Australia’s economic challenges – and the political implications

The federal budgets brought down in 2020 and 2021 during the height of the pandemic were thought to be some of the most difficult ever crafted. Many parts of the economy had been brought to a standstill because of lockdowns, curfews and various other mandates. The federal deficit ballooned because of measures taken to limit the impact of the pandemic, such as JobKeeper.
As it was expected that these measures would merely cushion the blow, it was something of a surprise that last year turned out to be, in financial terms, about as good as it gets.
Australia's share market finished the year up 17 per cent, and homeowners saw the value of their properties jump about 20 per cent, in part because so many cashed up expatriates returned to the country. 
Super funds had their third best calendar year return in 17 years and, most surprising of all, personal savings soared. In the second quarter of 2020 savings reached an all time high of 23.6 per cent. Australians were feeling pessimistic and had a lot less to spend their money on. About $5 billion was not spent on travel because of the closed borders, for example, so they put money away. That, in turn, was positive for the banks, which became flush with cheap domestic capital, reducing their need to source funds internationally. 
It increasingly looks like the financial shock of the pandemic was only delayed, not eliminated. There are signs of sharply higher consumer price inflation and possibly stagflation, the combination of negati...