By Reihana Mohideen
Economics are very much the starting point for understanding Australian politics in 1995. The international pattern of growth without prosperity or a large decline in unemployment very much describes the Australian economy today.
In the last few months there have been indications of a slowing of growth in the world economy. The OECD has cut its growth forecasts, and its leading indicators point to a downturn that is broadly spread, with the greatest weakness in the US and Europe.
There has been a lot of talk in the establishment media about the "soft landing" of the US economy — "soft landing" being the hope that a slowing of growth won't lead to a recession.
There was a big fall in US job figures (101,000 in May, the biggest fall in four years) accompanied by a drop in the US Commerce Department's leading index of economic activity in April, the third consecutive fall in the index — technically a recession.
According to the Schroders Economics Weekly report, "the majority view on the US economy remains a soft landing ... However, the minority camp now includes a significant number of economists willing to canvass prospects for a recession."
Federal Reserve Board chairperson Alan Greenspan has conceded that the US economy risks a "modest near-term recession".
In Germany, forecasters have been revising the country's growth prospects downwards for the coming year, with growth in Europe expected to slide back to 2%.
And the OECD has slashed its 1995 growth forecasts for Japan from 2.5% to 1.3%. Despite optimistic government forecasts, recent figures showed a negligible 0.1% growth in Japan's GDP in the first three months of the year. The figures from the last two quarters also show a slowing down in several of the leading indicators: exports, housing, public investment and private consumption. According to the Japanese research institute which most accurately forecast the growth results, "the economy is heading for a recession later this year, possibly in the second quarter".
Australian effects
This serious slowdown in the major industrialised economies threatens Australia's economic recovery. The budget forecast of growth of 3.75% in the coming 12 months assumes that our major trading partners will grow at 4.5%. On the strength of this Australia's terms of trade were expected to improve by another 3.25% during the year, and the Australian dollar was expected to recover by around 5.5%.
While the capitalist economic pundits initially welcomed the slowing down of Australian economic growth (closely following the US business cycle) as putting a downward pressure on two of their main problem areas — interest rates and the current account deficit — now there is a real nervousness of an economic slump.
According to the Financial Review, while the economy as a whole is experiencing a "soft landing", in key sectors — transport, retail trade and important areas of manufacturing — there is a "bumpy ride ahead".
In housing, there are now fears of a "crash landing", with housing sales across the country having fallen by some 40% since the 1994 peak. While the decline in demand, after three years of strong growth, was expected, what has caused alarm is the rapid pace of the downturn in the industry.
Meanwhile the current account deficit still remains a major problem. Direct foreign investment in Australia is suffering. Since the early '80s it has grown at about half the rate of such investment worldwide, the major exception being in the bond market, where foreign financial speculation is still high.
Through privatisation measures, both federal and state governments are hoping to attract back some overseas investors. But they will have to compete with other countries in the region, such as New Zealand, with its massive privatisation of government instrumentalities. According to the managing director of Salomon Brothers (Australia), New Zealand remains a "very, very popular market in the US". Half the New Zealand market is owned offshore, compared to 20% of the Australian market. So we can expect an ongoing privatisation offensive by both federal and state governments, with the states competing against each other.
Savings
The central thrust of the budget measures was to reduce this current account deficit through "national savings" via:
- privatisation of the Commonwealth Bank — the 6th highest profit earner out of the 500 biggest companies, registering a 45.5% increase in profit last year;
- the superannuation measures — a wage cut via a tax increase and a wage trade-off that was built into it.
The economic rationalist assumption here is that these measures make more capital available for productive investment, so investments will be less dependent on foreign capital markets.
But privatisation and superannuation funds are overwhelmingly about speculation rather than productive investment. When CBA shares were listed on the stock market in 1991, a selling frenzy by small investors resulted in $250 million for a lucky few. And the money in those massive super funds (some $186 billion by the year 2002) is essentially a huge speculative fund for business — some 70% of stock market capital comes from super funds. The 1987 stock market crash resulted in thousands of workers losing their superannuation.
Still central to the government's agenda of increasing domestic savings are cuts to the public sector. According to treasurer Ralph Willis, there will be savings of some $640 million in the next four years through reducing the "running cost of government departments". The Community and Public Sector Union estimates that this could mean around 4000 job losses per year.
This is an integral part of the neo-liberal economic strategy of attacks on services and the welfare state. The Labor government project is to deliver economic growth with relatively low inflation through "changing the structure of the economy", which translates into a reduction in labour costs (wages and jobs) and increased handouts to big business.
