Australia’s anaemic economy requires an alternative

Photo by Nick Haggarty/ABC: Anthony Albanese the new Prime Minister of Australia

Contributed by Joe Montero

Labor has scraped up enough seats to form a majority government. By just one. And it comes into office facing an economic headwind. Anyone familiar with the Australian economy knows that it has been in trouble for some time. Last week’s national accounts show that it is taking a turn for the worse.

The defeated Morrison government’s upbeat spruiking claims were not telling the truth. No surprise here. But the situation is even worse than just about anyone thought. On official figures, the economy was supposed to have grown by 4.2 percent. It grew by a mere 2.8 percent for the year and 0.5 for the quarter instead, and this is an over estimation of the true picture. Real growth would measure the creation of new wealth and not the circulation of money. This is far less.

Most of the stated growth came from mining and a little from retailing. Manufacturing, construction, and agriculture fell.

Inflation makes it look like there has been a rise in consumer spending. Consider that this has been a time when businesses under lock down and not trading had opened their doors. The published rise is in nominal terms. In real terms, it has been less. Profits, business inventories, government finance and international trade are down by 1.4 percent. The real estate bubble is beginning to come down.  

Business investment declined by 0.3 percent. Construction by 1.7 percent. Recorded wages growth has been just 0.7 percent.

Graph from the Reserve Bank of Australia

The graph above shows the growing gap between the rising cost of living as measured by the Consumer Price index (CPI) and wages.

These figures do not take account of the economic impact of the devastating floods in eastern Australia. Most of their impact is yet to flow through the economy.

The shortage of available affordable housing is hitting individuals, families, and the economy, blocking potential expenditure on other needs.

The bove figures do not suggest there is a meltdown of the Australian economy. But they do show that the trend to stagnation and decline is well and truly still here. And this has been around since well before Covid.

It means that the incoming Albanese government faces considerable challenges in economic policy. The promise is to work for an economy that is for people and not the other way around. Now it is time to start delivering.

The above indicators are part of the challenge.

Business organisations are calling out the skills shortage. Everyone else is complaining about the rising cost of living. The problems of affordable housing and unsustainable credit are real. There is the climate challenge, requiring a shift from fossil fuels and a major investment injection into building sustainability.

Business Council of Australia chief Jennifer Westacott has called for “…cooperation between business, government, and workers.” To address the “…labour shortages and investment drought.” The view from this quarter is to expand the use of migrant labour. More than anything else is a push for what is called labour flexibility. This has meant increasing the proportion of the workforce in precarious and low paid work.

Big business is calling for a continuation on the neoliberal road. Cooperation between business, governments, and workers is one thing. The point is cooperation for what? Cooperation to continue implementing neoliberalism goes against the interests of most. Working together for an economy that puts people first is something different. Which is it going to be?  

An economy for people requires national plan to transform the economy and put it on a new foundation, where the priority is what will mean a better life for ordinary Australians. Investment must be channelled into this direction. This means greater government intervention, while not neglecting the importance of participation, innovation, and reward for effort.

It means increasing the wages share, and part of this is replacing the Fair Work Commission with an industrial relations system more sympathetic to workers interests, facilitating the right to combine in unions for mutual protection nd shared interests. This is only part of the answer. There is a need to rebuild the nation’s manufacturing base, and this means public control over the financial system, to ensure that investment is used accordingly. Change requires investment in infrastructure, like energy and transport. It requires solving the growing skills shortage through an investment injection into quality education and training.

A national plan worthy of the name will deal with the conversion of the economy into low energy and carbon neutrality, and ensure all sectors grow together in a balanced way. It will deliver a fair share in the gains to all, including those who do not have a job or are underemployed. Everyone should have a living income. An economy can’t be for people without meeting this condition.

We must realise, of course, the present conditions do put major limitations on the Albanese government and there won’t be a quick turnover into a new direction. But here lies the danger of falling into continuing business as usual.

There must be a break from the past and the implementation of polices that start to point Australia in an appropriate direction.

I have consistently pointed out that major change can only be assured with the support and involvement of the population. Efforts must be made to win this, and it involves convincing the majority that there are tangible benefits for them. Material benefits are part of it. Building confidence that the people are listened to and regarded as partners in building the future is the way to generate trust and enthusiasm.

A national economic plan must take on the principle of a democratic economy as the counter to the dictatorship of the big investors.

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