Australians are more worried about the economy than they have been since 2022, as interest rate hikes, price rises, and job cuts fuel financial stress. New data this week showed businesses reported their worst conditions since 2020, and economists are openly discussing the prospect of a recession.
Vanessa Freitas, a 37-year-old white-collar worker in Sydney's CBD, says she and her partner, both professionals, are at their absolute limit for what they can afford to pay in rent. Freitas, who moved from Brazil 13 years ago and is now an Australian citizen, has moved at least 14 times since arriving and still cannot afford to buy a home.
Families Scrambling to Make Ends Meet
"We are both on wages that should be enough, right?" Freitas says. "But what we're making now is barely covering the bills … I've started delivering pizza at night, because we are scrambling." She says migrants are being unfairly blamed for the housing crisis when they "contribute to this country [and] pay taxes like everyone else." Freitas adds, "In terms of stability and financial stability and just having a future, I think the Australian dream is dead, especially when it comes to housing."
The Reserve Bank (RBA) has said public trust is under strain after five years of strong inflation, which is not expected to return to a normal 2.5% until mid-2028. When the RBA this month lifted its cash rate to its highest level since 2008, the governor, Michele Bullock, said she couldn't yet see the economy "cracking" under the strain.
Consumer Confidence Slumps
Despite the RBA's outlook, consumer confidence has slumped to levels typically seen during recessions, according to Westpac surveys. The national debt helpline's coordinator, Vicki Staff, says the weakness has been felt beneath the surface this year. A record 190,000 people called the helpline in the year to August. The surge began as soon as the helpline reopened in January after the Christmas break, well before the Iran war began or interest rates began rising, Staff says.
"We knew something was up right from the beginning, and then we've just seen it deteriorate from there," she says. "People are terrified of losing their homes, or their cars." Australians with no financial buffers left have told the helpline they are taking desperate measures to make their repayments: skipping medical appointments, leaving prescriptions unfilled, leaving the car in the driveway, cancelling their children's out-of-school activities.
Arrears Climbing
This week, CBA reported the share of its customers behind on their mortgage repayments had climbed to a 12-year high. ANZ reported the share of customers 90 days behind on mortgage repayments hit a five-year high of 0.95%. Its chief executive, Nuno Matos, told parliament on Thursday the number of customers in hardship arrangements had risen 10% in the last six months. "We should expect those [arrears] numbers to continue to deteriorate," Matos said. "I don't expect them to go to a historically bad place, but they will get worse before they get better."
The founder of House You housing justice organisation, Chels Hood Withey, says people who work the hardest are doing it the toughest, while "rent is too damn high and mortgages are crushing families." Hood Withey urged the government to prioritise housing as a human right, including scaling up the public housing available for people who couldn't afford private rentals. "Millions of people would have a secure home, and when your home is secure, everything else gets easier: your health, your work, your ability to plan a life," they said.
Social Cohesion Under Strain
Financial stress is contributing to Australian society becoming more divided and pessimistic about the future, according to the Scanlon Foundation social cohesion report for 2026, a study now in its 20th year. The survey of 10,000 adults found 40% of people were dissatisfied with their financial situation, and 30% went without meals, could not pay the rent or mortgage, could not heat or cool their home or could not pay for medicines or healthcare often or sometimes in the last 12 months.
The Scanlon Foundation chief executive officer, Anthea Hancocks, says financial stress is lowering people's sense of belonging and trust in others. Nevertheless, Hancocks stresses that people should remember there are "sources of optimism" to be found, even if things feel hard at the moment. "We know Australians feel a greater sense of belonging in their local area and feel comfortable with the diversity in their local area," she says. "Most of the strength of our social cohesion comes from what's happening in our local areas."
When confidence in the economy was last this bad in 2022, unemployment was still below 4%, another source of optimism. But a slowing economy has seen jobs growth stall and brought unemployment up to 4.7%. It's expected to reach 5% – back to where it was before the Covid pandemic. Australia has also seen a series of high-profile redundancy rounds, after the National Australia Bank in October announced it would cut 2,500 jobs and design platform Canva cut 1,200 jobs. The country's biggest airline, Qantas, this week said it would scrap 850 Australian jobs.
And while falling house prices have so far helped affordability, the Australian Prudential Regulation Authority on Thursday warned "substantial" job losses could snowball into a "more severe" financial shock. The deputy chief economist at AMP, Diana Mousina, says unemployment will probably hit 5% by July, but is still historically low and conditions are better than they were in the 1990s. Mousina says households have been worn down by four years of high inflation and are starting to blame the government and RBA for failing to fix it. "[People] think, well, I can't change interest rates," she says. "I can't change the fuel price, there's so little that's in my control. I'm at the whim of government or the central bank or politicians overseas determining my livelihood."
But AMP expects Australia to avoid recession and mass job cuts, with most people only facing a longer gap to find new jobs and slower wage growth. "There will be people that are going to lose work due to the slowdown in economic growth, but hopefully the economy is strong enough to absorb those people," Mousina says. "We still have pockets of growth, but clearly our economy is slowing."
