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December 2004   

Interview: Minority Report
New federal ALP industrial relations spokesman Stephen Smith on the hostilities in store for the labour movement.

Industrial: Girl Power
Tim Brunero looks at how women are making their mark in a once-male dominated trade.

Unions: Made in NZ
Jim Marr looks behind the rhetoric to uncover what the Howard Government has in store for Australian workers.

History: Spirit for a Fair Go
Paddy Gorman looks at the importance of Eureka on the Australian political psyche.

Economics: Fool's Gold
Tom Bramble identifies some contradictions in Howard's economic miracle.

Politics: Worth Fighting For
One of the Left's most influential figures of the last 40 years gives his theory of power ...

Health: The Force Behind Medibank
Public health has always been a core activity for the union movement, writes Neale Towart

Legal: Robust Justice
Former ACTU executive member and textile union leader Anna Booth argues that Alternate Dispute Resolution is one way around the looming assault on union rights.

International: After the Revolution
Has China entered a post-revolutionary phase - and where will it take the world, asks James Goodman

Poetry: The Sound of Unions
Ah, the hills are alive, with The Sound of Unions, muses resident bard, David Peetz

Review: Bad Santa
Billy Bob Thornton's newest role puts the 'nick' in Saint Nicholas and reveals the Satan in Santa, writes Tara de Boehmler.


New Matilda
How Labor Lost the Plot
In his contribution to Australia's new political zine 'New Matilda' , Father Michael kelly argues the ALP is in search of a soul.

The Soapbox
Outside the Tent
Labor exile Lindsay Tanner is warning the ALP to be careful who it gets into bed with.

The Locker Room
Sons Of Beaches
Phil Doyle gets the perfect wave, and waves back

The Westie Wing
150 years since the struggle at Eureka, the fight to achieve social justice, equality and responsible government is just as vital as ever in the neo-conservative Australia, writes Ian West.

Postcard from Harare
Ken Davis, from Union Aid Abroad, on how unions are at the forefront in the battle for democracy in Zimbabwe


Moral Majority
Unions NSW is currently hosting one of the world�s great thinkers in Robert Reich; academic, commentator and Clinton labour secretary; a man with a mind as big as the dilemmas progressive politics face right now.


 Moral Crusade to Save Family

 20 Dead � Stockmarket Applauds

 Karen Gives Howard a Paint Job

 Buckeridge Bill Blocks Entry

 Casual Beach Closures

 Railworkers Scull Costa

 Racism in the Dock

 Go Home Alone � And Other Survival Tips

 Vet Beats Bullet

 Cleaners Clean Up

 Weekend Work Wiped

 Miners Go to the Movies

 Feds Attack Low Paid

 Activists What's On!

 Leadership Skills
 Not A Casey Fan
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Fool's Gold

Tom Bramble identifies some contradictions in Howard's economic miracle.


The re-election of the Howard Government in October was widely attributed to its successful management of the economy, in particular, the maintenance of low interest rates. This explanation of Howard's victory was also shared by ALP Opposition Leader Mark Latham, who promised in the aftermath of the election to steer the party closer to the Coalition's neoliberal agenda and to highlight the economic 'reforms' set in place by the Hawke and Keating governments of 1983 to 1996.

In this article I set out some of the main economic factors that help explain the buoyant economy enjoyed by the Howard Government in its third term in office, but also point out the limitations and contradictions of the current situation. I conclude that the situation facing the Howard Government is rather less promising than was being made out in the weeks following the 2004 election and that behind the superficial picture of 'economic sunshine', storm clouds are gathering.


The starting point for understanding the Australian economy today is the recovery in the rate of profit from its low point in the late 1970s and early 1980s. The post-war boom peaked in 1969 when the rate of return on capital hit 16.2 per cent. It then slid steadily under both Coalition and Labor governments to a low of 6.5 per cent in 1983. Under the Hawke government profitability rose substantially to 10.5 per cent and further increased under Howard to 13.4 per cent by 2001. The share of profits in national income has reached its highest ever recorded at 25.6 per cent, up from 23 per cent in 1996.

