There is a strong association between financial hardship and the experience of depression. Previous longitudinal research differs in whether this association is viewed as a contemporaneous relationship between depression and hardship or whether hardship has a role in the maintenance of existing depression. In this study we investigate the association between depression and hardship over time and seek to resolve these contradictory perspectives. We also investigate the consistency of the association across the lifecourse. This study reports analysis of two waves of data from a large community survey conducted in the city of Canberra and the surrounding region in south-east Australia. The PATH Through Life Study used a narrow-cohort design, with 6715 respondents representing three birth cohorts (1975-1979; 1956-1960; and 1937-1941) assessed on the two measurement occasions (4 years apart). Depression was measured using the Goldberg Depression Scale and hardship assessed by items measuring aspects of deprivation due to lack of resources. A range of measures of socio-economic circumstance and demographic characteristics were included in logistic regression models to predict wave 2 depression. The results showed that current financial hardship was strongly and independently associated with depression, above the effects of other measures of socio-economic position and demographic characteristics. In contrast, the effect of prior financial difficulty was explained by baseline depression symptoms. There were no reliable cohort differences in the association between hardship and depression having controlled for socio-demographic characteristics. There was some evidence that current hardship was more strongly associated with depression for those who were not classified as depressed at baseline than for those identified with depression at baseline. The evidence of the contemporaneous association between hardship and depression suggests that addressing deprivation may be an effective strategy to moderate socio-economic inequalities in mental health.