Sole Parent Pension which is ‘income support for illegitimacy and divorce’.

In a final flourish the CIS paper declares that poverty today is defined by ‘ignorance, waste and shiftlessness’, a phrase that captures the relentless nastiness of the whole document but which betrays the true feelings of the intellects of the libertarian right.

In truth, the underlying difference between the St Vincent de Paul Society and the Centre for Independent Studies is not one of statistics or even of ideology; the difference lies in the emotional responses of the protagonists to the condition of the poor and dispossessed. The Vinnies people are moved by compassion and a caring disposition, while those associated with the CIS are hard-hearted and punitive.

Even if the Vinnies claims about the extent of poverty were contradicted by the statistics, I know whose world I would rather live in.

Real versus imagined deprivation

Most people in consumer societies believe they need more money than they have, no matter how wealthy they already are. Their actions suggest they are convinced that more money means more happiness. But when people reach the financial goals they have set for themselves they feel no happier. Instead of wondering whether the yen for more money is the problem, they raise their threshold of sufficiency. This is a vicious cycle.

For 2004–05 the typical, or median, level of disposable income for all families with children has been calculated at $50 500. The average disposable income is higher than the median. For the middle class, rising incomes in recent decades have been accompanied by an even faster rise in expectations about what is needed to live a decent life. Since aspirations always stay ahead of actual incomes, many people who by any historical or international standard are wealthy feel they are doing it tough.

According to a poll we commissioned, sixty-two per cent of Australians believe they cannot afford to buy everything they really need. When we consider that Australia is one of the world’s richest countries and that Australians today have incomes three times higher than in 1950, it is remarkable that so many people feel their incomes are inadequate.

It is even more remarkable that almost half (46 per cent) of the richest 20 per cent of households in Australia—the richest people in one of the world’s richest countries—say that they cannot afford to buy everything they really need.

Obviously, perceived needs change as incomes rise. A decade ago ‘everything you really need’ would not have included a plasma-screen television, an ensuite bathroom, a phone that takes pictures and an outdoor kitchen, but for many people now it does include these things. Pressured by their social milieu and advertising, people feel dissatisfied with what they have, so that what begins as a novelty becomes a ‘must have’.

The confusion between wants and needs is at the heart of affluenza. When people see wants as needs, it is not surprising that two-thirds say they cannot afford everything they need. And their feelings of deprivation are real, since thwarted desire is transformed into a sense of deprivation. Of course, the purpose of the advertising industry is to convert perceived wants into perceived needs.

All this suggests that Australian households—and especially middle-income and wealthy households—have an inflated, perhaps grossly inflated, understanding of how much money they need to maintain a decent standard of living. It also confirms the view that as people become wealthier perceptions of the necessary consumption levels rise. This has profound implications for the conduct of politics in Australia.

Recent studies help us understand the distinction between real and imagined hardship. One survey asked respondents whether they could afford to spend money on items such as annual holidays, a night out and hobbies. By looking at specific behaviours, rather than general attitudes to financial circumstances, the survey elicited information on whether households actually go without necessities.

With the exception of new clothes, the items in question—holidays away, eating out, having friends for a meal, and hobbies—cannot be considered physical necessities, although most would be regarded as essential to a reasonable standard of living in Australia today. Being able to participate in society is important to our wellbeing. As a child whose parents cannot afford to send them on a school excursion well knows, the inability to participate can be distressing.

In the case of items such as a week’s holiday away, a night out once a fortnight and having friends around for a meal, the proportion of households saying they cannot afford them is relatively low, at 5 to 27 per cent, when compared with the general belief of 62 per cent of households that they cannot afford everything they really need or the 56 per cent who say they spend nearly all their income on the basic necessities of life. In other words, most Australians see items such as a week’s holiday and a night out as ‘needs’ and ‘basic necessities of life’, at least for the middle classes. Even among low-income households, only about 20 per cent say they have to do without special meals, new clothes and leisure activities, and 56 per cent of households in the lowest income group say they can afford a week’s holiday each year.

Another study, by Australian Bureau of Statistics, found that on average 16 per cent of households could not pay their gas, electricity or telephone bills on time; this included 5 per cent of the wealthiest households. Although wealthy households can experience cash-flow problems that make them late in paying their bills, it would be fair to assume that the stress caused by the inability to pay bills on time is much greater among the poorest households. The same applies to the other items the Bureau of Statistics asked about.

On the other hand, any household forced to pawn something, to go without meals or home heating or to seek assistance from a welfare organisation is experiencing genuine hardship. It is noteworthy, though, that even in the very lowest income group only about 10 per cent of households are so affected, and across the whole population perhaps only 3 or 4 per cent fall into this category. There could be other markers of genuine hardship that the Bureau’s questions did not pick up, but even so it appears that a substantial majority of households in the lowest income group do not report hardship of this kind. As Bray notes, ‘…while lower-income households have, on average, higher levels of [financial] stress, many of these households experience no financial stress at all’.

