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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
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Time for a House Un-Australian Activities Committee?
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Make Gina Rinehart work for her dole
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Me on Razor Sharp this morning
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Is the Australian economy headed down?

Over the last two years, the determined band of boosters from the Reserve Bank, Treasury and the Labor government, backed by an army of mainstream economic commentators such as Ross Gittins in the Age, have continually touted the supposedly glorious future of Australian capitalism. We were told that Australia, virtually alone of all the advanced economies, was set to enjoy an incredible bonanza based on mineral exports to China.

Indeed, the Reserve Bank repeatedly argued that the main danger facing Australian capitalism was “over full employment” (what a tragedy if people actually had jobs!) and that “greedy” workers could take advantage of this situation to demand higher wages that cut into booming company profits. The Reserve Bank saw its main task as disciplining workers by forcing up unemployment via higher interest rates.

The latest phase of the economic crisis sweeping Europe, North America and Japan has delivered a rude shock to the Australian establishment’s triumphalism. But even before panic swept the share markets, all was not as rosy for the Australian economy as the likes of the Treasury and the Reserve Bank made out.

Over the last year, the Reserve Bank has repeatedly been forced to revise its growth forecasts downwards. These growth downgrades were dismissed as being due to one-off factors such as the floods in Queensland. The Reserve Bank insisted that once these temporary hiccups were overcome a rosy future was still in store for us all, courtesy of the minerals boom.

In its recent statement – released just before the latest upheaval on world markets – the Reserve Bank slashed its growth forecast for 2011 by a full percentage point to 3.25 per cent. But this is still a highly optimistic scenario. Even sections of the establishment are now painting a much more pessimistic picture.

The IMF is forecasting just 2 per cent growth for Australia, while Westpac Bank chief economist Bill Evans is forecasting rising unemployment and that the economy will crawl along at a 1.3 per cent growth rate in 2011 and 2.3 per cent in 2012. If the US and Europe plunge into recession, all bets are off. Chinese demand will not be enough to sustain the Australian economy, and Chinese growth could itself falter.

Robert Gottliebsen and Alan Kohler of the Business Spectator have an even more negative take on the direction of the Australian economy. According to Gottliebsen, “Australian non-mining companies have started to retrench workers on a massive scale”.

Roy Morgan’s latest employment survey estimated that total employment in July fell by a horrendous 418,000 to 10,802,000, with full time employment down 219,000 and part time employment down 199,000. This was the biggest monthly fall in employment ever recorded by the Roy Morgan survey.

According to Roy Morgan, which uses slightly different criteria from the ABS to calculate its results, unemployment rose 0.6 per cent to 7.6 per cent, while underemployment stands at 7.3 per cent. That is an overall level of unemployment and underemployment of 14.9 per cent. Hardly boom times!

A mass of other figures underscore the weakness of the Australian economy: home building approvals are down 20.3 per cent since the start of the year; retail sales for the 12 months to June 30 grew just 2.6 per cent, the weakest rate of growth in 50 years; consumer confidence collapsed in July down 8.3 per cent; the ANZ job advertisement index shows job ads have been shrinking since April; the ABS employer survey reports job vacancies falling since February; credit growth for 2011 is at a near-recession annualised rate of 3 per cent; and the latest monthly rise in housing credit was the weakest since 1984.

So what is going on? Why hasn’t the surge in commodity prices and exports to China led to a booming Australian economy?

Mining companies are making record profits, but little of this has yet flowed through to the rest of the economy, let alone to the mass of workers. In part, this is because of the Labor government’s backdown on imposing a mining super profits tax.

The result is that the mining bosses are getting away with murder when it comes to paying tax, and this is set to continue. They will go on paying next to nothing in taxes for some years due to tax write-offs for new investment.

As well, mining is highly capital-intensive and does not employ many workers. It will be the construction projects to build new mines, railways, ports, processing facilities and other infrastructure that will provide the bulk of the jobs.

If most of the resource projects on the drawing boards do go ahead over the next few years, then the ball game could begin to change. There would be a significant flow through to the rest of the Australian economy. However the economic turmoil in the US and Europe can well result in some of these projects being put on hold.

In the short term, the rise in commodity prices and the associated rise in the Australian dollar have hurt a series of industries that are much bigger employers than mining: domestic tourism, manufacturing, education and the retail sector. If the Australian dollar remains high for a sustained period, then its debilitating impact on much of industry can well lead to more and more investment decisions being revised downwards. Indeed, non-mining investment is already soft.

