On May 22nd, 1942 Robert Menzies delivered the first of his weekly broadcasts, one which defined his political career for the next two decades. In this keynote speech, he labeled Australia’s then middle class as the forgotten people. Salary earners, shopkeepers, skilled artisans, professional men and women were called to arms. Menzies argued they were the forgotten Australians.

Irrespective of his politics, it’s clear he had one the best political radars of his generation. It can be argued that this particular group of Australians may have indeed felt forgotten, especially after the Great Depression when governments around the world justifiably poured a huge amount of energy and money to get their poorer citizens back to work.

When Menzies was delivering this speech their voice may have been a whimper but by 1949 it had grown into a roar.

A combination of Menzies eventually winning government and the post world war economic boom turned this group of Australians into a significant economic and political force. It’s no exaggeration to suggest that they became Menzies’ pretorian guard, providing his political party with a solid and loyal constituency for many decades to come.

By the early 2000s, a typical middle class Australian would still be a salary earner, shop keeper, skilled artisan and a professional. But they had far less dependence on government, instead their independence was propped up by a healthy dose of their own asset and cash wealth.

They were still a reliable block of votes for a Liberal Party that espoused a narrative that resonated with these Australians. Good economic management, less government waste, less government spending on the public sector were all great policy positions for a class that had little need for government but a greater reliance on a thriving economy.

Multiple generations of Liberal Party politicians would learn to depend on these middle class voters and eventually take them and the economic structure that created them for granted. But two major economic events were about to end this political marriage.

The Global Financial Crisis (GFC) and Australia’s housing boom.

Much has been written about how Australia largely avoided most the GFCs impact. If you are taking a global, bird’s eye view of Australia’s economy then yes, this country avoided a visit from the economic equivalent of the Grim Reaper. However, it was to become a different story for the bottom 80% of this country’s wage earners.

Australian household financial wealth fell by around 16% through to the June quarter of 2008. Industries that were heavily reliant on foreign trade took the largest hit, impacting many of the jobs that Australia’s traditional middle class relied upon.

The first signs of their economic decline started to appear. The number of students enrolled in Independent schools in certain parts of Melbourne and Sydney started to drop. Middle class parents opted for high performing public schools or cheaper fee paying Catholic schools.

Older middle class Australians who had limited time before retirement in 2008 were left with scant opportunity to recover any investment losses.

Financial independence for this group of Australians was suddenly under real threat. As bad as the GFC may have been for many other developed countries, Australia weathered the storm enough to inoculate many from the sort of horror stories that were being told and retold across the world.

Menzies’ forgotten Australians were bruised and battered but they were not knocked out. Australia’s economy recovered enough to restore many to their pre GFC financial position. But the killer blow was just around the corner.

Australia’s property boom.

Much has been written about this false economy, enough to fill dozens of Libraries, so I will spare you another rendition on how our housing market has turned Australia into a feudal economy, where for most, real wealth can only be measured by the land you own or for the majority, the land you will never own.

Australia is rarely a world leader in much but we are close to taking the number one podium position when it comes to household debt and it’s our housing boom that is to blame. The ratio of household debt to income has more than doubled since 1995. This means a person earning $80,000 net, which would be considered middle class, have $169,000 of debts.

Back in 2014, Prushka Fast Debt Recovery’s CEO Roger Mendelson said that those least expected to be financially up against it are the group of Australians doing it tougher than ever before. He was talking about Menzies forgotten Australians.

He goes on. “They are the ones driving an SUV and living in a home with a white picket fence with kids in private school. The biggest single class of debts we are pursuing debts for are people in this category. People who are probably paying off a home, at least one of them is working and earning quite good money and their jobs are not under threat. If these families had to come up with $1000 on the spot, most of them couldn’t”.

The percentage of middle class debt on his books had more than doubled to 40% of all debtors his company was pursuing.

Roger Mendelson added that most of these people were focused on paying their mortgages and telephone bills while leaving other expenses unattended.

Many middle class Australian’s bought their first or second home during the housing boom, lumping themselves with a mortgage so large, that not even their fairly good wages were going to be enough. Wages that once provided them with financial independence were now getting chewed up by debt repayments.

This is the sole reason why cost of living constantly comes up as the number one issue, every time a pollster asks the question. Voters, especially middle class voters will never articulate to a researcher the real driver behind their cost of living concerns beyond highlighting anger towards utility costs. Admitting you may have over financed is very hard for even the best of us.

Middle class Australians still have the same jobs, live in the same suburbs and earn the same good wages. But their debt has more than doubled.

Already at the time of the GFC, Australian households were at 190% debt to net disposable income, 50% more indebted than American households at that time. It’s now well over 200%.

Source: Australian Independent Media Network. RBA

But it gets worse. Unable to meet the cost of living expenses, many Australians, especially the middle class now rely on further debt to meet their financial demands. In 1995 there were 6,746,697 credit card accounts in Australia. Today that number is 16,216,996, purchasing $240,421,518,854 of debt in 2018.

Menzies’ forgotten Australians may have once been financially independent but today, they are desperate for every bit of government assistance they can get, which brings me to my main point.

The middle class today share the same economic needs as people living in suburbs like St Albans, Dandenong and Craigieburn. They no longer turn their attention away when a politician talks about funding the local public school, they prefer the public health system and struggle to fund private health insurance. They want a big government, one that intervenes to help them with their daily and weekly financial burdens. Their ears prick up anytime a political party offers a solution to the housing crisis because deep down in their bones they know they will still be paying off their mortgage well into retirement, potentially robbing them and their family of their main asset – the family home.

In my opinion, Australia’s housing boom has permanently altered the political landscape and the relationships political parties once had with traditional economic classes. If you want to know what that looks like then just look over your shoulder to last November’s Victorian State Election.

Many of Menzies’ forgotten Australians jumped ship and voted for Labor. There were many reasons for this seismic shift but at the front of a very long queue must be financial stress. You tend to not worry about culture wars, imaginary hordes of African gangs when you are losing sleep on keeping the roof over your family’s head.

This is why they now support a political party that has helped those in financial need for well over 100 years.

The Liberal Party has potentially lost a sizable chunk of their base and perhaps it’s their loss that has this Party flaying around trying to define their base. Whoever their base may be, Menzies forgotten Australians are not part of it.