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September 2006   

Interview: Australia’s Most Wanted
The ACCC is the latest state agency to turn its guns on the construction union. National official, Dave Noonan, discusses the implications.

Industrial: The Fox and the Contractor
With new laws looming for “independent contractors”, Foxtel subbies have had the carpet pulled from under their feet, writes Nathan Brown.

Unions: Industrial Wasteland
A group of inner-Sydney veterans appear to be working to strip their families of retirement incomes. Jim Marr records their desperation.

International: Two Bob's Worth
German and British workers are participating in business decisions while WorkChoices locks Australians out of the conversation, writes Anthony Forsyth.

Economics: National Interest
John Howard claimed that interest rates would always be lower under a Coalition government than under Labor, Neale Towart crunchess the numbers.

Environment: The Real Dinosaur
Economic ignorance remains at the top and the critics are oblivious says Sol Power

History: Only In Spain?
The experiences of self management during the Civil War have been the one positive factor to come from that tragic event, and the Mondragon Cooperative Corporation thrives today.

Review: Clerk Off
Nathan Brown draws solace from some fellow social misfits.


Westie Wing
MLC Ian West ventures beyond Macquarie St and into the desert of the eco rats.

The Soapbox
Testing Times
Former RLPA secretary and Newcastle Knights prop, Tony Butterfield, fires up over dawn raids.

Dare to Win
The union movement has lost an inspirational leader of working men and women, writes Jeana Vithoulkas

Tommy's Apprentice
Chapter Two - Tommy’s Tale.


Justice, Applied Liberally
To think, Phillip Ruddock used to be a liberal.


 Boss Gives Dad the Finger

 Amber's Law Pulps WorkChoices

 Westfield Flogs Good Deal

 Building Workers Spooked

 Bankers to Train Assassins

 Astroboy Blasts Off

 First Global Deal Docks in Germany

 Bans Stop the Press

 Deportation for Pay-To-Work Tradesman

 Telstra in Bush Bloodbath

 Boss Punts Assaulted Teen

 Ballots Stuffed By WorkChoices

 Howard in a Spin

 Extras – The Waterfront.

 Activist's What's On!

 Please Don’t Go
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National Interest

John Howard claimed that interest rates would always be lower under a Coalition government than under Labor, Neale Towart crunchess the numbers.


If Howard were correct he we would have interest rates running at about minus 10% at present, beating even Japan whose real rates are negative at present.

The Whitlam government ran interest rates, real interest rates that is, at about negative 9% for a while there. We need to appreciate that real interest rates are nominal rates minus inflation and Gough and co certainly had plenty of the latter, driven in part by guess what, high oil prices.

Howard framed his statement about interest rates carefully to avoid saying he would keep them low. He just had to keep than lower than the ALP meaning it seems Hawke-Keating.

Reframing the question, as we have to, we can ask who had the most impact on getting interests rates down?

This question has been asked by Junakar. He has analysed the interest rates under Hawke-Keating and under Howard and has shown that borrowers has their rates lowered further by the bogeyman PJK than by Honest John Howard over the period 1984 to 2004. Real interest rates were very high when the ALP won office from Fraser and Howard in 1983 and declined. They have declined by a much smaller amount under Howard, and are now seemingly inexorably rising so they performance (down 5.2% under ALP but down only 2.26% under Howard) will look worse with two rises this year and more on the way according to the beloved Treasurer on Tuesday 14th August.

Ancient History

The forces in the economy in the 1970s were similar international ones to now, oil prices, Middle East instability, War, a declining US economy in the face of competitive pressures from Asia (then Japan, now China). Oil prices rose fivefold in the early 1970s. Since the invasion of Iraq, an action that Rupert Murdoch welcomed as a sound way to guarantee oil prices at $US20.00 per barrel (they were around $US22 at the time) the price has gone to about $US75.00 this so the increase hasn't even been as great.

The end of the so called post war boom was exacerbated by fuel prices and people lost confidence in the managers. Or in the jargon of econospeak, consumer confidence fell. So people were (and still are I guess) willing to but their money into bank accounts where the real return was lower than the inflation rate. The sharp decline in the consumer confidence index is presumably a measure of the same sentiment. How safe the banks are with your money is probably more questionable now than in the 1970s however because of financial market deregulation and the removal of the statutory reserve rules for banks.

