If the past few years have sharpened the point of the cost-of-living crisis, then the first six months of 2026 have driven that point home.
Intense economic headwinds care of interest rate rises, the war in Iran and the fuel crisis have made the outlook particularly grim, with the ANZ-Roy Morgan Consumer Confidence index plummeting to 63.6 in April and 66.0 in May – the lowest monthly readings on record, even worse than during the 1990 recession.
Currently, 64 per cent of Aussies believe we’ll be in a recession by the end of the year, but there’s a silent crisis unfolding in our youngest earners for whom this spells disaster.
The unseen impact of rising prices
According to research from News Corp’s Growth Distillery with Medibank, the impact of this backslide in living standards is impacting Gen Z hardest of all.
Money and financial issues were the most universally cited stressors, affecting 48 per cent of the Australian population, with Gen Z severely impacted. Nearly 40 per cent of the cohort reported feeling behind financially, or feeling guilty for spending money.
It’s the same story across other data sets too.
Research from Monash University last year found an overwhelming 85 per cent of young Australians experienced financial insecurity over the past year, with one in four stating this happens often.
Youth mental health organisation Reach Out found money worries were causing severe mental health repercussions for young people, including sleep problems in over 50 per cent.
The isolation of being broke
On the other side of the crisis, many of the protective behaviours proven to ward off mental ill health can appear out of reach on a budget.
Gym memberships, psychotherapy, maintaining social connections through outings – these are some of the first “discretionary” items to drop from the budget when things get tight.
But Medibank chief medical officer Dr Andrew Wilson cautions that thinking of self-care only in terms of what we have to buy is prohibitive.
“The most effective zero-cost mental fitness practices include physical exercise such as going for a walk, simple relaxation or meditation exercises, maintaining sleep hygiene routines and actively scheduling social connections,” Dr Wilson told news.com.au.
“Structuring daily activities around specific goals and breaking down seemingly overwhelming tasks into manageable steps can also be useful to prevent stress.”
Medibank psychologist Ali Sutton emphasised that building in these kinds of mental health buffers cannot only be low cost financially, but they don’t require huge swathes of time, either.
“One of the biggest myths about mental wellbeing is that it requires lots of extra time,” she said.
“Most people don’t need to spend another hour in their day working on their mental fitness; they can simply use the small moments that already exist.”
Ms Sutton said this could look like “taking three slow breaths before opening your laptop, stepping outside for sixty seconds between meetings, or choosing not to fill every spare moment by reaching for your phone”.
“I often encourage people to think about ‘bookends’ in their day – those moments between activities,” she said.
Tackling the crisis head on
While free or low-cost mental fitness tips are useful, several Australian organisations are raising the alarm with campaigns to address the mental toll of the cost of living crisis.
Headspace’s Mind & Money initiative was established in 2024 in response to survey results showing over half of participants aged 18-25 said financial instability was the most pressing issue to address. It aims to help young people navigate the mental health impacts and stressors associated with the rising cost of living.
In addition to this the Australian Psychological Society has renewed calls to increase the current 10 Medicare-rebated mental health sessions to the 20-session limit that existed during the Covid pandemic.
“Each year, thousands of people reach breaking point in the second half of the year as their 10 Medicare-rebated sessions are used,” it said in a joint statement with Lived Experience Australia, the Australian Clinical Psychology Association, Institute for Clinical Psychologists, Association of Counselling Psychologists, the Heads of Departments and Schools of Psychology Association.
“Young people in particular are falling through the cracks of our mental health system and need support, now.”
Read related topics:Can We Talk?