This rise in profit has driven the current period of business expansion. With annual growth averaging 3.75 per cent since 1996, Australia has, with New Zealand, been the fastest growing of the developed economies in the past decade, outpacing the OECD average by some distance. Business investment has risen from a trend figure of $20 billion in the early 2000s to $26.7 billion in June quarter 2004. Monthly retail spending, kicked along by falling import prices, has risen from $12.9 billion in June 2000 to $16.3 billion in June 2004. The housing boom has been an important feature of the consumer spending boost. Dwelling approvals were running at about 10,000 per month when Howard was elected but have been tracking at approximately 14,000-15,000 since late 1999.

Rising consumer spending has been underpinned by relatively favourable trends in the jobs market. Employment has risen from 9.03 million in January 2001 to 9.67 million in July 2004. Unemployment (seasonally adjusted) fell to 5.7 per cent in July 2004, well down on the figure of 8.0 per cent when Howard was first elected. Skill shortages are apparent, and private sector job vacancies rose from 65,000 in March 1996 to nearly 100,000 in February 2004. Enterprise agreements have been consistently delivering annual wage rises of 3.5-4.5 per cent since March 2001, well above the inflation trend of 2.0-2.2 per cent.

The economic growth and declining unemployment experienced over the past 12 years created something of a 'feel-good' factor which undoubtedly contributed to the electoral success of the Howard Government in the 2004 election. In 1994, the proportion of people surveyed who believed that their living standards were going to improve in the coming year was 12 percentage points less than the proportion who believed that living standards were going to deteriorate. In 2002 and 2003, the optimists outnumbered the pessimists by four per cent. Twice as many respondents to the Australian Survey of Social Attitudes (AuSSA2003), conducted in November-December 2003, agreed with the statement "People like me and my family have a good chance of improving our standard of living" as disagreed (46 per cent vs. 23 per cent). The jobs market was an important factor in creating a sense of optimism - only 12 per cent of workers surveyed in AuSSA2003 believed that they were likely to be retrenched in the next 12 months, and nearly one-half thought that it would be "easy to find a new job with another employer with similar wages and conditions".


Sunshine for some...

The Howard Government appears to have enjoyed the benefits of economic prosperity. However, several factors demonstrate the limitations of the current conjuncture. Despite the picture of economic buoyancy and confident business predictions of continuing growth in the aftermath of the 2004 election, the situation is not as rosy as it might appear, most evidently for Australian workers. The rise in profitability in the 1990s which underpinned the past decade of growth has to be seen as part of a longer-term picture.

According to economist Simon Mohun, rising productivity and real wage cuts lie behind capitalist revival in the past 15-20 years in Australia. Underlying these trends have been the large-scale expenditure on information and communication technology (ICT), a weakening of the trade union movement, and a more hostile anti-union legal environment. Together, these factors have allowed employers to embark on significant reorganisation of work processes and work organisation in Australia over the past two decades. This has involved the shift towards part-time, temporary, casual work, labour- and agency-hire arrangements, outsourcing, unpaid overtime, 24 x 7 operations, and short notice call-ins.

The labour force is increasingly polarised between the under-worked and under-paid on the one hand, and the over-worked and exhausted on the other. Since the election of the Howard government, 35 per cent of all net new jobs created have been casual. Two thirds of the net increase in jobs between 2000 and 2003 paid less than $600 per week.

Official unemployment rates may have fallen to 20-year lows, but there is substantial under-employment - not just part-time workers who would like to work longer hours, but also many of the 680,000 people on disability support pension, now more than the number on Jobsearch and Newstart allowances combined. At the opposite end of the spectrum, we see the growing numbers of staff working long hours (45+ per week). In 2003, one million workers were working unpaid overtime, an increase of 24 per cent compared to 1996.

