The latest Household, Income and Labour Dynamics in Australia (Hilda) Survey released on Thursday provides vital details on the lives of Australians. It also helps answer the question of how much you need to earn to be a middle-income Australian.
The Hilda survey by the Melbourne Institute is a longitudinal study that follows the same group of about 17,000 people to get a sense of how Australia is changing across a range of economic and social measures.
For example, the latest survey, which covers 2024, found there has been a slight decrease in the share of Australian households made up of couples with either dependent or adult children, but an increase (from 20.4% to 22.1%) of couples without children:
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The survey also found households now spend more on childcare than they did in 2002 – but the costs have stabilised over the past decade.
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The report also reveals that wages have become more equal, which has helped counter the increased inequality of non-wage income (such as investments):
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This poses the question of how we measure income and what is the “middle”, as opposed to the “average”, income of Australian households.
This is a tricky, but important subject.
For example, I regularly use per capita (or average) household disposable income to compare house prices to income. I calculate this from the national accounts, which come out every three months.
The Hilda survey uses both median and average household income, and pleasingly, my measure is relatively similar to the median household disposable income in the Hilda survey:
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The problem however is there are a multitude of ways to measure income, and also to split up the population.
Firstly “median” and “average” (more strictly, “mean”) are quite different.
Median is the midpoint (ie half earn more and half earn less), whereas average is just the total amount of income divided by all the people. As a result, average income is always a lot higher than the median.
The Hilda survey found that in 2024 the median income across every household in Australia was $103,166. But that actually isn’t very useful.
Yes, if the total disposable income in your household is more than $103,166 you can say you have more income than half of Australian households, but that says nothing about your living standards.
Obviously if you are a single person with a disposable income of $103,166 you are much better off than if that is the income for a family of four.
This is why the Hilda calculates a measure called the median “equivalised” disposable income. Essentially this is the income of a single person with median living standards.
In 2024 this was $66,311. By contrast someone in the 90th percentile (ie with living standards better than 90% of Australians) had an income of $122,675, and someone in the bottom 10% earned just $30,842 after taxes:
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Because most people think about gross income (ie before tax), this means that for a single person to have median living standards they need to earn $83,969 before taxes (assuming 2% Medicare levy).
But the ABS records that median total earnings in 2024 was just $78,567. The reason why it is less is that it only counts wages and salaries, not income from investments and other sources.
The Hilda survey also suggests that a pre-tax income of $170,513 puts you in the top 10%:
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But again, this is only slightly more helpful because it is just for a single person. What about for a couple, or for a couple with two children?
This is where we shift from talking about median incomes to living standards and try to work out what you would need to earn to have the same living standards as a single person on median income.
The standard formula is to count every extra adult in a household as requiring 50% more income, and each child 30%. This is because a couple living together does not for example double the cost of electricity or even rent. So, for a couple to have the same living standards as a single person they need to earn 1.5 times more. Similarly, for a couple with two children they would need 2.1 times the income as a single person.
This means for a couple to have the same living standards as a single person on median income, they need a combined household disposable income of $99,467, while a couple with two children needs $139,253:
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If we assume each couple earns a 60/40 split of the household income, we can also estimate the pre-tax household income required for each family size to have median, average or top 10% living standards:
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On this score, a household income of $176,219 is needed to deliver median living standards for a family of two adults and two children – about $25,000 less than what you need to have “average” living standards.
So when you hear a politician talk about average income, always remember to ask if they are talking about a single person or a family, and whether they are really trying to pretend they are talking about middle income.
• Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
