PASSWORD RESET

Magazine of Socialist Action in Australia

What happened during the 1990s recession?

Reading Time: 3 minutes

The early 1990s was a tumultuous time for the Australian working class. The country was gripped by a recession which took place amidst a global economic downturn. Given that a new recession is likely on the horizon – and that 60% of the current workforce did not experience the last recession – it seems timely to look back at what happened during the 1990s.

The definition of a recession is two successive quarters of negative economic growth. Behind this technical definition stands the fact that recessions wreck lives. Everyone has friends and family that are thrown out of work.

A lot of the people who were laid off in the early 1990s stayed unemployed for more than two years. Many were never able to find a full-time job again. The official unemployment rate climbed to 11.2% but the real figure was much higher.

The early 1990s recession was the classic capitalist boom and bust. Any boom built on rising asset prices and financed by increased borrowing has to end, and at that point you see a rush for the exits.

The response of the Hawke/Keating Labor government was to try and open Australian capitalism to the world market. They introduced neoliberal policies to deregulate the financial system, they floated the Australian dollar and slashed tariffs.

Workers were told new wealth would be created and that it would ‘trickle down’, but economic growth sank by 1.7%. The government’s Prices and Incomes Accord capped wages and, as a result, the economic share going to wages shrank while profits went up.

Inflation in the early 1990s was around 9%. The government cut spending and pushed interest rates up to 17%. This ‘monetarist shock therapy’ was designed to decrease inflation but the economy went into a downward spiral as businesses stopped investing and jobs were cut.

The government, locked in a capitalist mindset, decided to let market forces dominate. As factories closed and revenue collapsed, they refused to embark on any significant employment and retraining projects.

The government expanded its neoliberal agenda with the privatisation of the Commonwealth Bank, Qantas and telecommunications. Along with the trade union leaders, they restructured the Accord to suppress worker resistance to their policies.

Income inequality increased and household income dropped 3.5%. It took more than four years to recover. The fall in asset prices meant many loans could not be repaid. Mortgage arrears increased.

A number of financial institutions failed such as the state banks in Victoria and South Australia, the largest credit union, the Pyramid Building Society and several merchant banks. A number of major businesses and the big banks incurred losses and had to be recapitalised.

In Victoria it was especially bad. Victorian employment was depleted by 8.5%, compared to 2.1% in the rest of Australia. Tariffs cuts impacted on areas like Dandenong, where 800 workers were sacked at the Nissan plant alone.

The effect was long lasting with social, physical and psychological impacts flowing through the entire community. The demand for social services was poorly met. The Victorian Kirner Labor government sold off 2200 public properties, cut funding to community groups and cut $230 million from education.

The working class in Victoria turned their back on Labor, and the Kennett Liberal government was thrown into power. But Kennett was no different. He immediately embarked on a vicious budget slashing exercise. 350 state schools were closed and 7000 teaching jobs were lost.

Thousands of public servants were sacked and electricity, gas and public transport were slated for privatisation. In an attempt to disempower trade unionists, employment contracts were introduced and picket lines outlawed. On top of this, a draconian poll tax was imposed on every household.

But it wasn’t all one way. Victorian workers were outraged and demanded action. On November 10, 800,000 people went on strike. Over 150,000 workers demonstrated in the city centre.

The Kennett government was on the brink of withdrawing its austerity measures, but the union leaders pulled back. Out of the jaws of victory they snatched defeat.

While recessions wreak havoc on the lives of working class people, they can also stir people into action. During every capitalist recession the bosses try to make working people pay.

With the right politics and leadership, the bosses and their governments can be pushed back, but the struggle has to be prepared for. Ultimately, we must do away with the boom/bust capitalist system itself.

By Michael Naismith