Rhiannan Tones at work. Credit:James Boddington. The firm looked at everything from income levels, Melburnians' work-life balance, their health and the quality of the city's environment over the past decade and found 10 had declined, 18 remained steady and the remainder had improved. But the research revealed a "happiness divide", that showed those who were paying off their own home in a good location and had secure employment had enjoyed a great past decade. "For those searching for their first job, or whose family is in a low income bracket, life has become more challenging," SGS Economics & Planning principal Terry Rawnsley said. "If these trends continue this poses challenges for the future liveability of our city." Environmental indicators, SGS found, had largely been on the improve, with greenhouse gas emissions stopping increasing, water use falling and municipal waste decreasing. Air quality had decreased slightly in recent years, they found.

They also found spending on infrastructure was not keeping up with population growth, that Melburnians were not happy with their city's political leaders – but were still strong participants in elections – and that they were less satisfied with the decisions of government. The unemployment rate had also increased, while underemployment was worse in Melbourne than the rest of Australia, the research found. But peoples' feelings of safety in their local area had simultaneously increased and 96 per cent of Melburnians had someone to turn to in times of need.

Economic indicators showed the city as a whole doing well, with both household wealth and disposable income increasing. But the city's labour productivity was not improving as fast as the rest of the nation. Mr Rawnsley said the findings revealed that while many in Melbourne were doing well, others could be left behind. Housing affordability has also emerged as a key divider, with a report on Thursday by the Australian Institute of Health and Welfare showing a big jump in the number of Australians in housing stress, with more renting and a dramatic fall in the number of people owning their homes outright.

Rhiannan Tones is among the young people concerned about how they will ever afford a house, and for whom Melbourne appears not to be all that "liveable". The 22-year-old Rowville childcare employee wants to buy a house, but on a wage between $40,000 and $50,000, it isn't easy – even living at home instead of moving out. Ms Tones, who has worked in the industry for five years, is now finishing a diploma and will next year begin study to become a primary school teacher where the wages are better – despite loving her current job. "If it paid properly I'd be happy to remain in it – I just love working with children and seeing them develop, and ... getting them ready for school," she said. "But you just can't live off the wages from early childhood."

She said she had been bemused, given her difficulty in affording a home and the city's other issues, to hear of The Economist's top liveability ranking being handed to Melbourne. The head of United Voice, the union representing many of the city's lowest paid workers, said Melbourne was already splitting into two distinctly different cities. Wages for many were flat-lining and job security was unknown for a large swathe of the economy, the union's state secretary Jess Walsh said. "Incomes for the top 10 percent are off the charts," said Ms Walsh. She said the city was heading down the "US path of a working poor", with egalitarianism replaced by inequality.