As one would expect, in the highest income group the incidence of genuine hardship is virtually zero. Yet nearly half of this group say they cannot afford to buy everything they really need. It is reasonable to conclude that, using any reasonable definition of ‘needs’ and ‘basic necessities of life’, a substantial majority of Australians who experience no real hardship believe they are ‘doing it tough’. This might be seen as an unfortunate delusion on the part of the people concerned—except that the notion that large swathes of the Australian population are suffering some form of deprivation is one of the underlying suppositions of political debate and policy formulation in Australia. Among other things, it provides the basis for the political appeal of middle-class welfare and tax-cutting auctions at every federal election.

The debate about how to define a ‘poverty line’ has gone on in Australia for decades and has often been used as an excuse for doing nothing about poverty itself. Although we might not be able to agree on whether 5 or 15 per cent of Australians live in poverty, most people would agree that poverty is caused by unemployment, family breakdown, illness and disability. But it should be apparent by now that the poverty debate is irrelevant for understanding affluenza: we might not know precisely where poverty ends and an adequate income begins but most of us know affluence when we see it.

Thus, when we pose the question ‘How much is enough?’ we are not concerning ourselves with the material shortages faced by the genuinely poor in Australia. The debate about how to define more clearly the poverty line is irrelevant to the lived experience of at least 80 per cent of Australians. In considering the definition of overconsumption, a lesson can, however, be learnt from attempts to define poverty: consensus is unlikely.

It is no easier to determine whether buying a new car every two years or every four years signifies overconsumption than it is to determine whether an avocado is a basic food item or a luxury one. Trying to answer the question of how much is enough in material terms makes sense for people enduring material deprivation, but it is meaningless for middle- and high-income Australians. For the average Australian, asking how much income is enough is akin to asking how long is a piece of string.

When questions are too hard to answer it is often the case that we are asking the wrong question or thinking about the answer in the wrong way. To ask whether $40 000 a year is ‘enough’ misses the point. The problem of affluenza is not so much that we consume too much but that we measure our lives in terms of money and material things. Of course, any affluenza-afflicted Australian who seriously asks themselves whether they have enough will almost certainly decide they have too much. Then they will become aware that the more important question is ‘What am I missing out on that money cannot buy?’

For some, the answer to this question might be ‘nothing’. They might have a job they find rewarding, time to spend with their family and friends and time to pursue their passions—be they macramé, mountain climbing or saving the environment—and they might have learnt all they wish to learn about themselves, their society and the world. For such a person, pursuing a higher income in order to fulfil a material desire, if they still have one, could make sense.

But, for a person who finds their work stressful and unrewarding, who lacks the time or emotional energy to engage fully with their friends and families, who longs to spend more time on their hobbies or improving their mind, to ponder how much more money they need to be happy is a diversion—not a path towards happiness. The purpose of becoming rich, both as individuals and as a country, is to relieve ourselves of the burden of worrying about money, yet as our incomes have grown we seem to have become more preoccupied by our wealth, not less.

After decades of growth we still have poverty. About 10 per cent of Australian households fit any reasonable definition of ‘poverty’ and perhaps another 10 per cent seriously struggle at various points in their lives. Of the rest, perhaps half would say they are struggling—and not just the bottom half—although few would be able to look the average East Timorese in the eye and complain about their financial situation.

Concern for the underprivileged is right: a society in which no one cared for others would be a type of hell. But this necessary compassion should not provide the motive for a politics of social change in a society where the great majority of people are surrounded by abundance. Clinging to the deprivation model actually reinforces the arguments and political position of conservatives—the growth fetishists—and prevents us from confronting poverty. The deprivation model is simply the obverse of the growth model: they are both obsessed by income.

In Australia today we do not lack the ability to solve poverty; we lack the willingness. And the richer we become as a society the more unwilling we are to sympathise with those at the bottom of the heap. We have been unable to make the necessary changes to social structures to reduce poverty because of the majority’s preoccupation with protecting their own incomes, a preoccupation nurtured every time a political party declares that its priority is more growth. The goal of full employment has consistently been sacrificed to the interests of higher incomes for the wealthy. In a society where too much is not enough, social justice is an impossible goal.

Thus, to solve the problem of poverty, real deprivation, we must first solve the problem of affluence, imagined deprivation. Yet that must be done in the face of the formidable pressures applied by consumerism itself, which, having solved poverty materially, must constantly recreate it psychologically. Otherwise, the system cannot keep functioning, because the role of marketing is to sell the belief in one’s own deprivation and the redemption that comes through consumption.


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© Copyright Clive Hamilton