The recent downturn of the Australian rural economy has implications for the quality of rural life. In this study, quality of life was measured in terms of both the circumstances of people's lives and their perceptions of those circumstances. Objective life quality comparisons made between farmers, ex‐farmers, and metropolitan residents revealed that metropolitan residents reported more frequent contact with family and close friends, while farmers reported more involvement in the community and more productive behaviours. No such differences were found between ex‐farmers and the other groups. Analysis of subjective life quality revealed no overall difference in absolute levels between the three groups. However, evidence is presented to suggest that subjective life quality is maintained through "domain compensation", where falling satisfaction in one domain is compensated by rising satisfaction in another. It is suggested that this may be a process basic to the homeostatic maintenance of subjective quality of life. Copyright © 2000 Australian Psychological Society.