An economy for everyone?

Huge amounts of spending are being promised, but over ten years, when the election is for the government for the next three years.

But what is the economic situation we are in? Is it the “strong economy” claimed by Treasurer Josh Frydenberg? Can any of the promises really be implemented?

Labor’s campaign is highly focused on bold change with fairness, the Morrison Coalition’s campaign is focused on its claim to good economic management and a fear campaign that ‘Labor can’t manage money’. The Greens project evidence-based solutions to growing economic inequality, increasing cost of living, environmental destruction and climate change.

Huge amounts of spending are being promised, but over ten years, when the election is for the government for the next three years.

But what is the economic situation we are in? Is it the “strong economy” claimed by Treasurer Josh Frydenberg? Can any of the promises really be implemented?

Australia in the global economy

During most of 2018 the mainstream outlook on the economy was one of ‘recovery at last’ and ‘normalisation’ of interest rates. This was led by the United States where the Federal Reserve had already stopped printing money (quantitative easing) and was starting to lift interest rates and sell off the huge assets it had built up since 2008. The overall effect was to increase interest rates and reduce the volume of money in circulation world-wide. By the end of 2018 this was thrown into reverse – interest rate rises were put on hold in the US and everywhere as economic growth slowed and inflation slowed even more.

All the free trade agreements over the last decade – organised by global corporations to enhance their supply chains – have failed to improve the situation.

In other words, the ‘recovery’ from the Great Recession was an illusion and the drawn-out capitalist crisis since 2008 continues. The Australian Reserve Bank has also faced lower than forecast economic growth and very low inflation, and decided to halt interest rate rises and even consider more interest rate cuts. The verdict – the Coalition governments since Abbott have not been good economic managers or created a “strong economy”.

Australia’s economy has been de-industrialised over the last 30 years, and relies on huge volumes of mineral exports to pay for the growing cost of sophisticated imports. This has been supplemented by the residential property boom, itself financed from around the world.

With the Chinese economy slowing its rate of growth, and now under intense trade pressure from the US, the Australian economy is vulnerable to setbacks on balance of trade, foreign investment and therefore to unemployment and social stress.

We also face the rapidly rising threat of catastrophic climate change, which requires a just transition to renewable energy and other low carbon industries. Climate change is already causing more frequent cyclones, bushfires and floods with economic impacts.

What’s promised in the Federal Election?

The Morrison Coalition government is going to continue to provide tax cuts to the rich and rely on the discredited ‘trickle down’ and ‘user-pays’ economics of the last 40 years. It will not invest more than it is today in infrastructure and other economic activity. Its ‘industry policy’ is really a ‘defence industry policy’.

The Greens promise no further privatisation, much stronger public health, education and housing services, and concerted action on Climate Change. They would pay for their programs by closing off tax loopholes for big corporations and the wealthy.

Labor promises a more comprehensive range of policies to increase wages, also close off the giant tax loopholes to raise a lot more tax from the wealthy, and to invest in strong public health and education services, and in manufacturing. It has a strong focus on action on climate change which extends to manufacturing car batteries in Australia for local use and export, creating a hydrogen energy economy, expansion of rail services and rail equipment manufacturing, and the revival of Australia’s coastal shipping fleet.

Labor and the Greens now share a strong opposition to the corporate free trade agreement provisions which promote privatisation, migrant worker exploitation and the right of foreign corporations to sue governments over new policies that they claim will hurt their profits.

The “Costings Debate”

After Labor issued its policy costings on May 10, there was no longer a serious argument about how it could finance its program. Instead the focus shifted to whether the Senate elected on May 18 would pass all the tax reform measures which Labor would rely on. This is not an economic management debate but a political strategy debate, and one which recalls the crisis of 1975 when the Senate blocked money bills even though it is argued that it has no Constitutional power to do so.

Is it enough?

Both Labor and the Greens rely on the private sector to power economic growth and transformation. They will supply funds through an array of structures like the Clean Energy Finance Corporation, the Advanced Manufacturing Future Fund and the Australian Investment Guarantee to target new jobs and technology in specific sectors. Experience in the renewable energy sector already shows that this can have a big impact. However, in the end it relies on the private corporate sector to take the initiative.

This approach both suits the social democratic ideology of these political parties, and is a calculation of what the Australian people would be willing to support, given the aggressive opposition to government intervention by big capital, both Australian and foreign.

But both the economic and environmental outlooks do not provide a lot of time for big changes to be made, and for the people to take their time to learn that more radical changes are needed and achievable.

The climate science is in – a decade to ensure that runaway global warming is averted; shocking species extinction within 20 years if no change is made to protect and expand habitats. The economic data is also there for those who care to read it: capitalism as we know it cannot recover from its current crisis after more than a decade of “unconventional” monetary policy; beside the fact that capitalism is driving the ecological disaster.

The very important grassroots movements – Change the Rules in the trade unions; Stop Adani; Get Up; Students Strike for Climate; women’s movements against domestic violence; Grandmothers against Detention of Refugee children – have shaped the election debate, shaped the polices, and will continue to work beyond the election. These movements need to be the incubator of a more focused and united political movement which can keep up the pressure for positive change whatever the election outcome, maximise what a new Labor-Greens government could do, and enable governments to go further, as we urgently need them to do.

The SEARCH Foundation itself draws on a century of Australian experience in making radical social change, and promotes democratic ecological socialism as its contribution to our urgent challenges.



Authorised by L Whitington, SEARCH Foundation, Suite 8, Level 5, 377 Sussex St, Sydney NSW 2000.

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