Australia is ending the year in much better shape than we ended 2020.

That’s so even though our region is still a dangerous place, and an aggressive China under Xi Jinping continues to be the primary driver of this nasty circumstance. Covid-19 too remains a changeable, unpredictable threat to the health and social functioning of the world.

Last year ended with these two nasty truths providing some intrusive and damaging effects for Australia.

Back then, we felt more lonely, with less of a plan, than we do now. It’s worth noticing that a lot has changed in a good way over 2021: on the pandemic, with the economy, and in big strategic and security ways.

On Covid, 2020 ended a bit like now—a new strain from India, Delta, was proliferating globally ^[1]. Early data showed it was more contagious than the original Covid strain from Wuhan, but also that it caused high hospitalisation rates for the unvaccinated. That was a problem because Australia’s vaccination levels lagged much of the world, meaning most of our population was vulnerable.

In December 2021, Omicron is more contagious ^[2] than the Delta variant it’s displacing, although we don’t yet know how many hospitalisations it will cause or at what speed. But one big thing that looks like it’s really making a difference from 2020 is that Australia’s national vaccination level of 90% ^[3] of people over the age of 16 is among the highest in the world (the US ^[4] and much of Europe ^[5] are bogged at about 60–70%). On top of this, we’ve got all the tools we had in 2020 for managing Covid—social distancing, masks and contact tracing, along with improving treatments. We also have a ready supply of booster shots to maximise our safety in an Omicron world while we build our own national mRNA vaccine production facility—something that just wasn’t true in late 2020.

It also looks like the public understands that Covid’s now a shared risk nationally and want it managed that way, ending the state-by-state adventure we’ve lived through. It’s up to our federal, state and territory leaders to take this cue and respond accordingly.

Overall, despite the feeling now that we’re all heading back into the Covid tunnel, Australia is as well placed as anywhere to manage the next twists and turns of the pandemic. The main risks are political complacency or parochialism and public weariness, not national capacity.

On economics and China, back in late 2020 Beijing’s $20 billion hit ^[6] on Australian trade in lobsters, coal, barley, timber and wine was still fresh and echoing around the economy. We’d told ourselves China was indispensable for every export for so long that we seemed ready for the damage from Beijing’s vindictive measures to be huge.

A year on, we know that’s not what happened ^[7]. Despite Beijing’s deep desires, the Chinese economy can’t do without Australian iron ore or coal, and prices are good. For other exports, the world has other wealthy markets that want quality Australian exports. Only those that had made no plans for a real alternative to China—like lobster exporters ^[8] and universities ^[9]—are still taking time to adjust to the new normal of the high-risk China market.

As Treasurer Josh Frydenberg said in handing down last week’s mid-year budget update ^[10], the Australian economy is in rude health compared with most of the world. Public debt is low relative to most advanced economies and the economy is resilient to the combined shocks of Covid and China. Companies are diversifying their market risks away from the all-in China bet that was the old conventional corporate wisdom, particularly since the now dead parrot that is the China–Australia free-trade agreement ^[11] came into force in 2015.

In 2022, Australia’s economy is likely to see greater diversification as we take advantage of neglected free-trade agreements with Japan and South Korea, maximise the benefits of the US and new UK agreements and build deeper economic links with India—and, despite the cancellation of the French submarine contract, with the EU. It’s smart to deepen trade and supply chains with partners who won’t use them as economic weapons to bludgeon you.

In the international security realm, 2020 marked five years of largely defensive policy resetting to deal with Xi’s China, instead of the benign China we’d all hoped for—a mutually beneficial trading partner whose different strategic interests didn’t matter because they were quietly resting in the background. Xi’s aggressive use of Chinese power has brought the strategic differences jarringly into the foreground for Australia and for many other nations ^[12] that are now busily reassessing and resetting their own ^[13] China policies.

As we ended 2020, Australian domestic policy was in place to cope with an aggressive Xi. Foreign investment laws were strengthened following the 2015 Port of Darwin lease ^[14]. Rules to counter espionage and foreign interference ^[15] in Australia’s political and public debate were all in place. Australian cyber capabilities were increased ^[16], including through an acknowledged offensive cyber capability to hack back at those who attacked Australia. And we’d excluded high-risk Chinese vendors from our 5G network ^[17] to protect that key digital backbone’s security and integrity.

Other ^[18] governments have been looking to Australian policy for guidance in these areas as they reset ^[19] their own national policies to face the systemic challenge of China.

However, Australia was an outlier in 2020, by virtue of being ahead.

That’s been perhaps the biggest shift. Over the course of 2021, Australia has gone from being the canary in the coalmine on China to being in the centre of the two powerful ‘minilateral’ groups that in combination are doing the most to reset the economic, technological and strategic balance away from China. This is essential to protect the Indo-Pacific from conflict and to not have Beijing dictate others’ choices, including ours.

But maybe we don’t really understand how uniquely positive for Australia’s wellbeing, prosperity and security being in the middle of the Quad partnership ^[20] with India, Japan and the US and in the middle of the AUKUS technology partnership ^[21] with Britain and the US is for our nation of 25 million people at the hinge of the Indo-Pacific. And maybe we don’t really get the phenomenal speed with which these two new groupings have come together and started to act with common purpose.

This is an extraordinary development from March 2021 when US President Joe Biden called the impossible, unthinkable leaders’ meeting of the Quad that simply wouldn’t happen ^[22] but did. And it was only six months later ^[23] that another rolled-gold ‘unthinkable’ happened: the US and UK agreed to share nuclear submarine technology with us, and we agreed we needed it.

Next year will be one of delivery for these two fast-moving minilaterals, because each nation in each of the two groupings needs this for itself. And they all see the benefit of working with each other at a pace we aren’t used to but which must quickly become standard. We can hear this already with news about the rapid implementation ^[24] underway in the three months since the announcement. Expect to see UK AUKUS announcements with Australia and the US early in the new year, to demonstrate to any doubters that the UK in AUKUS has substance and value.

There will be more surprises and twists in 2022, so don’t be lulled by anyone telling you they know the future. But Australians should at least notice we remain the lucky country (actually, and not in the snide way this term can be tossed around). That’s because we’ve made a lot of our own luck over 2021 and we’ve got willing partners to face the years ahead.