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Family Matters No. 50 - June 1998

Costs of children in Australia - update

There are two important differences between results obtained by using the basket-of-goods method and the expenditure survey method as presented in the accompanying Tables. First, the basket-of-goods approach provides only part of the cost of a child, while the expenditure survey measures the total amount spent on the child. Second, the basket-of-goods method indicates how much parents would spend on their children if the child was to enjoy the fruits of the basket specified by the researcher. In this sense, it provides an 'ideal' or desirable costing. In contrast, the expenditure survey method indicates how much parents actually spend on their children, even though the amount spent might be considered inadequate or excessive by the objective standards of the basket-of-goods method. For a full description of the two approaches, see McDonald, P. (1990), 'The costs of children: a review of methods and results', Family Matters, no.27, pp.18-22.

Basket-of-Goods Approach
Based on Lovering 1983
Adjusted to CPI figure December Quarter 1997
    Age of child      
  2 years 5 years 8 years 11 years Teenage
Low income families
(below average weekly wage)
         
Per week 31.88 40.92 50.18 53.22 79.29
Per year 1663.30 2172.13 2616.45 2776.66 4134.62
Middle income families
(average weekly wage and above)
         
Per week 47.99 53.82 69.49 89.95 131.92
Per year 2502.52 2808.78 3623.69 4574.79 6878.90

Note: Included are food and clothing, fuel, household provisions, costs of schooling (not fees), gifts, pocket money and entertainment. NOT included are housing, transport, school fees or uniforms, child care, medical or dental expenses. Holidays are a component of the middle income figures only.

Source: Lovering, K. (1984), Cost of Children in Australia, Working Paper no.8, Australian Institute of Family Studies, Melbourne.

Expenditure Survey Approach
Based on Lee 1989
Adjusted to AWE figure December Quarter 1997
Age of
child
(years)
Food Transport Recreation Household
goods
Housing
and
Utilities
Clothing Other* Total
expenditure
weekly
0-1 32.68 48.22 33.49 33.29 26.89 18.13 18.02 210.85
2-4 28.74 37.46 26.77 30.68 17.22 15.91 15.47 172.49
5-7 30.28 39.06 40.27 27.73 21.74 18.40 12.20 186.56
8-10 42.28 54.41 40.52 29.13 14.70 16.99 26.80 225.02
11-13 46.59 46.17 37.72 32.36 31.26 24.57 31.37 250.24

* Includes medical and dental costs, education costs and other miscellaneous costs. Costs of children vary according to the number of children in the family, the parents' incomes and whether one or both parents are working.
Note: The figures in the table relate to a one-child, one-income family with an income of $709.07 gross per week. The Lee data show that two children cost about 55 per cent more than one child, while three children cost about twice the cost of one child. The dollar costs of children are relatively 'flat' compared with rises in family income: children in poor families cost proportionally more, and children in rich families proportionally less than those in middle income families.
Source: Lee, D. (1989), Calculations of the direct costs of children based on the 1984 ABS Household Expenditure Survey, Australian Institute of Family Studies, Melbourne.

OTHER COST OF CHILDREN RESEARCH

In March 1998 the Department of Social Security published a report* it had commissioned from the Budget Standards Unit of the Social Policy Research Centre at the University of New South Wales. The Costs of Children (chapter 14, pp. 591-599) outlines budget standards for households with different compositions to describe how costs vary with the presence of children; costs are shown for low cost budgets and for modest but adequate budgets.

* Saunders, P. et al (1998), Development of Indicative Budget Standards for Australia, Policy Research Paper No.74 (March), Department of Social Security, Canberra.