2023 Strategic Outlook

Executive Summary

Politically, economically, and strategically, 2023 will see the continuation and consolidation of trends that emerged in 2022. The Australian electorate has shifted somewhat towards the progressive end of the spectrum, with implications for government policy and future elections. The economy faces the twin challenges of rising inflation and slowing growth, while China continues to loom large as a source of both export revenue and strategic angst.

The start of 2022 was heavily shaped by the Covid-19 pandemic – with many Australians still facing lockdowns and other restrictions following the circulation of Delta and Omicron variants of the virus. Despite this, 2022 was characterised as one where Australia entered a new era of “Covid-normal” with almost all Covid restrictions lifted, vaccine mandates eased, and borders re-opened.

Politically, 2022 saw a change in both the South Australian and federal governments, with new Labor governments in both jurisdictions. The incumbent Victorian Labor government was also re-elected, leaving New South Wales (NSW) and Tasmania as the two remaining states led by Liberal-National Coalition governments.

The federal election results signalled a new era of Australian politics, edging away from the country’s two-party system with the rise of a new breed of politician – the teal independent – progressive, climate focussed candidates elected to previously Liberal seats. Interestingly, this trend was not replicated at the state level in either the South Australian or Victorian elections.

Economically, the country has come out of the pandemic in a comparatively strong position, but inflation and interest rates are rising. The Reserve Bank of Australia (RBA) has predicted a significant slowing of growth in the global economy in the year ahead, to rates well below those seen prior to the pandemic. Australia’s national growth outlook in 2023 will be determined by slow wage growth, the war in Ukraine, and global energy prices, which will all contribute to the speed and severity of interest rate rises in the year ahead.

As the federal government looks to consolidate its election victory and deliver early on some of its election commitments, 2023 is shaping up to be a year of policy reform, coupled with a strong legislative agenda. The government has made it clear it wants to change Australia’s trajectory on several fronts, with the establishment of the National Anti-Corruption Commission (NACC) and National Reconstruction Fund. An Indigenous Voice to Parliament, management of Australia’s energy crisis and long-term plan for renewables, economic and labour market reforms, and the delivery of the Defence Strategic Review (DSR) all likely to dominate political bandwidth in the early months of the new year.

The new Labor government has made a flying start — ending 2022 in a commanding position, posting Anthony Albanese’s highest voter approval since becoming prime minister, pushing significant legislation through parliament and rushing to repair relationships with neighbours. It has set itself a high bar in terms of activity and achievement, and will need to maintain that tempo as it balances spending decisions in defence and health while managing a budget in deficit. While relations with Beijing are thawing, the government must still navigate the fine line between China being its largest trading partner, and biggest strategic competitor.

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