The Truth About Australia’s Middle Class: A Society in Crisis
Michael Yardney
I bring investors clarity in the chaos of all the mixed messages, sharing my 50 yrs perspective. Voted in the top 50 Influential Australian Thought Leaders. Host of the Michael Yardney & the Demographics Decoded Podcasts
Australia’s middle class is no longer the robust backbone it once was.
Over the past few decades, it has been hollowed out, squeezed by economic forces, structural changes, and policy decisions.
What was once a bell curve society—dominated by a thriving middle class—is now becoming a U-shaped structure, with more people slipping into the lower class and the upper class pulling further away.
The impacts of this shift extend far beyond the financial, affecting social mobility, community cohesion, and the future of Australian society.
For weekly insights and strategic advice, subscribe to the Demographics Decoded podcast, where we will continue to explore these trends and their implications in greater detail.
Subscribe now on your favourite Podcast player:
The Cereal Aisle: a telling metaphor for modern Australia
Picture yourself walking through the cereal aisle of a supermarket.
What you’ll see is a stark representation of the economic divide in our society:
The budget brands: These are the no-frills, home-brand products. They offer the same basic utility as their counterparts but at half the price. These cater to an increasing number of Australians who must count every cent.
The middle ground: Iconic staples like Weet-Bix represent the traditional middle class—a reliable, moderately priced choice. But, just like Australia’s middle class, this section is being overshadowed.
The premium range: At the other end, you’ll find luxury cereals—organic, gluten-free, protein-packed options. These cater to the wealthier consumer who values exclusivity and is less price-sensitive.
This segmentation illustrates how the middle class is shrinking as our society polarises.
The once-dominant group that defined Australia is now being squeezed between the extremes of wealth and poverty.
From Bell Curve to U-Shape: a society divided
In the 1960s, Australia’s socioeconomic structure resembled a bell curve.
Most people were part of a strong, egalitarian middle class.
A smaller proportion sat at either end—either very rich or poor.
Today, that curve has flattened and morphed into a U-shape.
The middle class has eroded, leaving an expanding lower class and a growing number of wealthy elites.
This change has far-reaching consequences.
In the bell-curve era, upward mobility was attainable.
The poor had a realistic shot at joining the middle class, and many of the wealthy came from middle-class roots.
In today’s U-shaped society, those pathways are much narrower.
The poor face significant structural barriers, and the wealthy are increasingly insulated from the realities of the broader population.
Education: a broken gateway to the middle class
Education has always been seen as the key to upward mobility.
However, Australia’s educational policies have inadvertently contributed to the erosion of the middle class.
Charging fees for TAFE programs—a traditional entry point to trades and middle-class jobs—have discouraged many from pursuing these pathways.
As a result, fewer people are entering trades like plumbing, electrical work, and construction, which were once the backbone of the middle class.
Instead, students are increasingly funnelled into universities in pursuit of higher-paying careers.
While this has created a wealthier upper class, it has also left Australia with a shortage of skilled middle-class workers.
Ironically, this scarcity has driven up wages for those who enter the trades.
Plumbers and electricians now earn wages that rival or exceed those of university graduates, highlighting the economic distortions caused by these policy changes.
Housing: a market that mirrors inequality
The housing market is one of the clearest examples of Australia’s growing divide.
Developers naturally gravitate toward high-margin projects, focusing on luxury apartments and homes that cater to the wealthy, including rightsizers (OK downsizers).
This has created a severe shortage of affordable housing, leaving many Australians—particularly those in the lower class—struggling to find suitable accommodation.
Even within the middle class, the housing crisis is evident.
Homeownership, once a hallmark of middle-class success, is slipping out of reach for many.
The free market offers little incentive to address these issues, and government policies have yet to fill the gap.
The result is a housing market that reflects and reinforces the widening economic divide.
Technology and Automation: a potential equalizer?
The rise of automation and AI is often viewed with concern, particularly for the impact it may have on low-skilled jobs.
However, these technologies could also serve as equalisers if managed properly.
As Australia’s workforce ages and labour shortages increase, automation could help fill gaps, allowing workers to transition into higher-skilled, better-paying roles.
That said, strategic planning is essential to ensure these transitions benefit all Australians, not just the wealthy.
Without deliberate policies, automation risks exacerbating existing inequalities rather than mitigating them.
Skilled migration: an untapped opportunity
Australia’s migration policies are another area where reforms could help address middle-class erosion.
Skilled migration can potentially fill critical labour shortages, particularly in trades and other middle-class roles.
However, current policies often prioritise short-term economic gains over long-term workforce needs.
For example, international students are heavily relied upon to subsidise universities, but this doesn’t always meet the country’s labour market demands.
A more targeted approach to skilled migration—focused on addressing gaps in the middle-skilled workforce—could help rebuild the middle class and alleviate some of the pressures on the housing market and other critical sectors.
Social implications of a shrinking Middle-Class
The erosion of the middle class isn’t just an economic issue; it’s a social one.
As society becomes more polarised, communities become increasingly segregated along socioeconomic lines.
This segregation is most visible in our cities, where wealthy suburbs are worlds apart from lower-income areas—not just in geography but in opportunities and lifestyles.
This divide extends to education, where children often attend schools populated by peers from similar socioeconomic backgrounds.
Over time, this reinforces the gap, limiting exposure to different perspectives and reducing social cohesion.
Solutions for a thriving Middle-Class
Rebuilding Australia’s middle class will require coordinated efforts across multiple sectors.
Here are some key steps:
Reinvest in TAFE: Making technical education free and accessible again is crucial for rebuilding the middle class. This would encourage more Australians to pursue trades and address critical labour shortages.
Reform housing policy: Governments must incentivise affordable housing development, either through public initiatives or partnerships with private developers.
Enhance skilled migration: Align migration policies with workforce needs, focusing on middle-class roles in trades and technical fields.
Strengthen social cohesion: Support community initiatives that bring people together across socioeconomic divides, such as local festivals, sports, and volunteering.
Invest in regional areas: Encourage economic diversification outside capital cities, promoting value-added industries like manufacturing and agriculture to create middle-class jobs.
The road ahead
Australia’s middle class is at a crossroads.
The trends shaping our society—rising inequality, housing unaffordability, and labour shortages—demand urgent attention.
A thriving middle class isn’t just an economic goal; it’s the foundation of a fair and cohesive society.
By addressing these challenges head-on, Australia has the opportunity to reverse the erosion of the middle class and ensure a brighter future for all its citizens.
The stakes are high, but the solutions are within reach.
Let’s not wait until the divide grows too wide to bridge.
If you found this discussion helpful, don't forget to subscribe to our podcast and share it with others who might benefit from it.
Subscribe now on your favourite Podcast player: