The truth about poverty – from a certain point of view

 Adam Creighton, economics correspondent at The Australian, recently wrote of Australia’s ‘addiction to welfare‘ aided and abetted by a ‘welfare lobby whose existence depends on maintaining the “poverty” charade.’

This drew a quick response from Dr Cassandra Goldie, chief executive of the Australian Council for Social Services (ACOSS), who published an opinion editorial reiterating statistics from an ACOSS report suggesting that Creighton was ignoring the ‘real poverty faced by 2.2 million’ Australians.

These poverty wars are happening against a political back-drop of a commission of audit into Commonwealth expenditure and a review into the Disability Support Pension and Newstart Allowance. The findings of these inquiries are yet to be handed down but it is likely that one or both will recommend reforms to income support policy.

According to David Hetherington, executive director of the progressive think-tank Per Capita, Creighton and others are involved in a ‘creeping barrage … to distort the meaning of terms such as poverty … to allow them to be ‘claimed’ by the Abbott Government as it advances its agenda.’ But whether one is distorting the meaning of poverty depends greatly upon your perspective as to what poverty is.

Creighton argues that a household with an annual income of $28,600, made up of two-unemployed adults and two children, is not living in poverty because they would receive $37,190 in cash transfers from Centrelink. In Dr Goldie’s view, this household would require at least $39,104 to escape poverty.

Creighton arrives at his poverty line by assessing whether this family could afford a 1973 basket of goods in today’s prices. ACOSS arrives at theirs by comparing the income of this household to half of median household income after adjusting for household size. The former is often referred to as absolute poverty and the latter as relative poverty.

There has been a long running debate in Australian social policy – in which the CIS has been an important participant – as to the extent to which each should be a priority.

Critics of the absolute definition of poverty argue that the choice of a minimum basket of goods and services is inherently relative to the standard of living of the society at a particular point in time. This is true and in this sense the term absolute poverty is unfortunate. Nonetheless this approach involves a qualitatively different value judgement about what relative standard of living is required to escape poverty.

Creighton’s specific choice of poverty line doesn’t leave much room for a personal computer, an internet connection and other goods and services many would wish were within reach of all Australians in 2014. An absolute poverty line needs to be updated over time rather than frozen in 1973.

That said, it is disingenuous to accuse those who support the absolute view of poverty of distorting the meaning of poverty. To do so is to assert one’s ideological perspective as fact and deny that there can – or should be – any debate.

Matthew Taylor is a Research Fellow at The Centre for Independent Studies.