The elephant in the room is continuing low productivity growth. Right wing ideologues like Peter Reith have used this as an excuse to attack workers – demanding tougher industrial relations laws to further weaken the unions, force down wages and make us all work harder in shittier conditions.

But the problem is not “greedy” workers but that the bosses outside the mining sector have refused to invest in new productive equipment. Profits have risen considerably over the last two years, but companies have used them to boost directors’ outrageous salaries, give handouts to wealthy shareholders and pay down debts rather than engage in productive investment.

Another factor adding to the flatness of the economy is the fall-off in government spending as the economic stimulus package that helped to sustain the economy through the worst of the 2008 Global Financial Crisis is wound back.

Workers are facing increased cost of living pressures. The Consumer Price Index rose 3.6 per cent over the twelve months to June but for working families the rise was more like 5 per cent. By comparison, average wages have only risen by around 3.8 per cent over the last year. Workers, especially low income earners and pensioners, are much more severely impacted by increased prices for electricity, fruit and vegetables and other basic necessities than the middle class and the rich and benefit less from the fall in prices of expensive electronic goods.

Average incomes have been rising but much of that reflects the skyrocketing incomes of the rich. Between 1995 and 2008 the top 20 per cent increased their share of total income from 37.8 to 39.4 per cent while the bottom 20 per cent received only 7.6 per cent – down from 7.9 per cent.

It is no wonder that workers are refusing to spend in the shops. Despite continual pressure on living standards, working class consumption in Australia, the US and much of the Western world was sustained over the last decade or more by greatly increased debt. But the Global Financial Crisis brought that to an end.

In Melbourne and Sydney in particular, workers are paying down debt as they realise that housing prices are no longer steadily rising and worry about their future job prospects in the rapidly changing economy.

All of this means a very uncertain future for the Australian economy. Even if the mining boom holds up, at best we face a stagnant economy over the next year, with increased pressure on the living standards of most workers.

Well before the latest outbreak of turmoil in the world economy, a whole series of industries – retail, housing, cars, tourism, manufacturing and many services – were in trouble. Employment held up during the first half of the year, though the number of new jobs being created fell off markedly, with just 38,000 being added according to the ABS, and hours worked declined.

Now, if the Roy Morgan employment survey is to believed, the bosses have started to sack ruthlessly – 418,000 jobs gone in just one month. If the crisis in the US and Europe turns into a full-blown recession, then things will get a lot worse.

In country after country, the bosses and their governments are imposing vicious austerity packages to make workers pay for an economic crisis that they did not cause, while the bankers and the profiteers get off scot free. So far we in Australia have escaped the worst of the crisis but if the local economy does continue to falter, Australian bosses will be just as ruthless in their determination to make the rest of us pay. 

This article, by Mick Armstrong, first appeared in Socialist Alternative.

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Comments

Comment from Ross
Time August 17, 2011 at 10:53 pm

In the last few months demand has dropped dramatically.Jobs are going at a rapid rate.Employers are not replacing people who leave.My phone rings with more people wanting to sell me things than those who want to buy.Some are saying it is already worse than Keatings recession.

People have lost confidence in the future.They see riots all around the planet and the US Fed counterfeiting the peoples’ money.Gillard’s carbon tax didn’t help.The stimulus money has run out.

This is the really big fall and no amount of stimulus money will make a difference.Labor are way out of their depth,gutless and clueless.

When the US $ collapses the rush for the exits will see the share market implode.Our super funds still believe that the Bond market is safe,but the USA cannot afford the interest on the debt let alone repay the principal.

I think this will be far worse than the Great Depression of 1929 because debt is enormous,we don’t produce anything and the service industry is not needs based.People can mow their own lawns or do their own repairs etc.

Comment from Michael
Time August 18, 2011 at 6:08 pm

I don’t understand how these jokers can think Australia is any different to the rest of the west when we followed the same types of economic policies. I’m starting to wonder if the ‘mining boom’ had anything whatsoever to do with Australia managing the storm so far – i think government stimulus and a liveable minimum wage and reasonable health costs had much more to do with it. Resources only get you so far, as apparently we knew in the past.

I see one of the biggest problems now as being the housing price bubble. People are earning enough to live comfortably (or at least not go hungry, have a roof, and a car), but too much of their wage is going into servicing unproductive debt on their mortgage. And the banks are mostly just pocketing their win-falls. Eventually this lack of free spending money MUST depress the rest of the economy, and I think this is the real reason retail has suffered of late. So the housing bubble will have to burst because the rest of the economy is being starved of cash and eventually something will have to give way. A sharp jump in unemployment will help kick us closer to the edge.

