If nothing is done, we’ll be waving goodbye to middle-class Australia

There is growing understanding about the depth and extent of the Australian cost-of-living crisis, which is driving thousands of working families into poverty.

It is less well appreciated that the most dramatic effects of the crisis will be in permanently remaking economic and social relationships across communities, driving and solidifying inequality.

Without decisive government intervention, the current cost-of-living crisis will see a substantial portion of the Australian middle-class wither.

The cost-of-living crisis is pushing many families to the brink of financial disaster. Food pantries and other elements of the community sector are helping unprecedented numbers of people, including many who have never previously required assistance. Spare a thought for those who are on the lowest incomes.

While many families have so far avoided defaulting on their mortgages, this might not be sustained over several years.

Meanwhile, those hoping to enter the property market are watching their dreams rapidly fade, especially if they are unable to leverage the wealth of their parents.

Given the central role of home ownership in Australian wealth creation, this threatens to carve out the middle-class and dramatically reduce the average Australian’s capacity to improve their economic position.

Even before the cost-of-living crisis, the age of first home ownership was rapidly advancing. For those in their 30s still unable to get their foot in the property door, a further postponement of a decade of crisis might put it forever out of reach. A whole section of Australian society that grew up middle class will see themselves slip into a permanent state of financial insecurity.

What defines middle-class Australia is less a particular income or amount of savings, and more a personal sense that a person can live in at least modest comfort. It is a belief that a person has a degree of control over their life and that, while trade-offs might be necessary, financial goals and security can be attained.

Today, many young adults are questioning not just whether they will ever own a property, but whether they will ever be able to afford to have children.

While employment levels are high nationally, youth unemployment is more than double the overall unemployment rate. Gaining an initial role to start a career remains difficult, with many forced to remain in the insecure work of the gig economy or casual jobs.

Even for those fortunate enough to find full-time employment, jobs that used to enable someone to be middle class, such as teachers or hairdressers, may not do so for those entering the workforce now.

If Australia wants to avoid a hollowing out of the middle class and growing social and economic polarisation, bold government policy is needed.

Nationally, scrapping the stage three tax cuts is a necessary step, but only a start. Left to its own devices, the market is rapidly widening the wealth gap. Only government can make sure that the labour of everyday Australians is valued.

The ACT government can focus on the rapid creation of new housing stock. Given limited capacity in the construction market, it should use the policy levers at its disposal to incentivise building more, smaller dwellings than a lower number of McMansions that would enable fewer people into the property market.

Housing cannot “trickle down”, so the way to address the housing shortage and reduce long-term inequity is through maximising the number of dwellings built over the next few years.

Without bold action from both levels of government, Canberrans will wave goodbye to much of its middle class.