Australian economy entering choppy waters

New housing in Perth. Most young workers cannot afford mortgages (Photo: Rob Burke/Creative Commons Licence)

Prior to the covid pandemic, the Australian economy entered its first recession in 30 years. Following this contraction, the economy bounced back out of recession. Based on a recent surge in mining exports the economy grew, according to AP news. However, the economy is by no means in safe waters.

For 27 years the Australian economy has boomed but all that has now changed – it is living on the brink of disaster and it is only a matter of when. 

“Gross domestic product (GDP) shrank 7% in the 2020 April-to-June quarter compared to the previous three months. This is the biggest fall since records began back in 1959 and come after a fall of 0.3% in the first quarter,” commented the Australian Bureau of Statistics.

Despite a global pandemic dominating global economies, the top 200 richest Australians increased their collective wealth by 24 per cent. Australia now has a record 104 billionaires, including seven people in the elite “ten-digit club” with a wealth exceeding $10 billion. There are now a million, millionaires in Australia while the majority of Australians are suffering a fall in incomes.

Trade union struggles have, at times, been bitter and long, such as the recent MUA battle with Patricks on pay. A growing economy for decades and the strength of most democratic and militant unions have played an important role in ensuring that Australian workers’ wages are amongst the highest in the world. Only a few smaller countries have a higher wage rate.

The biggest growth rates have been in banking, housing and other service industries. But these sectors thrived on the back of mining. China is the biggest importer. Coal, gas, and iron ore have all bolstered the Australian economy.

China uses more steel than every other nation combined and 60.2% of its iron ore comes from Australia. This is despite repeated attempts by the Chinese regime to wean the country off Australian imports. Because of this, when China enters a recession, Australia will very likely enter a sharp depression and millions would be pushed into poverty.

For decades financial advisors have been telling Australians to invest in property, most often to mortgage a second house. For many families, a large part of their income goes towards paying high mortgage rates for a first and second home. A single sharp fall in family income would be catastrophic for these families and the economy.

Cost of homeownership

The problem now is that the cost of homeownership is so high young people are unable to buy a single home, even with two incomes. It is even worse for average or low wage earners who cannot afford any mortgage or even the high rents. So older generations are now also under financial strain because they are helping to finance their children’s first home. 

The recent recession has meant increasing homelessness and food shortages for the poorest sections of Australia. NGOs are reporting a dramatic increase in the need for food and shelter even before Covid. The situation now is dire, with State and Federal governments not addressing these problems.

Most of the banks and especially the mining industry pay very low taxes and royalties. Michael West, a journalist on Australian tax dodgers, states that the biggest companies pay no, or very little, tax at all. Workers cannot avoid paying taxes, so it is they that provide the funds for investment in infrastructures, such as hospitals, schools, transport and other social services while the super-rich fill their bank accounts.

Starting with the 2008 global economic crisis, the huge bailouts of big banks and businesses and then severe austerity, social service cuts and attacks on workers wages failed to resolve capitalism’s deep problems. Nation-states worldwide have had to pump resources into the failing economies. This approach has been reinforced since the Covid pandemic.

It has long been the case that so-called Labour or socialist-named parties are the second parties for the capitalists. In Australia the process has gone on longer than in most countries, in recent decades, the Australian Labor Party (ALP) has been the capitalist’s number one party when needing to keep down wages and erode workers’ conditions. The leadership of many of the trade unions are tied to the ALP, a party that is welded to the billionaires and millionaires.

ALP

The Australian Labour Party is only that in a name –  it is a party without a single MP who has a vision that is in any way genuinely socialist. This has not always been the case. The Whitlam Government in the mid-seventies introduced free education and health service for every Australian. There is even more wealth today to carry out such policies. The ruling class, along with the right-wing of the ALP and the right-wing unions, mustered every trick to remove the Whitlam government and they will try it again when workers start to struggle for socialism. As sure as the Australian economy will enter serious recession, it is equally certain the Australian working class will have no choice but to fight back and in doing so more workers and youth will join the fight for a socialist Australia.

It is time that the unions break with the ALP and put forward their own candidates in elections, who are directly held accountable by the communities they represent. This could form the basis of a new workers’ party to represent the needs of all Australians, not just the well off.

The only way to ensure against economic collapse is a massive programme of public works, as part of a programme of fundamental socialist change.

Australia stands in a unique position, with a vast amount of potential green power. Some Australian scientists say that it would take just two years to stop all fossil fuel use and to be able to rely on solar, thermal, wind, and wave power, and other renewable sources.

But you cannot control what you do not own. If the top 100 companies and banks were nationalised under workers’ control and management all that wealth could be channelled into providing a decent life, for all, and green energy alternatives. Furthermore, it would allow for the mass development of the health service and scientific research, to properly preparedness for more pandemics. Not only would this guarantee every household with secure and decent jobs, but it would allow the export of green energy to Australia’s poorer neighbours in Asia.

 

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