Drawing on 22 years of longitudinal data from the Household, Income and Labour Dynamics in Australia Survey, we investigate how exposure to poverty in childhood is associated with poverty risk in early adulthood. We find a substantial and highly non‐linear gradient in poverty persistence from childhood into early adulthood. Compared with children from households with an income between 150 per cent and 200 per cent of the poverty line, those growing up below the poverty line have an early‐adulthood poverty rate that is 22.4 percentage points higher on average, whereas those growing up in near‐poverty, with an income between 100 per cent and 150 per cent of the poverty line, have a rate 8.7 percentage points higher. These associations remain substantial after controlling for childhood family characteristics, indicating that childhood poverty remains a strong marker of later‐life disadvantage. We then examine whether this persistence is related to differences in educational attainment, employment, partnership, family structure and health in adulthood, and the extent to which these outcomes are in turn associated with poverty risk. Substantial associations between childhood poverty and early‐adulthood poverty remain even after accounting for these factors. While our analysis does not identify causal impacts of childhood poverty, our findings nonetheless suggest that policies directly addressing childhood poverty should be considered alongside downstream interventions focused on education, employment and family stability. We also find that these associations are considerably larger for children growing up in single‐parent families, suggesting that these families warrant particular policy attention.
This paper provides causal evidence that persistent changes in macroeconomic conditions in immigrants' countries of origin shape their labour market behaviour in the host country. We develop and empirically test a reference‐dependent framework in the spirit of Kőszegi and Rabin (2006), in which immigrants evaluate their material well‐being in the host country relative to a reference standard anchored in home‐country economic development. Utilising Australian longitudinal data from 2001 to 2017, we find that increases in home‐country GDP (Gross Domestic Product) raise immigrants' labour force participation, employment, hours worked and annual labour earnings, with little effect on hourly wages. These responses are stronger among immigrants with closer economic or cultural ties to their countries of origin and do not attenuate with time spent in the host country. Our findings suggest that immigrants' labour supply decisions remain shaped by transnational reference standards and provide new evidence that economic developments abroad can influence labour market outcomes in destination countries.
Economic indicators inform the assessment of economic slack for central banks, yet traditional output gap estimates are often limited by the substantial reporting lags of quarterly GDP. This paper extends a mixed-frequency Bayesian vector autoregressive (MF-BVAR) framework to the Australian economy by applying a multivariate Beveridge-Nelson (BN) decomposition. Compared to existing applications to the US economy, the modelling setup introduces three distinct contributions: the incorporation of a block-exogenous foreign sector, explicit accounting for COVID-19 outliers and the integration of a weekly indicator in addition to monthly and quarterly indicators. I find that the estimated output gap is broadly consistent with central bank estimates. Informational decomposition results reveal that every variable in the model contributes non-negligibly to the overall estimate, with foreign variables and the Trade Weighted Index (TWI) providing substantial shares of useful information. Domestically, aggregate hours worked provide a more significant contribution than the headline unemployment rate, suggesting more relevance of the intensive margin of the Australian labour market than its extensive margin. Furthermore, sectoral aggregation highlights the labour sector as the primary source of information for the output gap, while TWI alone provides informational value nearly equivalent to the entire financial or macroeconomic sectors combined. Shock decompositions reveal that while domestic shocks drive the majority of cyclical fluctuations on average, the Global Financial Crisis was largely attributable to foreign shocks. Finally, while weekly TWI allows for more timely updates, it does not improve estimates compared to a model utilising a monthly TWI instead.
We highlight the importance of high and low states of household indebtedness for the transmission of monetary policy in Australia over the period 1994Q1-2019Q3. Working with a state-dependent local projection model, we find that the dynamic effects of monetary policy shocks depend on household-debt conditions: In the low debt state, output, investment, house prices and the household debt-to-GDP ratio strongly react to monetary policy shocks, while the responses of these variables are muted in the high-debt state. Simulations from a stylised theoretical model show that high indebtedness triggers binding collateral constraints that shut off the home equity loan channel, thereby attenuating the consumption response to an interest rate shock. Our results suggest that (i) the home equity channel is active when household debt is moderate, but inactive when debt is high and (ii) this channel played a key role in the transmission of monetary policy in Australia over the sample period, potentially accounting for the diminished effectiveness of monetary policy under high household debt conditions.
