By Denis Hay
Description
How the impact of neoliberalism on Australia is increasing inequality, economic stress and social anxiety while pushing society toward the US model.
Introduction – A Warning from the United States
For much of the twentieth century, Australia built a reputation as one of the most stable societies in the world. Secure jobs, affordable housing, and strong public institutions created the expectation that each generation would live better than the last.
Today, that confidence is fading, and the impact of neoliberalism on Australia is becoming increasingly visible.
Housing costs are soaring, insecure employment is growing, and economic inequality is widening. These pressures are not random economic events. They reflect decades of policy decisions that reshaped the economy.
Many of these changes are already visible in the housing crisis affecting Australians today.
Many Australians sense something fundamental has shifted in the economic system.
But few public discussions explain why these changes are happening.
So, what exactly changed in the economic model that once delivered stability and opportunity?
Reality Check – Key Signs the System Is Changing
Several indicators show that the impact of neoliberalism on Australia is already reshaping society.
- The top 10 per cent of households hold half of Australia’s wealth
- Housing affordability in major cities ranks among the worst in developed economies.
- Household debt in Australia is among the highest in the world.
- Financial stress is now a major cause of psychological distress.
Sources:
- Australian Bureau of Statistics: Household Income and Wealth Statistics
- OECD: Household Debt Data
These indicators suggest the economic foundations that once supported broad social stability are weakening.
The Problem – Why Australians Feel Increasing Pressure
1. What Happened in the United States
The United States provides a powerful warning about how economic systems can gradually reshape society.
Beginning in the 1980s, the country adopted policies commonly associated with neoliberalism. These policies emphasised deregulation, privatisation, and the belief that markets should dominate economic decision-making.
These changes produced several long-term effects.
- Rapid growth in income inequality
- Declining job security
- Reduced social protections
- Increasing financial stress
Economic insecurity affects more than household budgets. It affects mental well-being.
When people feel their future is uncertain, stress and social frustration increase.
According to the National Institute of Mental Health, around one in five adults in the United States experiences mental illness each year.
Source:
- National Institute of Mental Health: Mental Illness Statistics
Trust in institutions has also declined sharply.
Large sections of the American public now believe the political system primarily serves powerful economic interests.
2. Warning Signs of the Impact of Neoliberalism on Australia
Australia once had lower inequality than other developed nations.
However, several warning signs suggest the impact of neoliberalism on Australia is becoming increasingly visible.
Housing affordability has deteriorated dramatically.
Many younger Australians now believe homeownership may never be achievable.
Other structural trends are also reshaping the economy.
- Expansion of casual and insecure work
- Rising household debt
- Privatisation of public infrastructure
- Growing wealth concentration
According to OECD data, inequality has increased across most advanced economies, including Australia.
Source:
- OECD: Income Inequality Data
These developments are contributing to rising economic anxiety across Australian society.
The Impact – What Australians Are Experiencing
3. Economic Stress and Social Anxiety
Economic pressure rarely stays confined to financial statistics.
It affects mental well-being, family relationships, and community life.
Research increasingly shows that financial insecurity is strongly linked to mental health outcomes.
When households struggle with housing costs, unstable employment and rising debt, anxiety becomes part of everyday life.
The Australian Psychological Society finds financial pressure as one of the leading causes of stress among Australians.
Source:
- Australian Psychological Society: Stress and Wellbeing Research
These pressures contribute to what many observers describe as a growing mental health crisis Australia is facing.
Young Australians increasingly report anxiety about employment prospects, housing affordability, and long-term economic stability.
4. Who Benefits from the Current System
When many citizens experience increasing pressure, an important question appears.
Who receives help from the current economic system?
In neoliberal economies, wealth often becomes concentrated among corporations and financial institutions.
Privatisation has transferred many public assets into private ownership.
Infrastructure originally built with public money is now often controlled by corporations.
Toll roads across Australian cities illustrate this pattern.
Private companies collect billions in revenue from infrastructure originally financed through public investment.
Meanwhile, wages have grown far more slowly than asset prices such as housing.
This widening gap between asset owners and wage earners is a major driver of economic inequality Australia now faces.
The Solution – What Must Be Done
5. Using Australia’s Monetary Sovereignty for Public Purpose
Australia has a significant economic capacity to address these challenges.
