The federal government will spend $48.6 billion on the military in the coming year. This, we are told, is to keep us safe. Defence minister Richard Marles has pledged that $575 billion over the next decade will not be affected by inflation, but will continue to rise in real terms.
Despite this, many are feeling decidedly unsafe. The fear is real: how do we keep warm, pay the bills, stay well, keep a roof over our heads and feed our families as the economy crashes around our ears?
Treasurer Jim Chalmers has warned that the future will be difficult. There is already a crisis in health and housing. Austerity policies mean wages are falling further behind the inflation and interest rate rises are pushing people to the wall. Despite this, Chalmers has indicated that the government will not be making any significant announcements about cost-of-living support any time soon.
Australia is facing a serious economic crisis — a crisis it shares with the rest of the capitalist world. Things are looking more than difficult.
When interest rates began to rise, Pollyannaish voices were heard. Financial comparison site Canstar glibly advised home buyers to “be prepared and do the sums for their specific situation … The trick with it is to get ahead now — pay more if you can afford it”.
Senior economics writer with The Age and Sydney Morning Herald Jessica Irvine said there is really nothing to worry about and that there is “very little chance” of interest rate hikes tipping us into a recession. Anyway, she said, we should all find ways to adjust.
For many people, the adjustment will mean finding another $1000 a month by this time next year to pay their mortgage. Wages are barely moving. More unreassuringly, Irvine said: “If we do hit a recession, the Reserve Bank won’t still be raising rates.”
This is a fantastical view of the world. Those with mortgages are under stress.
Home ownership remains high, although according to the Australian Housing and Urban Research Institute, just 50% of 25 to 55 year olds will be in the housing market by 2040. While home ownership becomes a fading option, there is another crisis in rental. People simply cannot get decent housing.
The health system is crumbling before our eyes: food banks have never been busier, charities are stretched to the limit and impossible new “mutual obligation” conditions are being imposed on dole recipients.
This was the grim reality facing many before the onslaught of rising inflation and interest rates were added to the mix. Wages have shrunk and even if the minimum wage is raised by a pitiful 5.2%, inflation is still set to rise by 7% by year’s end.
Long-term wages stagnation
A prolonged period of high inflation, coupled with low wages, lies ahead. Wages, regardless of the political hype that goes with election campaigns, have been stagnating since the global financial crisis of 2008 and before.
The economic crisis has been brewing for years as global economies never fully recovered from the 2008 crash. This is not a localised problem.
The global picture is bleak. Recession on a global scale seems not to be only likely but almost inevitable. President of the World Bank David Malpass described how the war in Ukraine, COVID-19 lockdowns in China, supply chain problems and global energy price rises are all “hammering growth” and that “for many countries, recession will be hard to avoid”.
The World Bank has just revised down its predictions for global growth. This is set to rise by just 2.9%, down from 5.7% last year. This sets the growth rate to even lower than the International Monetary Fund’s (IMF) revised growth estimates from April of just 3.6%.
US Treasury Secretary Janet Yellen, among many global economists, talks about of a period of stagflation, whereby prices keep soaring while the rate of increase in the output of goods and services slumps, with high inflation, coinciding with low economic growth.
Her words echo the reality for many developed economies. “The economic outlook globally is challenging and uncertain,” with “higher food and energy prices having stagflationary effects, namely depressing output and spending and raising inflation all around the world”.
Capitalism’s limitations
Working people and the world’s economies face structural problems derived from capitalism’s limitations. Despite the optimism of some, the IMF, the World Bank and the US Treasury all agree the crisis is real.
Logic suggests that the last thing the world needs is to commit a global budget of US$2 trillion on increasing military spending. Logic would suggest that Australia’s interests would be better served by not spending billions of dollars on nuclear submarines or, as Marles indicated, more spending on more submarines and missiles as an “interim” measure while the new ones are made. However, logic is not in evidence.
The deeper the crisis of the economy and capitalism, the more belligerent the capitalist states become. Inflationary rises do not get in the way of the business of militarising the world. The economy might collapse but, for capitalism, new profitable opportunities arise. War and the drive to war are a means to ensure the survival of the “fittest” capitalist regimes.