Since the mid-1990s, the Australian economy has expanded consistently, and the working class, at least most of it, has largely avoided the major assaults on living standards that others around the world have endured repeatedly. The one exception was the inflationary wave following the pandemic, during which, according to calculations by Australian National University associate professor Ben Phillips, household disposable incomes on average declined 11 percent between mid-2021 and mid-2023. That was the biggest attack on working-class living standards in several generations.
Taking a longer view, the 50-year trend has been rising average household incomes (they have almost doubled in real terms since 1975) and increasing life expectancy, which is up by more than 14 percent (people living ten years longer on average). Founded as an open-air prison totally dependent on British aid, Australia now ranks among the top ten economies in the world for per capita output and has become one of the wealthiest societies in human history.
How, then, is it conceivable that 14 percent of the country—nearly 4 million people—live in poverty and more than 120,000 are homeless, while those with homes are among the most indebted people in the world? How, amid such wealth, can it be that about 30 percent of households nationally are food insecure, and that 20 percent of people regularly have to skip meals or whole days of eating?
The reality is that, despite the broad-brush painting of increasing prosperity, the Australian working class has been ripped off, while a greater share of the tremendous wealth generated in the domestic economy has been distributed to those at the top—big business owners and wealthy households with substantial financial assets and property portfolios.
The charts here tell a particular story in which growing average household incomes have masked diverging fortunes: increasing concentration of wealth and growing income inequality. In 2019-20, for example, the top fifth of households had five times the income of the bottom fifth. And in recent years, the Governance Institute of Australia has reported average annual salary increases of 10-15 percent for CEOs and top managers and directors of the largest companies, far in advance of the 3-4 percent rises for workers. Meanwhile, the corporate sector has increased its profits and power decade after decade.
Soaring house prices, which have grown at twice the pace of wages in the 21st century, have resulted in Australian households having one of the highest debt-to-income burdens in the world. The situation is complicated, however. While many working-class households are financially stressed and more sensitive to rising interest rates, residential property debt, as with savings and financial assets, is concentrated in the highest-income brackets. The most recent figures show that only one in seven of the poorest 40 percent of households have a mortgage. To state the obvious: poorer people mostly can’t afford property and often don’t qualify for loans.
For those without property, rents have also increased—by more than 10 percent above wages this century—and the gap continues to grow. Renters are overwhelmingly and disproportionately working class and concentrated in the bottom 50 percent of income earners and wealth holders. As the Reserve Bank noted in a recent financial stability report:
“Renters tend to have lower incomes ... [and] substantially lower savings than mortgagors irrespective of their age. As a result, renters are much more likely to experience financial stress than other households. In 2021, renters were around twice as likely to face difficulties paying their bills and were around four to five times more likely to seek help from community services or family and friends.”
Specific groups are doing it much harder: working-class single parents, for whom there is a multiplier on inflation (single income, but several consumers); and those with lower incomes and little to no savings buffers, for whom only a small drop in real wages signals, or increases, financial distress.
Most discussions about what’s gone wrong revolve around government policies—tax rates, tax concessions and so on. They certainly have played a role. But the key chart in this series is surely the one showing the decline in working-class struggle (see below). As the wealthy have lined their pockets and the corporate world has increased its profits, trade union leaders have played dead, refusing to fight for their members, instead treating their member-funded positions as sinecures.
That collapse in the number of workers fighting for wages, rights and respect is at the heart of why Australia has increasingly become a paradise for billionaires and a daily battle for so many workers.
Results
One of the most striking features of the post-pandemic economic situation is that, by almost every measure, the labour market is the tightest it has been in generations—unemployment has hovered near 50-year lows, and the employment-to-population ratio is the highest since records began in the early 1980s—yet stories of hardship abound. While the charts tell a particular story, they don’t really capture people’s quality of life and how economic changes affect their relationships and how they feel about their place in the world. Consider the respondent quotes included in the preamble to the 2023 cost-of-living report from the NSW Council of Social Service, Barely hanging on:
“While the statistics are stark, it’s the comments from focus group participants that are most revealing. Statements like ‘there’s a lot of fighting about money’, ‘we have no time with our children’, ‘it’s diminished my pleasure in living’, ‘it’s impossible to enjoy family life’, and ‘it’s nearly torn my husband and I apart’ convey some of the anguish and distress that is being felt, particularly for those raising kids. People also spoke of their shame—at not being able to afford a haircut or decent clothes, having to borrow money from family or lining up at food pantries for the first time.”
Or consider a school leaver who gets a job but can’t afford to rent a place. Financially, s/he is better off staying at home, but might consider life tied to their parents to be stifling and prefer to be poorer if it meant having more independence. Or consider a full-time worker getting a second job because of rising rents or mortgage payments. They now have a higher disposable income, all other things being equal. But they might equally say that their quality of life has deteriorated because they don’t have the time to do the things—catching up with friends and family, playing sport, going out etc.—that make life worth living.
Or take the following anecdotes from media reports of the cost-of-living crisis over the last few years. Each person is now in a situation where they are, on paper, economically better off than before. But could you say that their quality of life has improved?
“At 39 years old, Claire did not ever foresee herself having to share her housing with anyone other than her 18-year-old daughter. For nine years she has rented houses for the pair but increasing cost of living pressures and rent rises meant they have had to open their Brisbane space up to strangers ... filling the extra space was the only option left. She said it was something her teenager struggled with ... ‘Having other people [in the house] has been an adjustment, her mental health has suffered’.”
“At the age of 44, Mike Coates is flipping a stereotype and moving into a granny flat in his mother’s suburban backyard. Mike believes he’ll be in the granny flat for several years to come.”
“Sue Leighton lives off the pension and a small amount of superannuation accrued in the years she wasn’t looking after her children ... To keep a roof over her head, Sue turned to house-sitting, and she has been doing it ever since without paying rent in Australia and even in the United Kingdom ... However, Sue admits this lifestyle is a necessity. She thinks about having her own home and garden again, but the finances scare her.
“‘I look at my bank account and go onto real estate listings, and start to have a mental breakdown. I don’t really think I have a choice at this moment’, she says. ‘For me to pay rent, water, electricity and all of my bills would far exceed my income. I read the news daily about ladies my age living in their cars. I do feel lucky that I can just keep doing this. But my health is starting to fail and this worries me.’”
Most of the quotes come from people at the margins. But the number of those living on the edge is increasing. How the economic situation will evolve over the next six months is now impossible to predict, let alone over the decades to come. Two things are certain, though: if working-class struggle doesn’t return to the fore, there will be few good news stories; and the exceptionalism of Australian capitalism—its capacity to sail through relatively unscathed—is going to be tested sooner or later.
