Pension has elder poverty falling

Poverty rates have dropped sharply for retirees as the share of the population in poverty with a bachelors degree has almost doubled, a new study has found.

An analysis of more than 300,000 people has found poverty rates have fallen for all age groups over 20 between 2011 and 2016.

Poverty rates have dropped sharply for retirees as the share of the population in poverty with a bachelors degree has almost doubled, according to a major new study by the Melbourne Institut­e.

An analysis of more than 300,000 people has found poverty rates have fallen for all age groups over 20 between 2011 and 2016, the two most recent census years, especially for those older than 65, for whom the poverty rate plunged by more than 25 percentage points to 15 per cent.

“The main reason is the Age Pension rate has increased faster between 2011 and 2016,” said Abigail Payne, a professor at the Melbourne Institute and the ­report’s author.

Professor Payne warned that the jump in unemployment during the COVID-19 pandemic could lead to a significant jump in poverty in coming years, based on what happened after the 2008 global financial crisis.

‘The most interesting thing for me in the report is the degree to which people have had a rollercoaster ride in flowing in and out of poverty’: Professor Abigail Payne. Picture: Aaron Francis

“The GFC had a relatively muted effect on the economy but poverty rates rose, and it’s likely the effect will be much larger this time,” she said.

The unemployment rate has increased from 5.3 per cent in January to 7 per cent in October, more than it did during the GFC, when the unemployment rate peaked at 5.8 per cent.

“While not triggering a reces­sion in Australia, the global fin­ancial crisis had a dis-employ­ment effect on the most vul­nerable groups,” the report says.

“It is commonly assumed that people who have lost their jobs as a result of COVID-19 related recession­ will gain them once again once the epidemiological situation gets back to normal.’’

The analysis, titled Breaking Down Barriers and partly funded by the Paul Ramsey Found­ation, pointed out that the share of the population with a univer­sity degree had increased from 18 per cent to 25 per cent.

Meanwhile, the share of people­ in poverty with a degree increased from less than 6 per cent to almost 11 per cent.

Professor Payne said the poverty rates for older Australians could overstate their relative priva­tion given that income measures of poverty excluded wealth, such as owner-occupied housing.

“The most interesting thing for me in the report is the degree to which people have had a rollercoaster ride in flowing in and out of poverty,” she said.

The report found that 69 per cent of people in poverty in 2011 were not in poverty by the time of the next census in 2016.

Overall poverty, defined as having a total income from all sources below 60 per cent of the median level of income, rose about two percentage points between 2006 and 2011 to about 18 per cent, before falling sharply to about 13 per cent in 2016.