Inequality has also been climbing over the past decade and the bulk of the rewards of recent growth have gone to the wealthy. Between 1994-95 and 2000-01, average real disposable household income rose by eight per cent for the low income bracket (predominantly those reliant on government pensions and allowances), by 11 per cent in the middle income, and by 14 per cent in the high income bracket. However, even these figures understate the real situation, as they do not take into account the effect of the GST which disproportionately hurt the poor. They do not factor in the impact of compulsory superannuation payments, effectively a form of privatised pensions, on workers' wages, and nor do they account for the impact of 'user pays' on working class households, whereby many services which used to be provided free at point of delivery are now costly - the decline in bulk billing is just one example.

Executive salaries have mushroomed. Executive pay was on average 22 times greater than average weekly earnings in 1992. By 2002, it was 74 times greater. And when wealth is factored in, the differences become even more striking: ten per cent of the population hold 46 per cent of the wealth, and the top half have 93 per cent of all household wealth.

These trends indicate that Howard's period of economic sunshine has coincided with a significant shift in the balance of power towards the capitalist class, at the expense of the working class. No surprise then, that for Labor voters, interest rates ranked a distant last as an issue determining their vote in the October federal election.

Limits to growth

The second factor that sheds a very different light on the economic 'success story' of recent years is knowledge of its internal limits. Several factors dim the prospects for continuing growth.

(i) The long-term slowdown in the world system

Regardless of the immediate prospects for the world economy, which are currently reasonably positive, the contradictions in the world system have not disappeared. The dynamism of the OECD economies experienced in the 1960s has long gone. GDP in the big seven OECD economies grew by only three per cent each year in the 1990s compared with five per cent in the 1960s. Indicators of GDP per capita, labour productivity, real wages, and private business investment all follow a similar trend.

Underlying this slow-down is the long-term picture in profits. Profitability in all the major economies is now substantially lower than in the boom decades. Although the rate of profit in Australia is now at its highest since the 1960s, it is still one-sixth below its peak in 1969 in the context of a much less robust world economy. Australia as a trading nation cannot be isolated from long-term trends in the world economy.

In addition to these long-term trends, there are also some significant medium-term factors that could trigger a sudden halt to world economic growth. The most obvious trigger would be a melt-down in the US financial system given the country's huge twin deficits in budgets and international trade, the large overhang of household debt, and an overextended stock market. In addition, the Chinese economy could be dragged down by a crisis of overproduction potentially triggering off another Asian economic crisis on the lines of 1997-98 but with rather more damage to the West given its increasing dependence on China as an export market.

(ii) Household debts and the potential for housing collapse

The growth of household debt and the housing boom of the late 1990s and early 2000s also impinge on Australia's economy and are a two-edged sword. On the one hand, they have fuelled the consumption boom which has created jobs and lifted living standards. On the other hand, booms turn into busts and debts have to be paid, with interest rates a key factor holding everything in the balance.

The housing boom is now over. However, even the boom was a mixed blessing for Australian workers, benefiting those who own their own property outright but hurting younger workers and cutting home affordability. The proportion of 25-39 year olds who own their own home has fallen by 10 percentage points in the past decade.

Any significant rise in interest rates will prick the housing bubble in two ways. First, it will hurt those who have taken out the huge loans that are now necessary to buy a house. It is estimated that it will only take a two percentage point rise in mortgage rates to have the same effect on borrowers' capacity to repay as the 17 per cent mortgage rate overseen by Paul Keating because the value of debts is so much larger today. Second, by taking the heat out of the housing market, a rise in interest rates will liquidate the huge growth in paper wealth enjoyed by many home owners, reducing their ability to borrow against the value of their home to finance consumption.

Housing debt contributes to the problem of household debts more generally. Household debt to income ratios gradually rose from 35 per cent to 50 per cent between 1976 and 1990, but since then have grown exponentially to 75 per cent by 1996 to 150 per cent in 2004. Some of this is borrowing against the value of the home and is hostage to the housing market discussed already. Other debt has been racked up on credit cards - outstanding balances have more than quadrupled from $6.6 billion to $27.7 billion between March 1996 and June 2004. If this debt pyramid should collapse in the context of a rise in interest rates or a sudden jump in unemployment, it will have major effects on consumption and living standards of an order not seen since the recession of the early 1990s.