As a nation that issues its own currency, the federal government can invest in major national priorities when resources are available.
Recognising this capacity is essential when examining the impact of neoliberalism on Australia.
Instead of relying primarily on private markets to solve social problems, governments can fund initiatives that strengthen economic stability.
Examples include:
- large-scale public housing programs
- expanded healthcare and education investment
- a national Job Guarantee
- infrastructure designed for public benefit
Further discussion can be found here.
6. Rebuilding Social Stability
Economic reform must also be accompanied by stronger social institutions.
Policy priorities could include:
- expanding affordable housing supply
- strengthening worker protections
- reducing corporate influence in politics
- investing in community services
Countries with stronger social protections report higher levels of well-being and social trust.
Source:
- Equality Trust UK: The Spirit Level research
Frequently Asked Questions
Is neoliberalism responsible for mental health problems?
Economic systems do not directly cause mental illness. However, inequality and economic insecurity significantly increase psychological stress across societies.
Why is economic inequality increasing in Australia?
Housing price inflation, financial deregulation, and tax policies favouring asset ownership have contributed to widening wealth gaps.
Can Australia avoid the path of the United States?
Yes. Australia still has strong public institutions and policy flexibility. However, avoiding that path requires deliberate policy decisions.
Final Thoughts – Australia’s Future Is Still a Choice
Economic systems shape societies slowly but profoundly.
The United States shows how rising inequality and insecurity can gradually erode social stability.
Understanding the impact of neoliberalism on Australia is therefore essential.
Australia still can change direction before the pressures seen in the United States become entrenched.
If Australia continues following the same economic path as the United States, the social pressures now visible in America may eventually reshape Australian society as well.
What’s Your Experience?
Have you noticed the impact of neoliberalism on Australia, affecting housing, employment, or community stability?
Your experience matters. Share your perspective in the comments below.
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If l could see this in 1992 , simply as logic , why has it taken experts so very long to wake up? But a an aging woman in the sticks has no opinion worth noting then , or now
All the promises were empty. Small government just means the rich get richer and services get fewer and if far less quality. I was never convinced so I don’t feel had. I just feel so bad for everyone who can’t work out why it’s all so bad.
win jeavons, you raise an important point. Many people did recognise these trends decades ago, but those concerns were often dismissed because the dominant economic thinking at the time strongly supported market-driven policies. Looking back now, it is clear that some of those early warnings were worth taking much more seriously.
Roseanne, I think many people share that feeling. The consequences of these policies have taken decades to become visible, making it harder for people to connect what they are experiencing today to the economic ideas that shaped those policies. Understanding those connections is an important first step toward changing them.
win jeavons, as Denis points out, many people did see these trends decades ago, Chomsky for one.
He predicted that hyper-liberalism would be a disaster for the Global South, but that even in the developed economies we would see islands of prosperity in a sea of poverty and struggle.
As we see now.
The warnings were ignored because from about the sixties onwards, the Right mobilised their resources by setting up think tanks.
They had the money to do so.
It was only a few at first, but then they took off and took over.
They took over the media, the universities, and ultimately governments.
They transformed the way we think about everything.
Their false assumptions now form part of everyday conversation.
Their lies are taught in universities as economic text-book dogma.
It will take decades to get the balance right once more.
John Howard’s obsession with destroying the Unions has a lot to do with the current societal situation. The workers lost the only effective weapon they had. The EBAs were and are the biggest swindle that was ever imposed on a work force.
Mediocrates, weakening unions fundamentally shifted power away from workers and toward corporations. Once collective bargaining power was reduced, wage growth stalled and job insecurity increased.
Steve, you make a very good point. Many people did warn about where these policies were heading decades ago. Chomsky was one of the most prominent voices raising concerns about market fundamentalism and its social consequences. The problem was that those warnings were often drowned out by well-funded think tanks and media narratives promoting the neoliberal model.
Excellent article Denis, thank you.
I could not agree more, and find it particularly interesting as it dovetails perfectly with what Gary Stevenson has been saying. Particularly,
“Meanwhile, wages have grown far more slowly than asset prices such as housing.
This widening gap between asset owners and wage earners is a major driver of economic inequality Australia now faces.”