Those who had fixed rate mortgages were sitting pretty as their interest rate was lower than inflation by quite a margin for some time. From 1972 to 1975 bank rates went from 7% to 10.13%, dropping slightly to 9.13% in 1978 only to rise to 13.5% by the time Fraser-Howard were voted out.

The Australian short-term real interest rate rose from minus 2 percent in 1980 to 4.1% in 1981, and after a short reversal in 1982-83 peaked at 8.7 % in 1984.

Australians are constantly told without any examination of the evidence that the Coalition manages the economy better than the ALP ever could. To this observer both have failed to manage it in the interests of people, environment and sustainability because of misplaced notions of an all knowing market combined with the power of big business and mining companies in particular. The only things we have going for us now are China's rapacious appetite for resources with which we are well endowed for the time being and which we are digging up as fast as we can. Productivity grew fairly rapidly under the ALP and under Howard for awhile but this was largely driven by attacking wages rather than industry getting smarter. Industry continues its mass exodus to China.

All the Way with the USA?

The same is happening to John Howard's role model, the USA. Paul Craig Roberts, former Treasury official under Reagan, predicted in 2004 that if the pace of offshoring in the US continued then the US would equate to a third world country in 20 years. There has been no let up. The service sector is next with former US Federal Reserve official Alan Blinder saying that between 42 and 56 MILLION service sector jobs in the US susceptible to offshoring. Starting salaries for computer scientists in the US are reflecting this with a 12.7% decline between 2001 and 2005. The information sector in the US has lost 644,000 jobs between 2001 and 2006 or 17.4% of the workforce. What happens to these people as interest rates rise. The jobs they can get that are left will certainly be paying less. Roberts this week reported that real wages today in the US have only 82% of the purchasing power they had in 2001.

Where has been the commitment of the parties to real sustainability, skills for a new century in the much vaunted knowledge economy? Nowhere. Fraser and Howard failed in the early 1980s when the last Asian superpower surge for minerals was on. Japan was coming t the rescue but we just got holes in the ground. The interest the Japanese bureaucracy and corporations showed in investing in high tech cities was never seriously taken up, when it could have, with the right angles into seats on influence, transferred knowledge and capacity to Australia. Investors in China are now seeing the Chinese making sure know how stays with them and is developed there, not just shipped in and out. China is exploiting its people mercilessly while we exploit our dirt similarly. The actions of both countries continue whilst the world's environment spirals further out of control.


If we look at inflation, a factor in lowering real interest to the negative rate under Whitlam, we see that the figures show a rate of 17% in the mid 1970s, when the price of oil had increased 5 fold. That declined to about 8% and then went back up over 10% when Fraser Howard got the boot, declined to around 6% in the mid 1980s only to rise again and then decline when Hawke and Keating did push real interest rates up to 10%.

We can also say that the attack by Hawke and Keating on inflation, via raising real interest rates, was successful and very painful for "all of us". They did bring inflation below 2% however.

All this led to deep entrenchment of the orthodoxy, and thus the removal of a requirement to think. Inflation goes up so we have to raise interest rates. These things do not necessarily compute. In fact they are self-fulfilling because the lack of thought means that the econocrats don't have to contemplate what is causing what. By putting up the rate we get further inflation not less because the econocrats stopped thinking in 1990 when they decided that interest rates had to go up to stop inflation and they think it succeeded.

Prices, Your Pocket and the CPI

But how will a rise in interest rates work to reduce the price of fuel, or bananas for that matter? They won't but they will add extra expenses on to those who will also be paying more for fuel as they will have to pay more for their mortgages, at the same time as their jobs are certainly made more insecure by WorkChoices. Those of us in these boats also know from our weekly bills that the official CPI rates do not truly reflect the rise in prices we face. The basket of goods the ABS uses as its measure reflects drops in prices for plasma televisions. Well hip hip hooray. Don't expect a revision of the basket to reflect what you really put in your trolley each week, as that would give the powers the true horrors and lead to screams for further wage cuts at the same time as they would call for even higher interest rates. SO maybe the bad stat is a bearable to protect us from further horrors. Interest rates are not included in the basket!!