(iii) Trade and debt

Despite years of economic reform, Australian trade patterns are still fairly traditional - the Australian capitalist class imports predominantly manufactured goods (electronic goods, machinery and equipment, aerospace, pharmaceuticals) and exports predominantly commodities and raw materials (gold, wool, coal, iron ore). Australian business exports significant amounts of alumina, which is included in manufacturing but is essentially a quasi-resource industry. There are some exceptions: Australia is now a significant exporter of relatively high value-added manufactured goods such as aerospace goods, cars and car components etc. Nonetheless the broad picture is little changed since the 1960s.

After years of the terms of trade (the relative price of exports versus imports) sliding against the Australian capitalist class, the situation in the past two years has been strongly in its favour. Export prices are rising on world markets, and import prices are in decline. The rise of China since 2000 has been crucial in this development. Nonetheless, despite this favourable picture for Australian business, the current account is once again drifting out of control, at $12 billion per quarter, equivalent to six per cent of GDP, up from $3.3 billion as recently as the September 2001 quarter. This is comparable to the deficit in 1986, when Treasurer Paul Keating declared that Australia was at risk of becoming a 'banana republic'.

The major contributor to the ballooning current account deficit is the rapid rise in the merchandise trade deficit, now running at approximately $6 billion each quarter. As recently as 2001 it was in surplus. Between June 2001 and June 2004, the dollar value of rural exports fell by 20.2 per cent, of resources exports by 20.2 per cent, and of manufactures by 10.2 per cent. Meanwhile, consumer goods continue to flood into Australian markets, rising yearly from $4.9 billion in March quarter 1996 to $10.9 billion in March quarter 2004. Rural and minerals exports have started to pick up in the most recent September quarter, but again the increase in dollar value has been outpaced by the rise in imports of consumer goods.

In the short term, a current account deficit means that Australian living standards are being propped up by borrowing from foreign institutions (or by selling reserves of foreign currency). Australia's foreign debt has risen from $245 billion in December 1999 to $394 billion in June 2004, or from 40.4 per cent to 48.5 per cent of GDP. This is not a problem so long as foreigners are happy to hold Australian debt, which they have been in recent years because of Australia's good credit rating and relatively high interest rates (5-6 per cent since January 2001, as compared to 2.5-4.5 per cent in the EU, 1-2 per cent in the USA, zero in Japan). However, the interest rate disparity may not last if the US increases its interest rates. An attempt by the Reserve Bank to meet such a rise in Australia, in order to keep foreign banks buying Australian debt, would potentially spark off the housing collapse.

These three factors tell us something very important about the recent decade of 'economic sunshine'. It cannot last forever. And, when the economic storm hits Australia, as eventually it must, employers must once again go on the attack against workers jobs and living standards. The economic circumstances of world capitalism simply do not allow us to re-live the post-war boom. It is this fact that underpins the entire balance of forces between workers and employers in Australia and elsewhere in the OECD.

Political limits to the Howard agenda

The second major limitation on the Howard Government and its potential longevity is the medium term ideological trends in Australian society. Contrary to arguments by Howard's friends and foes alike that Australia is sinking into a more conservative mindset, evidence from the regular surveys of social attitudes compiled by a team of researchers headed up by the ANU tell a rather different story.

On all the major questions bearing on class identification, there has been a shift to the left in political attitudes since the late 1980s, consistent with the findings of authors such as Michael Pusey. Between 1987 and 2001 there was a clear trend increase in the proportion of respondents agreeing that "big business has too much power" and "income and wealth should be redistributed towards ordinary people". For some reason not yet clear, the number fell sharply and against trend between 2001 and 2003, but this latter shift does not mean that people have been converted to a pro- business outlook. AuSSA2003 reveals that two-thirds of respondents agreed in 2003 that "ordinary working people do not get a fair share of the nation's wealth", and a massive 84.4 per cent agreed that "the gap between those with high incomes and those with low incomes is too large".

