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Magazine of the Socialist Party in Australia

Weak government wants to make us pay for weak economy

The dust has now settled after the May federal election.

The final results give the Liberal-National Coalition 77 out of 151 seats in the lower house, a very slim majority. In the Senate they only have 35 of the 76 seats, but will be able to rely on the cooperation of several small right-wing populist parties.

While big business managed to get their preferred team back in, most working class people don’t really consider the result a major blow. Just as they would not have considered it much of a boost if Labor had won.

Workers are generally disillusioned with both the major parties. This is seen in the fact that they both received a lower vote compared to 2016. The Coalition only won because their drop in support was slightly less than Labor’s, and they benefited from preferences from right-wing populists.

That they scraped over the line was hardly a ringing endorsement of their policies. Fundamentally this government is weak and without much authority. A couple of defections could easily see them thrown back into a minority, just as we saw in the last term.

Bleak economic outlook

Underpinning the government’s unstable situation is the bleak economic outlook. Economic growth is extremely sluggish and only really being kept afloat by government spending. Some reports suggest that government spending has accounted for nearly 80% of GDP growth over the past 12 months!

There has been a temporary surge in commodity prices and this has resulted in an unexpected boost to the government’s coffers. They have used the extra money on infrastructure spending, but also to employ some extra public servants.

While many of these jobs will be short-term, this has helped to hold up the employment figures, given that much of the private sector has put the brakes on hiring. Anticipating a recession, some companies have already started slashing jobs and cutting hours.

But there are limits on how much the government can do to keep the economy afloat. Commodity prices are expected to drop and government debt and the budget deficit make more substantial stimulus measures difficult.

Low wage growth and underemployment means people are spending less. The recent interest rate cut was an attempt to revive the economy and drive the Australian dollar down to make exports cheaper. While it will be a small gift to those paying mortgages, many will use the extra cash to pay down debt rather than on more goods and services.

The Reserve Bank has signalled it will slash rates further but even they admit that monetary policy is at its limits with interest rates already at record lows.

The government will likely try to roll out some more infrastructure projects in an attempt to give economic growth a boost. They want the states to do the same but the problem for states like New South Wales and Victoria is that their own budgets are under pressure.

Stamp duty revenue has dried up because house prices are lower and there are fewer sales. The housing sector is still under pressure and, while some commentators hope that the worst is behind us, that is by no means guaranteed.

Rising unemployment has the potential to turn the housing slowdown into a housing crash, but it’s not only domestic factors that threaten the economy. There is a real risk that the US-China trade war could throw the entire world economy into crisis for the second time in a decade.

These are just some of the issues that worry the government and their big business backers.

Who will pay?

Many in the capitalist class are now demanding that the Coalition get ready to make the working class pay for the next recession. The government wants to oblige, but they need to balance this against the risk of provoking people into struggle.

The main strength the government has is the absence of any real opposition. Since the election loss Labor has switched leaders, but instead of drawing the correct lessons from their disastrous performance, they are intent on shifting even further to the right.

Anthony Albanese thinks the mild populist appeals made by Bill Shorten were too much. He has said that Labor will now drop their “anti-business” rhetoric and instead forge closer ties with corporations to boost “wealth creation”. He also wants to pursue more bipartisanship with the government.

Albanese’s plan is to narrow the distance between the two major parties even further. His hope is that a recession hits on the Coalition’s watch and that this will remove any last vestige of authority the government has. He thinks that if Labor pursues a ‘small target strategy’ they will be able to avoid much scrutiny and slip back into power by default.

Labor are already signalling to big business that they would be a safe pair of hands. They have said they are open to the Adani mine going ahead and that they’ll scrap the modest tax reforms they had proposed around negative gearing and the capital gains tax concession.

They are presenting a tough image in relation to refugees and are saying they might even pass the government’s income tax cuts, which overwhelmingly benefit the wealthy. Labor will be of no help whatsoever to working people when the recession hits.

No real opposition

But it’s not just in the parliament that a real opposition is absent. The trade union and social movements are in crisis. The unions in particular are knocked and confused after Labor’s election loss. The government are taking full advantage of this confusion and are using the opportunity to test the mood.

On the one hand they are encouraging a fight to topple John Setka from his position as leader of the Victorian CFMMEU. Even if this is unsuccessful, they hope to lay the basis for passing new anti-union laws and to divide the movement, weakening the unions’ ability to resist looming cuts and job losses.

The Australian Federal Police (AFP) raids targeting media organisations were another attempt to see how much the government could get away with. There is no doubt the raids were an assault on freedom of the press and an attempt to criminalise those exposing government wrongdoing.

Their aim was to intimidate both whistle-blowers and journalists, but the government also wanted to see what the backlash was going to be. While the media union correctly explained that the raids represented a major attack on democratic rights, no substantial action was taken to push the government back.

The AFP arrogantly walked into the ABC’s Sydney offices and removed thousands of files searching for the sources of government leaks. Disappointingly the union didn’t even organise a lunchtime protest, let alone a stop work action.

The union did ramp up a social media campaign in the days to follow, but if a major attack on democratic rights is only met with selfies on Twitter the government will feel emboldened to continue with their attacks.

Organise a fightback

While the government will likely tread carefully, and try to avoid provoking a major backlash, they are making plans to ensure that it’s working people rather than big business who pay for an economic slowdown.

With this being the case, there is an urgent need to begin our own preparations for a fightback. While people are clearly worried about the future, most don’t yet feel pinched enough to be driven to struggle.

While the political mood in Australia is at a low ebb, we need to note that people do not feel defeated. There is a certain amount of indifference to politics, but that will change when politics imposes itself on people’s lives.

A slow squeeze is already underway. Even if the economy doesn’t suffer a hard crash there are political and physical limits on what people can endure. The processes in train are creating the conditions for class struggle, the question is who will be better placed to win?

Because the organisations that have traditionally helped organise struggle are either in crisis or have shifted to the right, the fightback will likely be messy and to some extent unpredictable.

If the existing unions and community groups do not act, it’s possible that new campaigns or groups can be thrown up and thrust into the spotlight. This is particularly the case in relation to the environment which remains a major concern, especially for young people.

No doubt some trade unions can be pushed into struggle but if they are to be really effective, they will need to break with the rightward-shifting Labor Party and develop a serious attitude towards organising industrial campaigns.

People are generally moving left, but there is a huge gap between the sympathy that exists with left and socialist ideas, and the need for organisation to translate those ideas into action. That gap will close on the basis of events and experience. In the meantime, the Socialist Party is working hard to win people to the ideas of struggle, solidarity and socialism.

We need to struggle against the idea that we should pay for a recession that was not of our making. We should build solidarity between the different parts of the working class that the government and big business want to attack. And we need socialist ideas and action to arm our movements with a program capable of challenging the system that is the heart of the problems we face.

Ultimately, we need to build a political alternative that represents ordinary people, and draws together all the different struggles of the coming months and years.

This is the best way to ensure this weak government doesn’t succeed in making us pay for a weak economy. A socialist approach will lay the foundations for a new type of society where the wealth we create is used for the betterment of all.

Editorial comment from the forthcoming July 2019 issue of The Socialist