Sweden’s Social Democratic Party has narrowly lost office since last weekend’s election, after governing in coalition or alone for the preceding eight years and for an extraordinary 73 of the past 90 years. The defeat follows a rise in support for a far-right xenophobic party.

Had the Social Democrats been returned for a third consecutive election at the head of a Swedish coalition government that would have meant, remarkably, that all five Nordic nations would continue to be governed by left-of-centre parties, with four of those five governments led by women.

This would have been a further important victory for the principles of fairness, humanitarianism and gender equality for which Sweden and its neighbouring Nordic countries – Finland, Denmark, Norway and Iceland – are renowned.

Sweden has long provided sixteen months’ paid parental leave for families. The government which has just gone to the polls under Magdalena Andersson increased the minimum amount of that leave which must be taken by fathers, from two months to three months.

That bold pro-feminist, social democratic policy approach, together with Sweden’s overwhelmingly public, non-profit, high-quality and affordable early childhood education and care arrangements, have brought outstanding economic success. The proportion of women in full-time jobs in Sweden is nearly 20 percentage points higher than in Australia.

In a recent webinar with the Australia Institute, Margot Wallström, Sweden’s Foreign Minister from 2014 to 2019, celebrated how Sweden has “changed drastically” in the time since she grew up, with so many more people that “have roots in another country”. She described this as a “blessing and a gift to our society…we develop thanks to that”.

The idea that egalitarian social democratic policies are incompatible with cultural diversity was a long-standing fantasy of the Right in English-speaking countries. It was disproven by the lived history of Sweden from the 1970s.

More than one in every four people in Sweden now has a foreign background, following decades of immigration, and as a result of one of the most generous refugee intakes in the developed world over the last decade.

As well as guaranteeing immigrants and refugees equal rights and pay, and the benefits of its universal welfare, Sweden has led Europe in recognising immigrants’ and refugees’ rights to education in their native language. Today many of the migrants who arrived in the 1970s and 1980s use their fluency in several languages to achieve personal success.

Sweden has also taken a distinctively inclusive approach to education about different religions, as well as non-religious outlooks and ethics. This study is required in all schools to help counter xenophobia.

But despite these efforts, and although the Social Democrats remain Sweden’s most popular political party, the rise of the far-right Sweden Democrats to become the second-largest party, with their hostility to immigrants, is a serious concern. So too is the recent decision by some ‘centre-Right’ politicians to seek to govern with the avowedly anti-immigrant party.

Sweden till then stood in contrast to many countries, including Australia, in that no major long-standing political party had suggested doing anything other than isolating xenophobic political parties and their policies from government.

As in all countries, increased cultural diversity in Sweden has brought some tensions. Better integration of immigrants and refugees is needed there and in some respects Sweden can learn from Australia’s multiculturalism.

Immigrants in Sweden are concentrated in large numbers in particular centres like the southern city of Malmö, and they experience lower employment rates than immigrants do in Australia.

Sweden now needs more effective job creation strategies for immigrants and refugees as part of facing up to its big challenge to enable their further integration into Sweden’s high-wage, high-skill employment – and universalist welfare – arrangements.

Many Swedish centre-right politicians will continue to resist collaboration with xenophobes. Any new Swedish coalition government which emerges from this election, which attempts to rely on the far-right party for a very narrow parliamentary majority, will thus be very unstable.

The next government could again include the Social Democratic Party as part of a ‘grand coalition’. Sweden can therefore still meet the big political challenges it faces, while still upholding its renowned humanitarian principles.