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Saturday, 21 July 2012

Income distribution in Australian states

Although the Occupy movement is under less media spotlight than in late 2011, there have been numerous claims in the media of increasing wealth inequality in the developed world, and most notoriously in the United States. The 2011 Australian census presents an opportunity to analyse income distribution and subsequently determine to what degree claims of inequality are borne out in the data.

Household income distributions across Australian states and territories, based on 2011 census data

At the lower end of the income scale, Tasmania stands out as having a significant spike with its mode at 14.5% of respondent households reporting income of $900 per week, which is equivalent to $47,000 per year. South Australia also has a similar, but less extreme, mode with 12% of households reporting income of $900 and similarly 12% reporting $1,000 per week. The tall, narrow profile of these the income distributions for these two southern states paints a picture of states with relatively high levels of income equality. These higher levels of income equality are quantified through the smallest standard deviations of all states (see chart below).

The big population states: NSW, Victoria and Queensland

While Tasmania and South Australia stand out as the lowest earning states, buried beneath them in the chart is a tangle of lines representing the core of Australia's population: New South Wales, Victoria and Queensland. These three states comprise 77% of the Australian population, and follow very similar income distributions (sharing correlation coefficients > 0.98). Victoria has the lowest mean income and smallest standard deviation, News South Wales has the highest, and Queensland is in between; however these differences are subtle and all three have similar levels.

Of the three high population states, one element of note is the minor spike in New South Wales at the $2,600 per week level ($135,662 per annum). This income level is at the 97th percentile in New South Wales, the 98th percentile in Queensland and the 99th percentile in Victoria.

Overall, however, these three states can be summarised as residing in the middle in terms of both mean income and levels of inequality. Victoria, New South Wales and - to some degree - Queensland export a relatively large quantity of services. While this can temper a boost from resource booms, it also reduces their exposure to negative phases in the commodity cycle. This level of diversification, combined with higher populations,  leads to more moderate income distribution profiles.

Measurements of inequality

Limitations on the available household income data - such as a maximum possible result of $5,000 per week - mean that an accurate Gini coefficient is not possible to derive. Further to this, income as a metric represents something different from wealth. As an alternative indicator, I am using standard deviation as an inequality metric. This measurement looks at the spread along the income distribution levels from the mean; the theory is that the wider the spread, the greater the inequality because there are more poor people and more wealthy people further from the mean. Whilst this is an imperfect indicator, it is useful for quantifying the range and relative frequency of incomes encountered within a given state.

Income inequality ranked using standard deviation as a measure of inequality. Higher standard deviation indicates higher levels of inequality. Mean income for each state is also shown.

When using standard deviation as an income inequality metric, the Northern Territory and the ACT show the largest spread of incomes in the country. Tasmania and South Australia show the lowest levels of inequality, although the potential range of incomes are constrained by relatively low average earnings in these states.

Western Australia


Western Australia follows a broadly similar distribution to New South Wales, Queensland and Victoria, albeit shifted to the right and with a significant shoulder around the $1,800 per week / $94,000 per year level. Its rightward position relative to New South Wales, Queensland and Victoria indicates that its earnings are higher. This view is backed up by a mean income of $1,465, third in the country and only behind the two lowly populated territories.

Western Australia's standard deviation is only $3 more than New South Wales, yet its mean earnings are $131 per week larger. This indicates that the lower earners in Western Australia have a larger income than their equivalents in New South Wales, and therefore possibly providing some evidence the mining boom is benefiting the broader economy. It should be noted though that these metrics do not take into account relative cost-of-living levels within Western Australia and New South Wales.


The two territories of Australian Capital Territory and the Northern Territory

The Northern Territory and the Australian Capital Territory have the highest earners of the states and territories in Australia. Both present an interesting and distinct distribution from the states.

Income distribution in the Northern Territory and Australian Capital Territory. Figures are based on the 2011 Australian Census.

The Australian Capital Territory has by far the highest mean household income at $1,909 per week and has its mode (i.e. peak value) at $1,800. Its distribution is offset significantly to the right of the states, reflecting the higher mean, and it displays a significant shoulder around the $2,100 level, exhibiting bimodal characteristics. This second peak can perhaps be explained by a groundswell of territory or Commonwealth public sector salaries supporting households that earn approximately $110,000 per year.

The results from the Northern Territory also exhibit some interesting traits. At $1,474, its mean is significantly below the ACT, yet its most frequent income level - at $1,900 - is higher. This difference between its mean and mode is caused by a heavy tail at its lower income levels, which is pulling down the mean. The Northern Territory also exhibits a significant amount of households with zero income, which also reduces the mean, while leaving its mode unchanged.