(yes i’ve been reading a lot of Steven Keen and Michael Hudson of late).

Comment from Tony
Time August 18, 2011 at 9:17 pm

“[S]ervice industry is not needs based.People can mow their own lawns or do their own repairs etc.”

Yes, Ross. To me, this suggests the initial rise in the headline employment numbers will be followed by an acceleration in unemployment 3-6 months thereafter. I’d expect a secondary effect where such “independent contractors” providing these services take time to realise the depth of the malaise before being forced on to the dole queues. As you suggest, this will occur after self imposed consumer austerity deepens and collapses the demand for personal services.

My gut feeling is many of these jobs shed in this cycle will not return as a result of further offshoring to lower cost base countries and also jobs disappearing through application of technology squeezing out labour costs that are currently marginally retained as “human” functions.

Both these factors have been present for decades, but the high cost of equipment made the process slow. Now, we have seen a massive fall in price of these items for business capital expenditure, mostly IT related for business process re-engineering rather than more long term physical capital for output in manufacturing.

In spite of comparatively low CAPEX, we have still seen industry infused with automation and computerisation. Even mining trucks can drive themselves, only requiring an operator for emergency shutdown.

Recent attacks have focused on “white collar” environments and continue on secondary industry workers, particularly with the high dollar. We are now reaching the tail end of business process re-engineering through application of IT to permanently eliminate mass labour, for an example see agriculture.

Facing this reality would see an effort to reduce the working day, ensuring people have adequate income in our high fixed cost (food, utilities, etc) environment and preventing the worker’s money circuit seizing, the point at which social disorder is likely to manifest.

We also need to recognise structural unemployment is going to increase permanently and cease attacking those who need the dole.

The tendency for capitalists and government to lengthen the working day (unpaid overtime, etc) while the dole queues lengthen will, over time, likely lead to the sort of unrest recently seen in the UK.

Consequently, in addition to systemic financial faults we have discussed at length, we must look seriously at a significant reduction in the full time working day for all workers.

A figure of about 4.5 hours, one I once saw suggested in a quality assurance research study, would set the working day to the average maximum productive time of typical intensity mental tasks before performance/concentration drops off rapidly. At the same time, workers should have their real wage outcome improved to ensure they can meet all needs.

Disappointingly, it would appear Australia’s capitalists or governments are incapable of comprehending the social tensions that are at play and likely only contained by the thin veil of the mining/debt induced boom, in spite of the events occurring in Europe.

Both capital and government fail to recognise that it is not in their “interest” to see domestic consumer demand collapse as a consequence of austerity. Should such conditions exist, in the short to medium term, those outside commodity sectors will see their profits collapse and government will see revenue fall massively.

Unless governments let the banks fail, while guaranteeing deposits, and relieving debtors of terms that were created in an environment of easy money created over the past 15 years, we will have a hard landing of the type the US and Europe is now experiencing. We will experience our own lost decade or two.

Should banks fail, then recreate them as people’s banks, not the stupidity of the bank bailouts overseas.

Stupidity and greed that have now ruined nations by transferring private losses to the public and rewarding those who were incompetent or criminal.

Now is not the time for the myopic perspectives projected by our reactionary leaders.

Comment from Ross
Time August 19, 2011 at 8:38 am

Tony the plan is to put Australia in dire economic circumstances and let the large corporates buy up our assests for cents on the dollar.This is why they are pushing for the carbon tax.China is already buying up our land and resources.We are an easy prize.

George Soros is switching from gold to farmland because soon food will become the new gold.

We have to force our Govt to make the Reserve Bank of Aust the lender of first resort.With all the inflation the US Federal Res is creating,it will only be a matter of time before rates begin to rise.The RBA can come to the rescue by making sure there is sufficient mnoey in our economy for it to function adaquately.

Our banks are not in good shape.They have borrowed from the US Fed and are relying on Govt Bonds just like the super funds.Govt bonds mean nothing if they cannot afford the interest.

Gough Whitlam’s greatest sin was not spending but the Kemlani Loans affair where he tried to borrow money from the Arabs instead of Western Central Banks.This would break their monopoly power so he had to go.

Yes Michael Prof Michael Hudson knows the reality,it is unfortunate that Saul Eastlake and his ilk cannot do likewise.