Socialist Party Australia - Will Howard have to face his first recession as Prime Minister?

During the election campaign, the Treasury Department predicted 3.5% growth in GDP over each of the next two years. Within days of being re-elected, Treasurer Peter Costello was already watering down these over-optimistic thoughts.

The obvious reason is the rise in the price of oil. Government forecasts were based on an oil price of US$43 a barrel, it is now higher. By late October it has risen to US$55 a barrel. The Treasurer himself believes growth could drop by 1% solely due to the rise in price of oil.

However, there are more serious long-term problems for the Australian capitalist economy. Much of the boom in profits has been based on rising exports. The twin deficits (budget and current account) in the US will at some stage grind that economy to a halt. The Chinese economy (see center pages) is also finding it difficult to maintain its massive growth rates of recent years. All this will cut Australian exports.

Internally, the low interest rates (driven down after the dotcom collapse in order to keep growth ticking along) have led to an orgy of over borrowing on cars, credit cars and especially on houses and apartments. The 125% debt:income ratio of Australians is the highest ever. An increase in interest rates will leave many families vulnerable, as would a cut in overtime or a rise in unemployment. When this occurs a recession of some degree is likely.

It is worth remembering that the so-called boom of the past few years has been low by historic standards. Australia’s average economic growth averaged 5.25% in the 1960s, 3.25% in the 1970s, 3% in the 1980s and 3.75% in the 1990s. The early 1970s, as Marxists have explained, marked an end of the longest boom of capitalism here and internationally. It was replaced with an a new era of long term capitalist crisis, necessitating an attempts by the ruling class to claw back all the gains in wages, conditions and social welfare won by the working class during the post-war boom.

It is very significant that the current higher growth rates have not led to a rise in wages as booms used to do in the past. In fact the boom is at least partially based on the super-exploitation of labour (labour market flexibility as bosses call it) via casualisation, longer hours, rising labour productivity through more aggressive management techniques and new technology in the workplace.

For example new Australian Bureau of Statistics figures show “that finance sector employees work about 1.17 million hours of overtime a week – a 19% increase since 2000 and equivalent to 30,000 extra full-time jobs”. Across the sector, about 45% of employees are not paid for their overtime, meaning that about 490,000 hours of overtime are not paid for in any way. No wonder the ANZ bank could register a profit of $2.8 billion last year (a 20% increase). As the Finance Sector Union put explained: “The ANZ unilaterally removed about 2000 employees’ right to a rostered day off per month, saving themselves millions. Couple this with the unpaid overtime we are witnessing across the industry and the real work/life imbalance emerges.”

Therefore, for Marxists, while a recession will lead to greater attacks from bosses and the governments on workers’ rights and will lead to a great politicization of young people against the system – even if the boom continues for a bit longer it means much less than in the past in terms of higher living standards for the working class.