Magazine of Socialist Action in Australia

Volatile economic situation backdrop to 2013 Federal election

Reading Time: 5 minutes

As we enter the fifth year since the onset of the Global Financial Crisis, the strategists of capitalism are still yet to come up with a way out of the mess. Far from solving any of the problems, their ‘solution’ of austerity measures – in effect, planned poverty – has only made the situation worse.

Sometimes the lack of insight shown by those who run this system can even surprise socialists. For example last month the International Monetary Fund (IMF) released a working paper analysing the effects of austerity.

Originally they had said that for every dollar governments cut in their budgets, their economic growth would suffer just 50¢. Now it has been revealed that for every dollar cut budgets have suffered by something closer to $1.50!

The IMF has pointed out that it wasn’t only them that got it wrong. The European Commission, the Organisation for Economic Co-operation and Development and the Economist Intelligence Unit all came to the same false conclusion.

Socialists on the other hand explained this process early on. We explained that deep cuts to jobs and services in the state sector will only result in an increase in unemployment, less money for people to spend and less money going into businesses and government coffers. It would also feed into other recessionary processes taking place in the economy.

For example, despite huge hoards of cash, the private sector is refusing to invest, preferring to hold off until bigger profits can be made.

The global finance system is, in the main, only being propped up by central banks printing more money. Having learnt nothing, speculators continue to engage in the same behaviour that led to the crash in 2008. Far from creating the conditions for a recovery all the elements exist for an even bigger crash in the future.

This is not simply an academic question. The economic crisis has given rise to a widespread social and political crisis. The hardship that ordinary people have been forced to endure has led to upheavals across the globe – not least huge strike waves in Europe, as well as revolutionary movements across the Middle East.

Incumbents have been thrown out of office in scores of countries such is the underlying anger that exists in many parts of the world.

With no end to these problems in sight we can safely say that more movements, on a wider scale, will arise in 2013. Europe will be at the centre of the storm but every corner of the globe will be affected in some way thanks to the interconnectedness of the world today.

Up until now Australia has been somewhat sheltered from the worst of the crisis thanks to China. Exports of minerals to China have fuelled the mining boom and helped prop up Australia’s two speed economy. But it seems now that this boom is coming to an end with even China now facing difficulties as a result of the world economic turmoil.

In anticipation of the end of the mining boom, and the huge impacts this will have on the Australian economy, Treasurer Wayne Swan has gone back on his promise to deliver a budget surplus this year. Having hung his hat on this promise for at least 3 years his failure to deliver will be seen by many as a betrayal.

The decrease in government revenue due to lower consumer spending, lower company tax receipts and a watered down mining tax was always going to make it near impossible for Labor to deliver a surplus.

The only way they could have done it would be to make even deeper cuts to spending. In an election year this would have been political suicide given the anger that already exists against Federal Labor thanks to the carbon tax and a string of corruption scandals. At a State level Labor is similarly despised thanks to their policies of cuts and privatisations.

The 2013 Federal Election will dominate the political agenda this year. Despite their record the government will be trying desperately to convince people that they are not as bad as the Coalition. And while having full agreement on all the major issues, the Coalition will be trying to pretend that they are some sort of alternative to the ALP. It will be nothing short of a phoney war of words.

While it is likely that the election will be close, if it were held today the polls show that the Coalition would win by a slim margin. This is not because people have any love for Tony Abbott, but because people have been disappointed by Labor and are asking: “Can the Liberals really be any worse?”

With the lack of any genuine progressive alternative available, the mood of many people is to continue to use one of the major parties to punish the other. It will likely be a case of people voting for whom they hate the least at this point in time not who they think can improve their lot.

Despite the fact that the ALP have undermined the living standards of workers since coming to office, most trade union leaders are preparing to throw their weight behind Labor’s election campaign with money and human resources. They will peddle the line: “While Labor is bad, the Liberals are worse and we need to keep them out”.

This ‘lesser evil’ argument is designed to block the emergence of any progressive third force, for the trade union bureaucrats themselves are key players in the ALP and use the party as a vehicle to climb the political ladder for their own personal agendas.

They will do all they can this year to ensure as little struggle as possible takes place. Far from having the best interests of the workers in mind they prefer Labor in power as it means they have their feet under the desk in Canberra and at least a finger on the reins of power.

The problem facing Labor is that that they have disappointed huge numbers of people on a range of different issues. Despite the best efforts of their allies in the trade union bureaucracy they will find this election contest a difficult one to win.

Whether it is the Coalition, Labor or some form of minority government that wins the election this year it will be little more than a poisoned chalice. With no recovery in sight for the world economy whoever comes to power can look forward to a rocky road ahead.

If the situation in Europe or the US worsens, this will further impact on China. The flow on effect will be the Australian economy slowing significantly. With the eastern states already practically in recession we could quickly see a situation here that closely resembles that of Europe.

While it is possible that China can prolong the pain a little longer, it is definitely the case that the length of time that Australia can continue to avoid the worst is limited.

We need to use the relative stability while it lasts to learn the lessons and prepare for what workers are already dealing with in the rest of the advanced world. We can’t allow governments here to force any more austerity down our throats.

In 2013 we need to continue the process of building fighting organisations that are capable of resisting attacks on our living standards and campaigning for a sane alternative to this crisis ridden system. The Socialist Party will be front and centre for both these tasks.


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