Relative income distribution standard deviation by state. The Northern Territory has both the largest absolute standard deviation, and the largest relative standard deviation. ACT has the lowest relative standard deviation.

The chart above looks at the relative standard deviation across state incomes. Notice that the Australian Capital Territory and the Northern Territory are at opposite ends of the spectrum. This further paints a picture of significant wealth inequality in the Northern Territory. It has the second highest mean income in Australia, but also the largest range of incomes relative to its average.

The 2011 Australian census captured that 27% of residents of the Northern Territory are indigenous Australians. It has been reaping many of the economic gains from the recent mining boom, and despite only having 211,945 residents - i.e. 1% of the population - it contains Australia's 20th highest earning town in Nhulunbuy. Its capital, Darwin, contains some of the wealthiest city centre residents in the country. These are the underlying details that support a picture of high levels of income inequality.

Canberra, in contrast, has managed to sustain both extremely high levels of average income and a relatively narrow band of income distribution, indicating that the territory has its wealth fairly evenly distributed.

Of course, with only around 2.5% of the Australian population residing in these two territories, statistical extremities can perhaps be expected. It is perfectly plausible that perhaps buried within outback Queensland or Western Australia, there are similar levels of income disparity to the Northern Territory. Or perhaps swathes of the Perth area contain similar patterns of high wealth to Canberra.

As an aside, it is worth paying attention to the relative standard deviation in New South Wales. It sits at the top of this particular ranking, alongside the Northern Territory. This metric indicates a high level of inequality relative to other areas in Australia. I have been performing further analysis on income distribution in major Australian cities, however that is a subject for a future post. I'm sure that particular future post will shed further light on this.

The ABS's Statistical Area Level 1 (SA1) data sets have been used as a proxy for determining income levels. These provide a level of data granularity to geographical areas containing approximately 500 people.

Friday, 13 July 2012

Migrant clustering and cultural influence in Australia

People born in Turkey are most likely to move to an area with a high number of their Turkish compatriots, according to the 2011 Australian census. Areas such as Meadow Heights, in Victoria, with around 20% of its populace born in Turkey are popular destinations for Turkish migrants. Despite only comprising 0.15% of Australia’s population, the median local prevalence of Turkish-born residents is 9%.

The chart below ranks migrants in Australia by their tendency to cluster with their national compatriots. This measure is based on a ratio that compares their proportion of the wider population with the median prevalence of compatriots within their local Statistical Area Level 1 (SA1) boundaries.

Ratio of weighted mean local prevalence to percentage of population. A higher ratio indicates a higher degree of localised clustering with compatriots. Figures are taken from the 2011 Australian Census.

Second place belongs to Cambodian migrants, who tend to cluster together disproportionately to their prevalence in the wider population. Despite making up only 0.13% of Australian residents, their median local prevalence is 6.4%. Springvale, a suburb in Melbourne, which comprises 23% Cambodian, and 15% Vietnamese residents, paints a fairly typical picture of a south-east Asian enclave. Likewise, more than 50% of the population of Cabramatta, in New South Wales, was born in Cambodia or Vietnam, according to the 2011 census.

Iraqi migrants are the third most likely to cluster with their fellow Iraqis. As mentioned in a previous post, this can be explained by the disproportionate degree of Iraqis that migrate via Australia’s Humanitarian Programme. Having fled their own war-ravaged nation, moving to areas with some of the familiar comforts of home makes sense.

Well Spread

At the other end of the scale, the Brits, New Zealanders, Germans, Indians and South Africans are relatively spread out across Australia. As a Western nation, it is hardly surprising that other Western nationals, such as those from the United Kingdom find it easy to integrate with the wider population. The spread of Indians can also be explained by the significant Western influence in the subcontinent, not least of which is a familiarity with the English language.

Arguably the most impressive spread of migrants are those born in China. Despite vast cultural differences, the Chinese are the tenth least clustered of 35 nations measured, and less so than many European nations, including Italy, Greece and Poland. Chinese people make up 1.5% of the Australian population, and their median local prevalence is 9.79%. This spread of Chinese demonstrates that the common perception that Chinese people cluster around Chinatown areas is a fallacy. 

Migrant Scale vs Clustering

There is a general trend that the smaller the amount of migrants from a given nation, the higher the degree of clustering. This trend is stronger among the nationalities that comprise less than 1% of Australian residents. 

