Last month’s global share market volatility – prompted by the deepening of the EU debt crisis, poor growth figures and a US debt downgrade – demonstrated increasing fear of a new global downturn. Australian share markets were in no way immune, with $100 billion wiped off Australian stocks in a matter of days. This dramatic episode highlighted just how sensitive Australia is to adjustments in international markets.
True to form, Treasurer Wayne Swan again attempted to downplay potential threats to the Australian economy, stating that Australia has “solid economic growth, a strong labour market, an enviable fiscal position, well regulated and well capitalised financial institutions, and a proven track record in dealing with global instability.”
Despite Swan’s upbeat rhetoric, many commentators are not convinced. The Reserve Bank has warned of “stymied” economic growth due to “global financial market problems”. Equally concerning is the growing unemployment rate and increasingly pessimistic predictions of further job losses.
The latest job figures show another 22,200 full-time jobs were lost in July. This led to an increase in the official unemployment rate to an eight month high. Expected to increase further, Merrill Lynch has predicted another 100,000 job losses by the end of the year.
Last month was plagued by a series of high profile, mass layoffs from large employers such as Qantas, Westpac, OneSteel and Bluescope Steel. They all blamed difficult international trading conditions and the strong Australian dollar for poor profit margins.
The China-fuelled mining boom, which has led to a post-float record high Australian dollar, is wreaking havoc on trade-exposed industries such as manufacturing and tourism. The chasm between mining and the rest of the economy continues to grow ever wider.
The mining sector now represents around ten per cent of the Australian economy. Yet it accounts for 70 per cent of all capital expenditure. It is this disproportion that has led the Grattan Institute to suggest Australia is at greater risk from a slowdown in the Chinese economy than any other developed nation.
In terms of jobs, the mining sector employs only 200,000 people. This is around the same number of job losses predicted over the next 18 months. The country’s largest industry employer, the retail sector, is expected to contribute a significant portion of these losses.
While the mining bosses are raking in record profits, retail bosses in the Australian Retailers Association are complaining of “recession-like conditions”. Their solution is IR reform, adamant that “the archaic penalty rate structure” should be abolished.
Since the onset of the global financial crisis, the retail sector has placed the full burden of reduced sales onto their workforce. Instead of accepting reduced profit margins, retail bosses have slashed 80,000 full-time jobs and forced thousands workers into casual or part-time employment on reduced hours. This has allowed them to maintain a total profits increase of 67.4 per cent over the past five years, while keeping wage increases to less than half this figure.
This strategy of driving down wages within the current framework is now reaching its limits, prompting retailers to call for changes to industrial law so they can do more to make workers pay for their economic woes.
The retail bosses have been backed by Reserve Bank of Australia governor Glenn Stevens, who has also promoted IR reform as a solution to the downturn. While forcing down wages would have the short term effect of boosting profit margins, ultimately it would intensify the collapse in consumer confidence and prolong the lull in retail spending.
Poor retail sales reflect the financial stress many people are feeling due to the rising cost of living, higher interest rates, job losses, reduced working hours and falling house prices. These problems will only worsen with the introduction of further job insecurity and wage reductions.
These contradictions inherent in capitalism and exaggerated by Australia’s two-speed economy are set to open up a new period of attacks on working people that will surpass the depths of the Howard era. More than ever we need to re-establish a fighting strategy within the trade unions and point towards a socialist alternative to the ever-increasing destruction of living standards.
By Socialist Party reporters