For three decades, Australia has experienced almost continual economic growth, even escaping the 2008 world financial and economic crisis. While there has been a marked decline in living standards for workers in every country, now for the first time in a generation, workers in Australia have been hit hard and are still in a state of shock. New data from the Australian Bureau of Statistics (ABS) showed that the cost of living over the past year grew by 9.3% – the biggest increase in the cost of living since 1987.
A global recession is widely expected during the latter half of 2023, but all the data indicates that Australia will avoid it. A recession is generally seen as a period of two-quarters of negative growth accompanied by a significant rise in the unemployment rate. In 2021, there was, globally, 6.1% growth, in 2022 it was 3.1% and only 2.9% is expected in the first half of 2023. At least one-third of the global economy is anticipated to be in recession in 2023, and for the rest “it would feel like a recession for hundreds of millions of people”, as the IMF put it. So, the definition of what a ‘recession’ is, accepted in every capitalist country for decades, is now coming under scrutiny.
We have seen the international capitalist crisis accompanied by a serious shortage of labour in almost every country. At the same time, in many countries, there have been huge cuts in the workforce and unemployment can start to rise.
The stated policy of every central bank, The Federal Reserve in the USA, the Reserve Bank of Australia, and the World Bank, has been to increasingly raise interest rates and keep wages down in order to avoid a massive rise in inflation, with the aim, primarily, to avoid a full-blown depression. A depression is an extreme recession that lasts three or more years or which leads to a decline in real GDP of at least 10%. But high interest rates also risk a depression. They are intended to slow the economy and carry with them the danger of going too far and creating a full-blow recession.
These definitions are the tools of the world’s leading capitalists. But we can apply the same definitions to the conditions of the working classes. In Australia, the official inflation rate has risen for the last three years from 0.89% in mid-2019 to 6.5% in 2022 and is now 7.8%. The real inflation rate is more than 9%. Wage rates have grown steadily from 2.4% in 2021 to 3.5% in 2023 (ABS). The precise measure of the falling living standards is hard to assess, but we do know that during 2021 and 2022 there were massive hikes in petrol, interest rates (rises in mortgage repayments and rents) electricity, gas, and food.
Estimates indicate that the average income in Australia has declined by around 5% in 2020 and 2021 but by 9.3%, last year, which is a cumulative decline of almost 20%. That falling rate of income is set to accelerate in 2023 and 2024, with gas and oil prices predicted to rise by around 20%.
And all these are expected to rise at a faster rate in 2023 than they did in 2022. Technically, and in reality, the Australian people, the 98%, are already in a state of recession and could enter a state of depression during 2023. The majority of the populations of many countries have already been in a state of depression. In countries like Sri Lanka, the great majority have been in a state of severe economic depression, for some time.
Meanwhile, the richest capitalists in the world fared very well in this period. The world’s ten richest men more than doubled their fortunes from $700 billion to $1.5 trillion —at a rate of $15,000 per second or $1.3 billion a day— during the first two years of a pandemic. This has seen the incomes of 99 per cent of humanity fall and over 160 million more people forced into poverty.
It is now almost impossible for the average young couple to buy a home. Interest rates are so high that even with the help of both sets of parents young people cannot buy a home. The rental market, in every state in Australia, is a nightmare. There is increasing pressure on young and middle-aged people.
Housing market is the Achilles heel
The housing market has long been the Achilles heel of the Australian economy. Financial advisors have for decades emphasised that the best insurance for the future is for families to buy an expensive home and also a second home, as their income will allow. This was based on the false assumption that living standards would continue to grow. That advice has now turned into a nightmare for Australian families.
“RateCity says this week’s official interest rate rise means the average borrower with a $500,000 loan is likely paying an extra $908 a month since rates started to rise last May” (Guardian. Since the average mortgage is $600,000, Australian families are now paying an average of $1,000 a month more than 9 months ago. This means almost a million homeowners will be under severe mortgage stress.
The situation for older Australians is not much better. Those in their 60’s, the 70s, and above, rely on their pensions and/or their superannuation. Investment funds have collapsed, and many older workers have lost tens of thousands of dollars in superannuation.
Tension is building among the Australian working and middle classes at a level unseen since the 1980s. Strikes continue to grow and although nowhere near the levels of the ‘80s, it is very noticeable. One of the indications of this process is the relative, very recent, wage rises that have not been noted since 2010.
As the tension builds inside the working class, anger can quickly turn against the Australian Labour Party (ALP), the party of government, and the leadership of the trade unions. That process will take place without a doubt, but it is not present yet. Sections of workers, under stress about the future of their families, are still holding back in the hope that the ALP will create conditions to alleviate their falling living standards. When that process of anger towards the ALP develops, socialists must intervene to direct that energy to the task of building new organisations of the working class, including a new mass workers’ party.
Workers have been under increasing work pressures for several years but now with rapidly falling living standards, there is a new sense of anger. There are sections of the working class that have never taken industrial action or at least not for decades. Nurses, public sector workers, and transport workers have all taken industrial action in the last year.
There are also sections of society that are potentially explosive. In the West Australian mining/recourse sector, which has held up the Australian economy for so long, workers have been under increasing work pressures for several years. But now with rapidly falling living standards, there is a new sense of anger. The CFMEU, in the building sector, which is highly unionised, is starting a campaign for big wage rises.
There is a mood of shock and disbelief among Australian workers. The leadership of the unions are holding back workers from industrial action because they have hope in the ALP federally, and in every state, but one. Most of the union leadership have put forward minimal wage rise claims of 5% in an attempt to support the ALP in this time of serious cost of living crisis. But anger amongst workers is growing. In a mass meeting of nurses recently, when the leaders put forward a 5% increase there were cries from the health workers for 10%, which grew. The union leaders were forced to put it to a vote, which was overwhelmingly accepted.
The explosion of the class struggle and the struggle for socialism being taken up by millions is inevitable, at some stage. What is not inevitable is the timing or the outcome. But the tiniest cog the human mind can imagine can turn the next smallest cog and so forth. Small forces of Marxism can grow in the next period, on the basis of correct ideas and political programme, and by intervening boldly in the workers’ movement and mass struggles. This process will develop in the coming period.
Only a socialist society can solve this nightmare for the working class. All capitalist routes lead to failure and a never-ending crisis, with longer and now shorter, booms and more catastrophic slumps, for all Australians.