The only economic tool the Reserve Bank and Treasury have is interest rates because the clamour for financial deregulation and the interests of Keating led to the removal of all other policy tools in the early 1980s. Already gone by then was the statutory reserve deposit requirement that ensured banks kept a certain reserve (up to 20-25% I recall) and that kept their brakes on. The Reserve also used to have formal meetings with the majors and made them defacto policy instruments by pushing them to lend in certain areas and not others. Now it seems the "private" banks call the tune and the Reserve and Treasury only have their small toy to play with. This is further exacerbated by the international financial markets finding more and more areas to play.

Financial Deregulation: Foreign Exchange and Your Home Loan

The deregulation has been claimed as a success but that conveniently ignores the foreign currency scandals that saw many rural landholders and other lose their farms by being drawn into borrowing using Swiss francs for example only to see values alter dramatically and repayment soar. We also saw the sale of state banks and the Commonwealth Bank, institutions that had been set up to serve not rip off people. And the banks let loose in this new pasture wrote off an estimated $28billion on bad debts and poor deals. Who paid for that needs no explanation.

That also helps explain why the interest rate bogey was so potent for the Coalition in 2004 and why the ALP was reluctant to fight back. Housing loans went from $23.5b in 1981 to over $674b in 2005. Manifestations of the growth in lending was the increased willingness of banks to loan for deposits and the rise of lenders such as Wizard. They could use the new financial environment to securitise loans. Securitisation involves the aggregation of like financial facilities into a larger parcel, and sold on to another lender, typically an institution. 50 per cent of mortgage loans are securitised in the US. Australia ranks third in the world, after the US and the UK, in the scale of securitised mortgage loans outstanding. So your house might actually be owned by a US bank, an Indian Bank, a junk bond holder or anyone really as long as Aussie Home Loans could get a better deal by parceling up its deals into a nice package for them. All these new lenders also encouraged more lending and investment driven as opposed to owner occupier purchase rose to about 40% of the total market, driving up prices and the size of loans.

Thus we saw the rise of household debt to disposable income to over 125% by 2002 up from 56% and rising at 14% per annum..

Money supply is so out of control because of international financial transactions that some estimate money supply still growing at 8% thus keeping pressure up to raise interest rates. The political pressures to keep them down, because of the rapid expansion of lending brought on by deregulation are tearing at the bank as that sector is the constituency the government has sought and won for the moment

Compulsory superannuation contributions flow into the share market, putting pressure on prices. Many financial adviser are also encouraging borrowing to get into share markets thus further increasing personal debt (currently borrowing for shares is at about $18 billion, or about 13-15% of non-housing personal debt). With bubbles bursting and interest rates rising to contain inflation rises?? Where will the pain hit hardest?

Where are the ideas for the economy? As unions we do not have to accept the economic situation and shape our approaches according. Unions have long had a role in developing alternative polices, and economists and people of ideas such as Frank Stilwell, Hugh Stretton, Barbara Pocock amongst many others do have practical innovative approaches to alternative economic policies that will develop industry and community and benefit the environment in ways that will ensure a livable planet and an equitable society. Workers Online had highlighted many of these ideas for some time. The means are there but we must ask and answer Lenin's question - What Is To Be Done? - rather than sit back and be done to!


P.N. (Raja) Junankar Who is Better at Managing the Australian Economy: Labor or the Coalition? (The Australia Institute Discussion Paper no 79, June 2005 (

Data on interest rates and inflation come from various Reserve Bank articles in particular

this one: showing interest rates from 1959.

Ian McAuley. Getting Real on Interest Rates (Wednesday 9 August 2006) in New Matilda

Frank Stilwell's The Accord and Beyond (Pluto Press) considered the Howard-Fraser economic record. Frank's Changing Track (Pluto Press) helps chart a course for the future as does Hugh Stretton's Australia Fair (Allen and Unwin)

A large chunk of the above relies on Alert and Alarmed (Evan Jones) warnings to us about the things we should be alarmed about rather than what Howard and Co say we need to be alarmed about. In particular the posts at John Howard versus Interest Rates (this is a brilliant dissection of Howard's record and his slimy speak that the ALP let him get away with because they are equally ignorant

Also Monetary policy as Sorcery at

and Costello Is a Cretin

Paul Craig Roberts writes regularly on Counterpunch. The stat on real wages in the US comes from

He produced a more detailed piece published in vol. 13 no 13 of Counterpunch for July 2006 called The New Face of Class Warfare


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