One Nation is capitalising on Australians’ economic pessimism like never before. Is a ‘stagflation impulse’ to blame? | Australian economy

In the three decades since Pauline Hanson entered federal politics, Australia has experienced much voter disillusionment with mainstream parties.

But recent negative sentiment towards the majors has propelled One Nation to unprecedented poll numbers, giving Hanson higher net approval ratings than the prime minister and opposition leader.

Why now and what happens next?

Cost of living crunch

Households are experiencing economic pressures similar to the unrest of the 1970s, marked by high inflation and a stagnant economy.

Households feel this “stagflation drive,” as some economists describe it, through cost-of-living distress accompanied by fear for their financial future, which often includes job insecurity.

Winter discontent has been further intensified by Australia’s notoriously high housing costs and the frustration younger generations feel at being priced out of home ownership.

This despair is also evident in consumer sentiment surveys that show Australians now experience “deep pessimism”, according to the Westpac-Melbourne Institute; Interest rate increases also put pressure on potential buyers and mortgage holders.

While these factors provide fertile ground for populist parties, this is not the first time Australians have felt under financial pressure.

The difference this time, according to Jordan McSwiney, a researcher who studies far-right movements, is that One Nation can link housing affordability concerns and other economic ills to immigration.

“Economic policy and housing are not generally comfortable areas for One Nation,” says McSwiney, a research fellow at the University of Canberra’s center for deliberative democracy.

“This kind of connection between immigration and housing allows people, like the economy, to address issues that come to mind, but to address it from where they choose.

“One Nation is doing a bit of bait and switch, using the context of housing and economics to talk about what they actually want to talk about, which is immigration.”

The party also attributes cost-of-living pressures to its campaign against net-zero emissions and renewable energy, providing Hanson with another well-known talking point.

shock sequence

The causes of Australia’s housing problem are multi-layered; Decades of chronic undersupply and investor-centered tax regulations are helping to drive up prices, leaving many behind.

Australian homes haven’t suddenly become unaffordable. According to government data, prices have been increasing well above wages for 25 years.

While periods of high immigration, now reduced, can put immediate pressure on rents and housing supply, they also provide the workers needed to build homes, expand the tax base and address critical skills shortages.

AMP’s chief economist, Shane Oliver, says policymakers need to get the balance right on immigration and avoid drastic cuts that would lead to labor shortages and the economy struggling with the costs of an aging population.

One Nation’s intention to tie housing costs and other economic ills unequivocally to immigration is clear; In a speech at the National Press Club last month, Hanson argued that “immigration policy has put our country in a state of crisis.”

The coalition has already explicitly linked immigration rates to housing supply, giving mainstream legitimacy to One Nation’s own policy. Hanson’s party is running the case better and the Coalition is fractured.

One Nation took its message directly to voters through “participation farm” operations that flooded social media, promising an easy solution to housing affordability at no cost to voters.

There is an interesting question as to why the first wave of inflation and cost-of-living pressures that began in late 2021 did not trigger the kind of support for One Nation that it now enjoys.

Hanson’s support only increased during the recent rise in the cost of living, which began late last year.

During the second wave of inflation, worsened by the Iran war, households stocked up on cheap canned goods and reduced their spending on takeaway coffee and restaurant meals.

Australians are now feeling worse as they face new price rises and mortgage increases on top of already depleted savings, shaking their financial and emotional resilience.

A new OECD report has found that “real hourly wages in Australia” are falling; This means living costs are rising faster than a typical paycheck.

“This continued erosion in purchasing power points to persistent pressures on household incomes, even though the labor market remains generally robust,” the OECD report says.

Gabriele Gratton, professor of politics and economics at the University of New South Wales Business School, says voters tend to respond to a series of “economic shocks” when changing political positions.

“As a result, voters’ trust is lost. [political and bureaucratic elites] and we are looking for alternatives to the liberal democracy we have built,” says Gratton.

“The lesson from the US and Europe is not that a single economic shock pushes voters left or right.”

growing review

One Nation’s rise in popularity will be severely tested at the next federal election in 2028, when economic conditions will play a significant role in the outcome.

The global economic situation is uneasy, given the effects of the Iran war and the future impact of oil supply disruptions on inflation.

Hanson now must face the increased scrutiny that comes with being a central political player as voters evaluate whether his party offers credible solutions.

Talk of “monoculture” and the end of multiculturalism could distract significant numbers of voters, and the party will need to avoid fragmentation to be competitive.

Labour’s problem is that there is no quick solution to the housing issue, ensuring it will still be a major election issue for the next two years.

McSwiney says Labor is tasked with “the long, slow process of announcing policies that will improve people’s daily lives and then implementing them.”

“This might take the wind out of One Nation’s sails, but it’s a long game. I’m sure Labor is very grateful that this surge in One Nation’s polls has occurred at this point in the election cycle and with six months to go before the election.”

“They need to mobilize for the coalition and present serious opposition.”