If I understand him correctly, Stevenson has been trying to warn politicians and corporate leaders, anyone who would listen that growing inequality is an existential threat to society.
He often says that we make the mistake of taxing work, that we should be taxing wealth (I believe meaning) as in assets.
He supports this argument through suggesting that the ultrarich have so much income in excess of what they need to live that they then spend it on accumulating assets from which they make passive income (houses, gold, shares, etc.) Certainly, holding housing and precious metal assets are not inducive to a country’s productivity, but there are more consequences.
In terms of housing, this means they compete with people on working salaries, only they have more to spend. Most mortgages are held by banks, and likely most bank shares are held by the ultrarich, meaning the ultrarich would hold an astonishing proportion of a country’s housing.
Even with the holding of shares, the influence of wealth over political power results in laws and decisions that concentrate wealth in the ultrarich.
The result of this, he says, has been the utter hollowing out of the middle class in the UK, and every other country he’s looked into – he says we’re on that path.
https://7ampodcast.com.au/episodes/the-great-housing-disaster-whos-to-blame?
This country had a chance in 2019 to change that direction and it refused citing dislike of the personality however nothing more than personal unaccountability, collective greed of the wealthy and FOMO from those that could.
Then you have a system that deliberately sets people up to fail, hammers them financially in mature age as they never had the opportunity to accumulate anything of substance in superannuation – I was 40 when that eventuated – and are forced to sell at bargain basement prices for developers to build units and pushing those sellers into either dump rentals or underfunded old age accommodation.
I don’t think so!
Said it before, and will say it again, Royal Commission into Real Estate and that includes every aspect from legislation, regulatory, legal, financial services, settlements, government authorities, tax, negative gearing, CGT, RBA and Treasury! The status quo and vested interests none the less.
During a gig economy job 30 years ago, I had a chance to speak with a Treasury employee who was celebrating the acquisition of yet another investment property, everyone of them has their snouts firmly entrenched in the NG trough.
Gonggongche, thank you for the thoughtful comment. Gary Stevenson has been making a very similar argument about how wealth accumulation increasingly drives inequality. Once large fortunes begin generating passive income from assets such as housing and shares, the gap between asset owners and wage earners can widen very quickly.
Housing is a particularly important example because it is not just an investment asset. It is also a basic human need. When large pools of capital compete with ordinary wage earners for housing, prices inevitably rise, and the system begins to favour those who already hold assets.
What you describe about the hollowing out of the middle class is already starting to be seen in several countries, including Australia. If these trends continue unchecked, the social consequences could become very serious.
Heather, you raise several important points about housing and the way the system currently operates. Housing has increasingly been treated as a financial asset rather than primarily as a place for people to live, and that shift has had major consequences for affordability and inequality.
When policies such as negative gearing, capital gains tax concessions, and easy credit interact with strong investment demand, housing prices can rise far faster than wages. That makes it extremely difficult for people who rely mainly on wages to compete with investors accumulating multiple properties.
Your point about superannuation timing is also significant. Many Australians who were already well into their working lives when compulsory super was introduced did not have the same opportunity to build retirement savings as younger generations.
These kinds of structural issues are exactly why the housing debate is becoming so important. Without serious reform, the pressures we are already seeing in the housing system are likely to intensify.
Denis, the matter of superannuation for the masses is interesting.
I’ve long been skeptical of a system, based on the vagaries of the market, being the most suitable system to provide security and comfort for those in retirement.
I did OK from it but only because I was in a position to salary sacrifice after the GFC to make up for my losses.
I know plenty who had to come out of retirement to take up low paid work.
If governments provided cost-free health care, transport, and housing for the elderly, which they can easily do, then most people would get by comfortably on a modest pension.
This is a simplistic picture, but the features I’ve mentioned, (there could be quite a few more) make the economy recession proof, to a degree.
Investment in the future, investment in tangibles, is the responsible path.
I think housing is just a huge ponzi they can’t allow to fail for political and commercial reasons. The commercial reasons inludes the value for politicians with housing investments, as much as for anyone.
That’s why they turned on public housing, because that offered a choice, according to plans, needs and circumstances. This, of course, after the unions were busted and social infrastructure no longer had any protection.
What we have is a society supporting an economy, when it should be the other way around…. Its all about the corporations and their shareholders…..