Rather than becoming more self-centred, the majority of Australians exhibit a growing concern for the broader community, evident in the shift over the past two decades in their answers to a question asking respondents to choose between "tax cuts" and "more social services". In the heyday of economic rationalism in 1987, those favouring tax cuts outnumbered those favouring more social services by more than four to one (66% vs. 15%). The position has now turned around completely, with support for more social services (48%) easily outranking support for tax cuts (28%). Two-thirds (68.1% and 63.5% respectively) of AuSSA2003 respondents would be willing to pay higher taxes to fund health & Medicare and public schools. It is ironic that Labor leader Mark Latham is now seeking to position Labor more solidly in the camp of economic rationalism when support for it amongst the mass of voters has virtually vanished. In his eagerness to curry favour with business, Latham is shooting Labor's electoral chances in the foot.

Popular attitudes to trade unionism do not support the idea that declining union membership is the result of greater individualism or a desire to foresake collective action in favour of the 'ladder of opportunity'. Annual surveys conducted since 1996 by the NSW Trades and Labor Council demonstrate that approximately 50 per cent of the workforce answers positively to the statement "I'd rather be in a trade union". When non-union members were asked why they had not joined, 28 per cent responded "no need to/ not worth it", 23 per cent said "don't know, no reason" (especially common amongst young workers), 20 per cent said "no relevant union, no union available", and only ten per cent said "I don't believe in unions". These responses suggest that many of those not currently union members could be attracted to join if union organising were more ambitious. They do not indicate that rampant individualism is the main deterrent to people joining a union. As with the polls on economic rationalism, these survey results also suggest that Latham's attempts to weaken Labor policy on union rights is a sure-fire vote-loser.

The Murdoch press have in recent years supported the socially conservative agenda of the Howard government with their constant refrain that the majority of Australians have turned against migrants, Aborigines, and 'special interest groups'. Howard and his ministers argue that the 'rights agenda', supposedly the creation of the 'permissive 1960s', must now be replaced by one focusing on people's 'responsibilities', usually construed as firm parental discipline, 'family values', hard work, and the firm application of laws against wild 'ethnic gangs', lawlessness.

In reality, however, popular sentiment on social issues has been shifting against the the conservative government agenda for some years. Support for abortion rights, for example, rose from 39 per cent to 81 per cent between 1987 and 2003. Over the same period, support for the death penalty slid from 60 per cent to 47 per cent, and support for stiffer sentences for breaking the law also fell from 88 per cent to 70 per cent. On the litmus test issue of support for cuts to the migration intake, the figure has fluctuated over the years but, at only 37 per cent in 2003, it was well below the figure of 63 per cent when Howard was elected. Similarly there has been a turnaround in attitudes to refugees and the arrival of 'boat-people' since 2001 and the 'Tampa crisis'.

Drawing these data together, there has been a general shift away from the values and priorities of big business and neoliberalism towards those of workers, trade unions, and the left. This shift has found expression in a variety of ways, all of which are distinctly unhelpful to the Howard Government. These include significant support for the struggle by the Maritime Union in 1998, the rise of the Greens (now polling 20-30 per cent in inner city Sydney, Brisbane and Melbourne), the popularity of public commentators such as Michael Moore and John Pilger, and the enormous attendances at the anti-war rallies in February and March 2003.

The problem that faces the left today, therefore, is quite different to that in the 1980s, when Thatcher and Reagan seemed triumphant, and when economic rationalism, privatisation and the market had some popular appeal.

In summary, the conclusions that have been drawn by most commentators about the significance of the 2004 election result are substantially out of kilter with both the long-term ideological trends and the underpinning economic foundations. Regardless of whether the Coalition or Labor wins the next federal election, these trends suggest that coming years are likely to be characterised not by a long period of conservative ascendancy, economic prosperity and social stability reminiscent of the Menzies era, but by structural economic crisis and popular, if sporadic, political protest.


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