Cluster ratio vs percentage of Australian population: generally, the smaller the number of migrants, the higher the  degree of clustering. A logarithmic cluster ratio scale is used to improve readability.


This pattern indicates that migrant sources typically begin in localised clusters, then spread out more evenly across the nation as their numbers increase. It can be expected that these initial clusters portray many of the cultural traits of their homeland, and help migrants to feel secure in a foreign land. As their scale increases within Australia, this leads to cross-cultural flows of influence between Australian and the expanding migrant culture. This, in turn, evolves into a hybrid, containing elements of both cultures and further supporting an even spread of migrants through a continual feedback loop. 

Mature examples of migrant source nations are the United Kingdom and New Zealand. The results of this cultural feedback loop are visible as the three nations share many cultural traits. Australia, as a result, continues to be attractive to migrants from these nations as a consequence. It can therefore be expected that in the future the Chinese and Indian feedback loops will gather pace, feeding into the very definition of ‘Australian culture’.

Thursday, 12 July 2012

Mining towns vs The Commonwealth: Australia's highest-earning suburbs

Mining towns and suburbs of Canberra dominate the top of the ranking of the highest-earning areas in Australia. Forrest, in the Australian Capital Territory, is Australia’s highest earning area according to the 2011 Australian census. The Canberra suburb has a median household income of $2,935 per week, which equates to a household income of $152,620 each year. Of the top twenty highest earning areas in Australia, the ACT has seven of them thanks to a prevalence of senior Commonwealth public servants. 
Top 20 Australian areas, ranked by median household weekly income. Areas are defined by ABS Statistical Area Level 2 (SA2) boundaries. Areas with less than 1000 people are not included.

Mining towns take up the majority of the remaining top ten areas in Australia, in positions 2 to 7 in the ranking. Karratha, in Western Australia, is just behind Forrest with a median weekly household income of $2,870. Western Australia dominates the high-earning mining town ranking, although Moranbah in Queensland and Roxby Downs in South Australia make an appearance in the ranking. These two towns leverage the economic benefits of the regional coal mining industry and SA’s Olympic Dam project respectively. 

The Northern Territory's sole representative, Nhulunbuy, in north-east Arnhem Land, comes in at 20th in the ranking. With road access only possible with a permit and via 700km of unsealed roads, the residents of this hot and humid seaport and mining town are clearly well paid to compensate for its extremities.

One interesting demographic characteristic of the wealthy mining towns is the age of their high earners. The median age is approximately 32, which is around 8 years younger than non-mining wealthy areas. It looks like Australia’s mining boom is fuelling a generation of wealthy, young Australian residents.

The cities and the rest

Composition of top 20 highest-earning area ranking
Of the city suburbs represented in the ranking, two are in Perth and one each are in Sydney and Brisbane. Floreat and the northern coastal suburbs of Iluka / Burns Beach are Perth’s two highest earning areas. Pymble on Sydney’s wealthy North Shore and Fig Tree Pocket – famed for its expensive riverfront property – in Brisbane’s inner west represent the eastern capitals in the top twenty ranking.

Victoria’s highest ranking area, the eastern part of Glen Iris, which incorporates parts of Burwood and Ashburton, has a median weekly income of $2,304. This suburb in eastern Melbourne is the 62nd highest earning area in Australia. The Cambridge, Mount Rumney, Roches Beach and Llanherne areas of Tasmania is the island state’s highest earning area with a median weekly income of $1,577 and is ranked 519th in Australia.

Monday, 2 July 2012

Overseas visitors by state

Greater Sydney has overtaken regional Queensland in the 2011 census as the most popular area for overseas visitors, with 50,579 (23%) of the 219,442 visitors nationwide. The non-Brisbane parts of Queensland came second with 41,108 overseas visitors.

Overseas visitors by state, percentage of total Australian overseas visitors (Source: ABS Census 2011)

In terms of single states, Queensland had the most overseas visitors with 65,020. This is 5% more than New South Wales, which came second with 61,918 visitors. Queensland was also the only state that had more overseas visitors outside of its capital rather than within. The Sunshine State's high visitor counts in regional areas can easily be explained by the chain of tourist resort that run along the state's 2,500km sub-tropical and tropical coastline. This chain begins with the iconic Gold Coast in the south, and finish with Cairns and the Cape York Peninsula in Far North Queensland. In both the censuses of 2001 and 2006, regional Queensland had more overseas visitors than Sydney.