Australia's Economic Winter: How Populists Capitalize on the 'Stagflation Impulse'

Australia finds itself gripped by a profound economic malaise, a sentiment of “deep pessimism” recorded by the Westpac-Melbourne Institute, echoing the widespread unrest of the 1970s. This climate of elevated inflation, a stagnant economy, and a palpable cost-of-living squeeze has created fertile ground for political shifts, propelling Pauline Hanson's One Nation to unprecedented polling numbers and securing Hanson higher net approval ratings than both the prime minister and opposition leader.

For three decades, voter frustration with mainstream parties has ebbed and flowed, but the current economic pressures, which some economists describe as a “stagflation impulse,” feel distinct. Households are grappling with job insecurity and fear for their financial future, a situation exacerbated by Australia’s notoriously high housing costs. Younger generations, in particular, face the despair of being priced out of home ownership, a challenge decades in the making rather than a sudden phenomenon, with government data showing 25 years of price growth far outpacing wages.

The critical shift this time, as highlighted by researcher Jordan McSwiney from the University of Canberra’s centre for deliberative democracy, lies in One Nation’s strategic reorientation. McSwiney observes that One Nation, not traditionally comfortable with economic policy or housing, has deftly tied these pressing concerns to immigration. This allows the party to address issues “very front of mind to people, like the economy, but address it from their preferred terrain.” It's a calculated “bait and switch,” where economic hardship becomes a conduit for discussing immigration.

Beyond immigration, One Nation also links the cost-of-living crisis to its campaign against net zero emissions and renewables. This broadens their appeal, leveraging another well-established talking point that resonates with segments of the electorate struggling with financial strain. This approach simplifies a complex, multilayered housing problem — one rooted in chronic undersupply and investor-centric tax settings — into an easily digestible, yet potentially misleading, political narrative.

Policymakers, as noted by AMP’s chief economist Shane Oliver, face the intricate task of balancing various factors. While high migration periods, which have now subsided, can indeed place immediate pressure on rents and housing supply, they are also crucial for providing the necessary workforce to build homes, broaden the tax base, and address critical skill shortages. The populist playbook, however, thrives on a less nuanced narrative, offering simple answers to problems that defy easy solutions.

The current environment signals a significant challenge for Australia’s political establishment. The “deep pessimism” reflected in consumer sentiment surveys, coupled with the effective framing of complex economic issues by populist movements, underscores a growing disconnect between voters' lived experiences and perceived governmental efficacy. The ability of parties like One Nation to weaponize economic anxieties by linking them to culturally resonant issues, even if indirectly, reveals a potent strategy for electoral gain in an era of widespread financial insecurity and distrust.