Material deprivation and financial stress

Key findings

• In 2018, around 1 in 8 (12%, or 400,000) of young people lived in households deprived of 2 or more essential items.
• Young people living with their parents were less likely to be living in material deprivation (10%) than those in other living arrangements (19%).
• More than 1 in 3 (36%, or 143,000) living in material deprivation also experienced financial stress.

Box 1: Data sources on material deprivation and financial stress

Data on material deprivation and financial stress are from the Household, Income and Labour Dynamics in Australia (HILDA) survey. The HILDA is a longitudinal household study that collects information about economic and personal wellbeing. Data on material deprivation are collected at the household level, with 1 respondent answering questions on behalf of the household. Since 2014, the module has been completed every 4 years, with the latest available data from 2018.

Data on financial stress are collected at the individual level, and responses from young people are available in each wave (except in 2010), with the latest data available for 2018.

Data limitations

Responses to questions on material deprivation may not necessarily reflect the perspectives of young people in that household about what is considered essential for an acceptable standard of living. Surveys designed specifically for young people may be better suited to report on how young people perceive and experience disadvantage.

For both material deprivation and financial stress, there are limitations to measuring a person’s individual level of deprivation or stress by counting items and experiences. Similarly, going without meals may be a better indicator of financial hardship than having to pawn or sell something for money. An alternative is to place greater weight on certain items – either those deemed essential by a larger proportion of people (material deprivation), or those with greater impacts on wellbeing (financial stress).

Box 2: How is material deprivation measured?

The material deprivation module in the HILDA is derived from previous studies conducted by the Social Policy Research Centre on material deprivation among adults (Saunders et al. 2007; Saunders & Wong 2012). The module asks a respondent from each household to specify whether they consider each of the following items essential, whether they have it and, if not, whether it is because they cannot afford it:

1. Getting together with friends or relatives for a drink or meal at least once a month
2. Medical treatment when needed
3. Furniture in reasonable condition
4. A decent and secure home
5. Medicines when prescribed by a doctor
6. Warm clothes and bedding, if it’s cold
7. A substantial meal at least once a day
8. A week’s holiday away from home each year
9. A roof and gutters that do not leak
10. A telephone (landline or mobile)
11. Home contents insurance
12. A washing machine
13. A motor vehicle
14. Access to internet at home
15. Comprehensive motor vehicle insurance
16. At least $500 in savings for an emergency
17. A home with doors and windows that are secure
18. Dental treatment when needed
19. Buying presents for immediate family or close friends at least once a year
20. When it is cold, able to keep at least 1 room of the house adequately warm
21. A separate bed for each child
22. A yearly dental check-up for each child
23. A hobby or a regular leisure activity for children
24. New school clothes for school-age children every year
25. Children being able to participate in school trips and school events that cost money.

Of the 25 items presented in the module, 23 were considered essential by a majority of respondents in 2018. The items not considered essential by a majority of respondents were: ‘a week’s holiday away from home once a year’ and ‘buying presents for immediate family or close friends at least once a year’. ‘Access to the internet at home’ was not considered essential by a majority of respondents in 2014 but was considered essential in 2018.

This approach is often referred to as the ‘consensual’ approach as it relies on a common understanding of what constitutes an acceptable standard of living. A person’s individual level of deprivation can be determined by the number of essential items their household does not have and cannot afford. Deprivation levels can be used to calculate the average number of items people are deprived of across a group, also referred to as the mean deprivation score.

This section uses a 2-item measure of deprivation to allow for responses errors. A person is considered to be living with material deprivation if they do not have, and cannot afford, at least 2 essential items.

This approach gives equal weight to each item and does not account for the seriousness of different forms of deprivation. The impact of not being able to afford ‘getting together with friends or relatives for a drink or meal at least once a month’ may differ substantially from being deprived of ‘getting medical treatment when needed’ (McLachlan et al. 2013).

Box 3: How is financial stress measured?

In the HILDA survey, financial stress is measured by asking respondents over 15 years of age: ‘Since January [survey year], did any of the following happen to you because of a shortage of money?

1. Could not pay electricity, gas or telephone bills on time
2. Could not pay the mortgage or rent on time
3. Pawned or sold something
4. Went without meals
5. Was unable to heat home
6. Asked for financial help from friends or family
7. Asked for help from welfare/ community organisations.

Respondents are asked to indicate which of these 7 events had occurred. Experience of any 1 of these events can be considered an experience of financial stress, although some events (such as going without meals) can indicate more severe stress than others (such as inability to pay bills on time). Two or more of the indicators must be experienced for a person to be classified as being in financial stress (Wilkins et al. 2019).