Are pensioners really impoverished?

| July 6, 2009

Confusing the average median income with the poverty line is sloppy statistics.

The OECD this week released a report that claimed that one in four Australian pensioners live in poverty. According to the report, pensioners in Australia face the fourth highest rate of poverty in the developed world.

According to the report's author, Edward Whitehouse, ‘Public pension spending is only 3.5% of national income in Australia, compared with an average of over 7% of GDP in OECD countries.'

While these claims seem shocking, closer scrutiny shows them to be almost meaningless.

The ‘poverty line' used by the OECD is half of median income. What this tells us is that a large group of pensioners have incomes lower than the average. What it doesn't tell us is how this actually affects their standard of living.

Another, more in-depth report called ‘Growing Unequal' released by the OECD last year looked beyond relative income poverty. It also examined material deprivation: whether people had adequate access to necessities such as housing, food, health care, heating, etc.

It found that while the overlap between relative income poverty and material deprivation was ‘far from perfect' for the population as a whole, this was especially so for elderly people.

Despite having relatively low incomes, many elderly people own their homes or other assets. In Australia, they have access to extensive free health care and subsidised private health insurance, transport, and utilities. The report therefore concluded that ‘income poor older people are not necessarily experiencing material hardship.'

Claims that Australia's level of spending on pensioners is miserly also fail to stand up to scrutiny.

Australia spends a relatively small amount on pensions compared to the OECD average, not because we are tight-fisted but because we have a targeted and means-tested system. In contrast, many European countries have social insurance systems that provide universal pensions often more generous to high-income earners.

This means that it's possible for a country to spend large amounts on pensions but also have a high level of material deprivation amongst pensioners.

Measuring government spending on pensions alone also doesn't take into account the effects of private retirement savings such as superannuation.

Measuring the standard of living of elderly Australians is a worthwhile endeavour. However, meaningless statistics and invalid comparisons do little to achieve this.

Jessica Brown is a Policy Analyst with the Social Foundations Program at the Centre for Independent Studies (CIS). This opinion piece draws on research from an upcoming CIS publication which explores trends in income inequality and poverty in Australia and New Zealand and was originally published on 3 July 2009 in the CIS newsletter and is republished here with the kind permission of Jessica Brown and the CIS.



  1. joy ray

    October 18, 2009 at 5:40 am


    My husband and I owned our own home, but unable to work full time medically. We did not want to have to rely on a benefit, so we mortgaged our home and bought a business to run at arms length….big mistake. We now have a failed business, and owe an unheard amount of money; bankrupt, and renting.

    I cannot begin to tell you how much a pensioner has to cut back..on food..soups are good..forget entertaining!.Heating…this winter we had blankets, scarves, and mittons to watch TV at night, or we gave up and went to bed.

    Free medical services are great, but if you need a specialist you need at least a $100.00 to get in the door, if your’e lucky some will let you pay the gap, but some don’t.

    I have not bought clothes for three years and neither has my husband, but we need to start replacing them soon, but unless you go to a shopping mall you don’t get many specials, and depression makes it difficult to plan ahead.

    We rent our home, and we are lucky that we found a home that is a true long term rental. The first rental we had was put up for sale after 12 months, and it cost about a thousand dollars to move just to the next suburb. If we have to move again it will be a real problam as we have no reserves left.

    While this all sounds sore and sorry for ourselves, we arn’t really, we do appreciate the opportunity we had, and we are making do with no danger to life and limb. We both help with voluntry services, my husband helps Meals on Wheels, and we started a grocery service for those elderly people having mobility issues in Retirement Living…we figure that all voluntry services started with the vision of need, and someone fulfilling that need, and one day, we may be the ones in need.

    Our computer and broadband is our luxery, and we hope our little car [20 years strong] keeps going! fingers crossed!

    Voluntry services fill a vital need in our community. There is no answer to the whole problem of varied social needs, but it would be nice if every family could at least be secure in their own home. Public housing has a very long list, and it seems that the people who damage their public housing house may appreciate it more if they were to be given a low interest loan for that house, and they maintained it themselves. When maintainance and damage bills are spoken about it frustrates me..those people who damage expect others to fix it, and then find them a new place. This doesn’t make sence to me.