Australia’s middle class is on Struggle Street as incomes stagnate and cost of living soars, according to a new OECD report.
Whereas people once aspired to join the ranks of the middle class, today’s cohort is increasingly discontented with economic conditions.
However the rich continue to accumulate more and more wealth and comprise 10 per cent of Australia’s population by income class.
The Under Pressure: The Squeezed Middle Class report delivers a “bleak picture” of life as a middle-classer, with housing, food, health and education bills eating up almost half of household budgets.
It comes as Prime Minister Scott Morrison focuses on the economy this federal election, with Opposition Leader Bill Shorten complaining about “everything going up except wages”.
A happy and comfortable middle class is considered vital to a successful economy, helping sustain consumption and drive investment.
In Australia, the middle class comprises by far the largest “income class”, with 58 per cent of the population earning between $27,000 and $73,000.
But for the past three decades, this once-comfortable and contented sector has experienced “dismal income growth” while cost of living has become increasingly expensive.
The report found more than one in five middle-income households in OECD nations spends more than they earn while one-in-six people face a high risk of losing their jobs to automation.
In Australia middle-class household spending on goods and services almost tripled between 1984 and 2015/16.
Housing was by far the largest expense with Australia’s middle earners forking out 23 per cent of their household budget on housing in 2015 compared to 19 per cent the previous decade.
In the past, it was possible for middle-class households to survive comfortably on one income. Today they need two incomes but even that may not be enough to counteract the economic struggle.
The report found every generation since the baby boomers has seen incomes shrink and economic influence weaken.
There has also been a noticeable decline in middle incomes across the generations. About 69 per cent of Aussie baby boomers were part of the aspirational middle class but only 65 per cent of generation X and 66 per cent of millennials make the cut.
OECD Secretary-General Angel Gurría called on governments to act to help the struggling middle class.
“Today the middle class looks increasingly like a boat in rocky waters,” said Mr Gurría.
“Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive inclusive and sustainable growth and create a more cohesive and stable social fabric.”
The report recommends changes to tax policies to reduce the burden on the middle class and more training opportunities.