Magazine of Socialist Action in Australia

World economy in crisis

Reading Time: 2 minutes

Make the bosses pay – Say ‘No’ to wage restraint!

There are ominous economic clouds forming over the heads of the Australian working and middle classes. Behind the early positive headlines for the new Rudd government, due to its position on Kyoto, Japanese whaling, and the Apology (positions which were critically supported by the Socialist Party), the economic reality is far worse than that faced by the first Hawke government in 1983 or Howard’s in 1996.

The US economy is in the early stage of a recession. This has been triggered by sub-prime crisis and the resulting credit crunch. The fear is that a slowing US economy will buy less of China’s exports, mainly manufactured goods. This will flow on to Australia as the backbone of the Australian boom is the export of raw materials to China for use in manufacturing.

For now, however, the Australian economy is staying in an upturn, with 3.5% growth expected this year. But the Australian economy is not without its own problems. For example inflation is higher than anyone wants at about 3.5% and thanks to anti-union legislation and to the fact that vast chunks of workers are not in unions, wage rises for most workers lag behind this inflation rate. For example public servants got only a 2.8% annual pay rise over last year.

The steady rise in interest rates (7% now, an 11-year high) to reign in inflation is causing mortgage stress. A massive 300,000 people in Australia are expected to lose their homes this year! This compares to one million Americans in the same boat, where the population is 15 times of Australia.

The result is that many families are working more jobs and doing more overtime just to stay where they are. Debt is the drug used to deal with the crisis. Household debt is now 160% of household disposable income, the highest rate ever.

If this is the best a booming capitalism can offer ordinary Australians. Imagine when a recession begins!

Rudd’s strategy is to slash government spending to help keep inflation down as well as using its influence to keep wages down. When this strategy becomes clearer to ordinary people, his popularity will fall.

What Australian workers and the middle class need is an economic plan, that includes a massive expansion of public transport, education and health, and an energy plan that will provide environmentally friendly power that moves away from carbon-producing coal. This can only be achieved by a democratic and socialist society that would bring the key levers of the economy into public ownership under workers control and management. This would ensure that both inflation and interest rates would be under control regardless of spending.

The Socialist Party calls for the creation of a new mass workers party to put these types of policies on the political agenda.

By Stephen Jolly


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