The Hilmer Report recommendations are in this framework and project an acceleration of these measures. Its "Cost Reflective Pricing Program" will result in a reduction in electricity prices to big business by up to 26%, freight up to 39%, water up to 18%.
Enterprise bargaining
As a consequence of this strategy, there has been a big increase of the burden on the working class and the poor. The Accord is key to this, in particular through enterprise bargaining, which has been the cutting edge of the restructuring drive in the last few years.
This restructuring is a never-ending-story. Take the wharves, for instance. A recent Business Review Weekly article complained that productivity on the wharves has slipped from a 1992 high (which was gained after cutting the work force by half in a period of two to three years). The reasons, according to the bosses, are that "As long as wharfies are assured of jobs for life they'll do what they like", and the union closed shop.
BRW goes on to discuss how to deal with this — the options of the "slash and burn" and "kicking arse" approach (WA style) or negotiations. Then there is a discussion with a number of bosses in the shipping industry expressing different views on the best strategy.
Whatever the cyclical fluctuations, long-term structural unemployment is still a feature of "growth". What they consider the "natural" level of unemployment continues to grow. Unemployment currently stands at around 8%, and this is welcomed by the government as a great achievement.
This is due to:
- increased productivity of labour, i.e. the rate at which technology is replacing labour as a result of their restructuring drive.
- the growth of speculative capital, which is no longer restricted to periods of high inflation or a particular phase of the business cycle.
Even Simon Crean was forced to admit recently that the boast about a 50% reduction in long-term unemployed isn't true. The long-term unemployed lose their status by participating in short-term training programs and then go back on the dole queues.
Intervention in Asia
Coming to the fore is the increased push for Australian capitalist penetration into Asia, with increased government intervention to assist this project. This is the heart of Keating's APEC project.
The ruling class is hoping that its regional trade with east Asian economies will cushion it from the full impact of a possible recession in the US, Japan and Europe. Growth in some of the newly industrialising east Asian economies is forecast to be around 7.6% this year.
But despite the government assistance, Australian capital faces some problems. This is most clearly illustrated by the low level of direct investment in the region compared to the rapid growth of exports.
Direct investment flows are an important indicator of the actual level of overall integration of Australian capital in the region. While exports to Asia are around 30% of all Australian exports, direct investments are low in absolute terms and as a share of overall Australian investments abroad. Australian investments abroad are still primarily directed to the US and the UK.
The main reason for this is that profits are low in the initial phase, unlike in the advanced capitalist economies, where companies can establish themselves quickly through acquiring existing operations. Many Australian companies are just not competitive enough to invest and make a loss for a period in order to establish themselves.
The companies that have managed to establish themselves are the big multinationals like BHP and CRA (developing Indonesian coal mines) or the huge government-owned infrastructural projects like Telecom projects in Vietnam and Indonesia.
Australian capital's desperation for these markets and investment opportunities dictates that more dictators and butchers will be wined and dined.
Bourgeois economic reports also advice investors on the importance of gathering "market intelligence". This is no doubt an important role for ASIS and explains Gareth Evans' efforts to outlaw media reporting of espionage activities.
Labor and Liberal
Keating's budget won approval from the ruling class. A BRW post-budget poll of the chief executives of Australia's top 1000 companies showed that the government's stocks had gone up among big business since the budget. In manufacturing, whereas in the previous poll 78% of executives supported Howard, after the budget that collapsed to 48%.
Heading into an election, winning solid ruling-class support is an obviously important consideration for Keating. The Canberra by-election and the fact that after years in opposition the NSW ALP just limped across the line in the state election make it clear the Labor government has a lot of lost electoral ground to recover. Hence the push on the republic issue.
The Liberals are hoping to ride into government on a wave of voter discontent. All they hope they have to do, unlike in 1993, is hide their policies, present a united and softened image, and wait. As a result we have Howard's banal "headland" speech.
On the substantive issues, the bipartisan nature of their policies is very apparent. In response to the federal budget, the keynote of Howard's "reply" was that Labor had stolen Liberal policies. Pointing an accusing finger at the "true believers", Howard cried, "Ben Chifley will turn in his grave".
An article in the Australian asked, "When a Labor government decides to flog cherished public assets in its budget, who does it tip off? Not the Labor left — but John Howard." It explained that key budget proposals to cabinet were first cleared with the Liberal leadership.
No-one from the Labor "left" in cabinet even abstained on the privatisation proposals. So much for trying to change the ALP from within.
Another example of this bipartisan approach is the relationship between Liberal state governments and the Federal Labor government.
Kennett and Court have been the cutting edge of Labor's austerity drive, although Bob Carr is trying to outdo them with plans to corporatise the state's rail freight and the appointment of Fred Hilmer to head Pacific Power — Australia's single largest electricity utility.
