Contributed by Joe Montero
As we approach July, two things are becoming increasingly clear. A depression rivaling the one that came 70 years ago could be in the making, and the top echelons in the business world, together with the Australian government know this, and they are actively preparing their response.
Everyone senses that Australia is moving into a difficult time. Many are already experiencing increasing hardship, and if the nation falls over a precipice, the suffering is going to be a lot worse than it already is.
Recognition of this is already starting to propel some into action. One form is the emerging Living Income For Everyone (LIFE) campaign. It is only at its beginning and not public yet, yet has already drawn together an impressive range of activists from the unions, advocacy groups, welfare organisations and others into a loose network, and shown a potential to build a movement powerful enough to change the political landscape.
LIFE revolves around the idea that everyone has a right to enough to live on enough to provide a decent standard of living, and that in the present circumstances, this has become more important than ever.
In sharp contrast, the approach of the Australian government is to prioritise the protection of big business and major investors, and to find ways to cut back on the rapidly rising government deficit, rather than lifting the position of the broad population.
Little has been made public. The political cost to the Morrison government would be far too high to do otherwise. The traditional way for governments to handle these situations, is to rely on thought bubbles aired through the media. This government has stuck to the tradition.
So we are getting thought bubbles about the new deficit, the need to encourage investors, the cancelling of subsidies to the unemployed and re-introduction of mutual obligation. Who is going to pay for this year’s stimulus packages? From where is government spending going to be re-routed?
There are also thought bubbles about the need to assist major private corporations in trouble, press ahead with a reduction in company tax, and introduce greater labour market flexibility.
The mindset remains firmly focused on neoliberalism, based on freeing of and encouraging big investors. The problem with this formula is that the track record shows, it doesn’t work.
This is not the quantity of investment dollars. It is about how the profit created in business activity is used, and therefore, how that portion making up investment funds is used. Failure to deal with this and the wrong use of investment funds, has caused further damage to the economy over time.
Consequently, Australia moved into the Coronavirus era with an already floundering economy. and the pandemic has added a new dimension to the crisis.
Anyone who has been following developments will know that none of this is new news. They would also know that the end of support for the unemployed has been earmarked for September, and that there is widespread concern that this could tip the economy into a free fall.
Employer organisations fearing this, are starting to call for some caution. The Morrison government is feeling some heat and contemplating a quick mini budget within weeks or, wither postponing or staggering the cuts in September. But nothing has been set in concrete yet.
We saw a similar approach last week over the minimal increase to the minimum wage, and the deliberate postponement of the rise, for those who work in certain industries.
None of it will make a huge difference. Unless there is sufficient action to stimulate both spending and positive investment over the foreseeable future, the economy will remain on a downward trajectory.
Unemployment is much higher than the said less than 1 million. The number receiving JobKeeper payments are around 1.6 million. The Centrelink associated count of unemployed is 7.1 percent, while those out of work and missing out, amounts to somewhere between 14 to 19 percent. This does not include those in precarious, part time and non-permanent work. In short, Australia has not seen so many out of work since the Great Depression.
Despite extra money from the Coronavirus packages, consumption has continued to decline. The number of permanent business closures has spiked. Investment has bottomed and share prices continue to fall, when measured in weeks.
Rent and mortgage stress continue to rise. If the temporary moratorium for hardship comes to an end in September, many will be saddled with thousands in arrears and face the prospect of losing their homes.
Initiatives like the proposals put forward by LIFE provide an alternative answer to the lack of income and consumption problems, as well as promoting the concept of a fairer economy and society.
There remains the need to address the investment issue. Given the failure of the pre-Coronavirus approach, a different approach is necessary. The pandemic has proved that government intervention is especially crucial during times of crisis. Intervention must be of the right kind as well. Instead of corporate welfare with few obligations, government intervention must address how profit is used, and ensure that investment is of a type useful to building a better future.
This is not possible without having adequate control over the financial system. The decades long process of financial deregulation must be reversed. Banks and other lending institutions must be regulated, to ensure the funds they hold, are used to properly stimulate the economy.
Control over finance will be vita to the growth of a more diverse economy that is sustainable and based on the recovery of manufacturing.
A public investment bank must be established where private banks and financial institutions must deposit a portion of the money they are holding, and where ordinary depositors can open an account. The purpose would be to ensure investment goes where it’s needed to meet the nation’s priorities, including the creation of jobs.