In the three decades since Pauline Hanson entered federal politics, Australia has experienced numerous bouts of voter frustration with the mainstream parties.

But it is only lately that the negative sentiment towards the majors has propelled One Nation to unprecedented polling numbers and delivered Hanson higher net approval ratings than the prime minister and opposition leader.

Why now, and what happens next?

Cost-of-living squeeze

Households are experiencing economic pressures that resemble the unrest of the 1970s, a period marked by elevated inflation and a stagnant economy.

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

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

This despair is evident in consumer sentiment surveys that show Australians are now experiencing “deep pessimism”, according to the Westpac-Melbourne Institute, with interest rate hikes also weighing on prospective buyers and mortgage holders.

While these factors have created fertile ground for populist parties, it is not the first time Australians have felt under financial strain.

The difference this time, according to Jordan McSwiney, a researcher who has examined far-right movements, is that One Nation has been able to tie housing affordability concerns and other economic ailments to immigration.

“Economic policy and housing are not really territories that One Nation is usually comfortable on,” says McSwiney, a research fellow at the University of Canberra’s centre for deliberative democracy.

“This kind of link between immigration and housing allows them to address issues that are very front of mind to people, like the economy, but address it from their preferred terrain.

“One Nation is doing a bit of a bait and switch, in that they use the context of housing and the economy to talk about what they really want to talk about, which is immigration.”

The party also links cost-of-living pressures to its campaign against net zero emissions and renewables, which provides another well-established talking point for Hanson.

Sequence of shocks

The causes of Australia’s housing problem are multilayered, with decades of chronic undersupply and investor-centric tax settings helping supercharge prices, leaving many behind.

Australian homes did not suddenly become unaffordable. There has been 25 years of price growth that has far outpaced wages, according to government data.

While periods of high migration, which has now subsided, can place immediate pressure on rents and housing supply, they also provide the workers required to build homes, broaden the tax base and address critical skill shortages.

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

One Nation’s intention to firmly blame housing costs and other economic ailments on immigration is clear, with Hanson arguing at her National Press Club address last month that “immigration policy has our country in the state of crisis”.

The Coalition has already explicitly linked migration rates to housing supply, giving One Nation’s own policy mainstream legitimacy. Hanson’s party is just better at prosecuting its case, and the Coalition is fractured.

One Nation has taken its message straight to voters via “engagement farm” operations that flood social media, promising an easy solution to housing affordability at no cost to voters.

There’s an interesting question as to why the initial wave of inflation and cost-of-living pressures, starting in late 2021, did not spark the type of support for One Nation it is enjoying now.

It was only during the latest rise in living costs, starting late last year, that Hanson’s support surged.

In the second inflationary wave, which has been made worse by the Iran war, households have stocked up on cheap canned goods and reduced their spending on takeaway coffees and restaurant meals.

Australians appear to be feeling worse now because they are facing new price hikes and mortgage rises on top of already depleted savings, with financial and emotional resilience wavering.

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

“This sustained erosion of purchasing power points to persistent pressures on household incomes, even as the labour market has remained broadly solid,” the OECD report says.

Gabriele Gratton, a professor of politics and economics at the University of New South Wales business school, says voters tend to react to a “sequence of economic shocks” when shifting political positions.

“The result is that voters lose trust in [political and bureaucratic elites] and seek alternatives to the liberal democracy we have built,” Gratton says.

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

Growing scrutiny

One Nation’s surge in popularity will be tested in earnest at the next federal election, to be held by 2028, with economic conditions set to play a major role in the outcome.

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

Hanson must now navigate the growing scrutiny that comes with being a central political player as voters evaluate whether her party offers credible solutions.

Talk of a “monoculture” and ending multiculturalism may put off significant cohorts of voters and the party will need to avoid splintering to be competitive.

The problem for Labor is that there’s no quick fix to the problem of housing, ensuring it will still be a major electoral issue over the next two years.

McSwiney says Labor is tasked with the “long, slow process of announcing policies that are going to improve people’s everyday lives, and then delivering on those”.

“That is what might take the wind out of One Nation’s sails, but that’s a long game. I’m sure the Labor party is very thankful that this spike in One Nation’s polling has happened at this point in the electoral cycle, and not six months out from an election.

“For the Coalition, they need to get their act together, and present a serious opposition.”

• Jonathan Barrett is Guardian Australia’s business editor