This bipartisanship is a dilemma for the Liberals. The ALP has left very little space for the Liberals to put up an alternative set of policies that seem credible to big business or saleable to the electorate.
Control of the unions
The main difference is still Labor's ability to control the trade union movement. This is still key in the ALP's strategy to win favour from the ruling class as the preferred party of government.
Recently there has been a debate in ruling class circles on this. The centre of this debate has been Labor's industrial relations policy, the heart of which is enterprise bargaining.
Enterprise bargaining is a halfway house for the ruling class. The ultimate aim is to take it to its logical conclusion — enterprise unions, i.e. essentially company unions or associations and the eradication of award conditions. Pushing the hardest and the most openly for a quick result in this direction is the Business Council of Australia.
In the March issue of its magazine, executive director Paul Barratt argues that the enterprise flexibility agreements which de-unionised Woodside Petroleum's North-West Shelf project and CRA's Weipa and Bell Bay sites were stymied by the Industrial Relations Act, which didn't allow the companies to go far enough.
There's overall ruling class agreement on the goal. The debate is on the pace at which to get there. The overriding concern is the high political price they may have to pay if they launch a premature frontal attack on the trade union movement.
This was one of the main debates around the MIM dispute. We had the Metal Trades Industry Association calling for tougher actions, for legislation against strikes, and the Financial Review editorialising in defence of the current system.
All the time there is a testing to see how far they can go. This testing is led by big capital, which has more fat on its frame and can sustain some losses in a battle without being driven to the wall.
Some capitalist media commentators are urging on this process of a more frontal attack on the unions. A recent article in the Financial Review, entitled "Why we need more strikes", argued for more MIMs, longer industrial disputes, because "it still represents the most efficient way for the owners of capital and labour to divide the spoils".
It's one thing for neo-liberal ideologues to propagandise but another for the capitalists to take the risks and carry out such an attack. Labor's strategy of white-anting is generally seen as preferable at the moment.
Although Howard makes general comments that "the great reform is yet to be done in the labour market" (which give you a hint of things to come), the Liberals are being extremely cautious at the moment about industrial relations policy. Peter Reith talks about "incremantalism and gradualism" and is apparently having discussions with the ACTU and individual unions.
But if the Liberals win the next elections, unions will be faced with this push. This could lead to major struggles that the union bureaucracy may be forced to wage.
Response to austerity
Labor's attacks continue, unabated, across the board, on virtually every conceivable front: democratic rights, education, health, environment, public transport, immigration, foreign policy.
It's a period of escalating take-backs in every area.
As a result there have been a number of protests and expressions of discontent. But what has really marked the last few months are the number of struggles on the industrial front: MIM, Caltex, Woolworths, waterfront, teachers in WA, Workcover in SA, a number of other struggles against public sector cuts.
These struggles still remain partial, relatively isolated and contained by the bureaucracy. But they show that while the union movement has been weakened through Labor's Accord, it is still a formidable force.
The militancy with which these struggles have been waged is a reminder that a revitalisation of the unions is not impossible.
As these struggles break out, the lack of an alternative leadership in the trade unions is starkly highlighted. Not even the most militant unions today attempt to play this role. The central leaders are still not prepared to challenge the ALP's hegemony in the unions.
Other movements
Other campaigns this year have been marked by several key features.
One is the stifling of campaigns by the peak bureaucracies as they attempt to divert them towards a lobbying strategy.
The anti-woodchipping campaign was blocked by the peak councils, whose strategy from the start was to lobby Labor and oppose the organisation of any systematic mass actions. Where they did call actions, it was because of rank and file pressure, the fear of losing their activist base, and partly also an attempt to show the Labor government that they had some muscle.
Similarly in the anti-fees campaign, the National Union of Students did a left turn leading to the budget and then turned off the tap under the pretext that the budget wasn't so horrendous after all.
Secondly, even partial victories are very hard to come by. Any concessions are no-cost, or low cost, measures, or are traded off against even greater take-backs.
Demoralisation and disorientation may result from the inability to have victories. But the concerns around the issues don't go away. They continue to simmer.
Thirdly, as the attacks keep coming, new brush fires spring up, and some campaigns get a new lease of life. There is a simmering anger linked to a preparedness of new layers to come into action.
As the leading activists in one area drop out, others emerge in new campaigns. But this also means there is no real understanding or generalisation of the lessons from previous experiences.
We see this in the anti-fees campaign as a new generation comes into the struggle. The lessons of the anti-fees struggles of the late '80s, such as the role of NUS and the various mass action tactics, need to be taught again.