Australia has long been considered one of the world’s happiest countries, but in the 2025 World Happiness Report released on March 20, that streak has taken a hit. For the first time, Australia is not among the top ten happiest nations, sliding to 11th place. Neighboring New Zealand follows closely at 12th. Finland retained its title as the happiest country, with Denmark and Iceland again in second and third, respectively.
How the World Happiness Rankings Work
The World Happiness Report combines data from over 140 countries, asking around 1,000 people in each country to evaluate their life satisfaction from 0 to 10. These scores are averaged over three years and adjusted based on six factors:
- Income (GDP per capita)
- Social support
- Healthy life expectancy
- Freedom
- Generosity
- Trust (low corruption)
Countries excelling in social support, trust, and quality of life consistently dominate the top of the list. Gallup CEO Jon Clifton emphasizes that happiness relies heavily on trust, community connection, and social safety nets.
Reasons for Australia’s Drop in Happiness
Several factors may explain Australia’s drop:
Cost of Living Pressures
Australia faces rising living costs, causing high stress for six in ten Australians. Expenses like housing, groceries, and energy have outpaced wage growth, straining household budgets and reducing overall satisfaction.
Housing Affordability Crisis
Australian cities rank among the world’s least affordable housing markets. Sydney ranks second globally behind Hong Kong. The frustration of high housing costs contributes significantly to declining happiness.
Economic Uncertainty
Although Australia’s economy remains relatively strong, rising inflation and interest rates post-pandemic have increased economic anxiety. Job security concerns and uneven economic recovery continue to affect Australians’ peace of mind.
Mental Health Challenges
Mental health issues have risen sharply, especially among young Australians. Nearly two in five aged 16–24 experienced mental health disorders recently. Lingering effects of pandemic isolation and stress have exacerbated these trends, negatively impacting happiness scores.
Social Cohesion and Trust
Trust in government and institutions fluctuated significantly during and after the pandemic, declining to below 50% recently. Societal debates and perceived divisions have also subtly reduced Australians’ sense of cohesion and collective well-being.
What Happier Countries Are Doing Differently
Australia might learn from consistently top-ranking countries such as Finland, Denmark, and Iceland, whose common success factors include:
- Robust Social Safety Nets: Comprehensive healthcare, education, family leave, and income support, enhancing citizens’ security.
- High Trust and Low Corruption: Transparency and strong public trust in government and institutions.
- Excellent Work-Life Balance: Emphasis on balanced lifestyles with shorter working hours and ample vacation.
- Well-being-focused Policy: Policies prioritizing mental health, equity, and community happiness.
The Power of Caring and Sharing
The 2025 report emphasizes “caring and sharing” behaviors, noting societies fostering kindness and generosity see significant happiness benefits, particularly for their least happy members. Increasing community volunteerism, social support, and kindness initiatives can positively impact Australia’s national happiness.
Australia’s Happiness Over the Years
Historically, Australia has consistently ranked high, typically within the top ten. The current shift to 11th, while minor, signals areas needing attention, particularly housing affordability and mental health. With focused efforts, Australia is well-positioned to regain a higher ranking.
Top 15 Happiest Countries in 2025
| Rank | Country |
|---|---|
| 1 | Finland |
| 2 | Denmark |
| 3 | Iceland |
| 4 | Sweden |
| 5 | Netherlands |
| 6 | Costa Rica |
| 7 | Norway |
| 8 | Israel |
| 9 | Luxembourg |
| 10 | Mexico |
| 11 | Australia |
| 12 | New Zealand |
| 13 | Switzerland |
| 14 | Belgium |
| 15 | Ireland |
Australia’s drop to 11th highlights opportunities rather than crisis, emphasizing the importance of maintaining and improving the quality of life for all citizens.
