Abbottonian ‘Aus’ terity not the answer

July 2012

  • John Spoehr

Countries with an unemployment rate of six percent are the envy of the developed world. We are lucky to live in one of them. Frighteningly it will probably take Europe and the US the rest of this decade to achieve an outcome close to Australia’s. There is little room for complacency however. The policies that helped to insulate us from the great recession need to be revisited.

While strong demand for our mineral and energy resources has been an engine of economic growth during the crisis the benefits of this have been largely concentrated in Western Australia and Queensland. The other states have relied on the Federal Government’s stimulus package to boost flagging growth. In the absence of the investment provided by the package there would have been a sharp rise in unemployment in South Australia, Victoria and New South Wales. The stimulus package had the desired impact, injecting confidence and investment in the Australian economy at just the right time. Now that the effects of the package have largely worn off and employment growth in the non-mining states is slowing, it looks like another stimulus package will be needed. This time it needs to be focused on vulnerable industries and regions.

Australia has shown the rest of the world what it takes to fight sharp economic downturns and contain unemployment. While stimulus policies have prevailed in Australia they were erratically and often tardily adopted elsewhere. In many parts of Europe austerity policies are prevailing, doing more damage than good to communities starved of the investment they need to generate jobs. Skyrocketing unemployment is the ugly face of the crisis enveloping Europe with the unemployment rate in Greece and Spain at catastrophic levels – 23 percent and rising. More than half of Greece and Spain’s young people are out of work. This is a tragedy made worse by tragically flawed policies – the policies of austerity.  

Notwithstanding the need for fiscal reform in Europe, austerity is delivering misery rather than prosperity to millions of Europeans. Over 25 million Europeans are now unemployed. Austerity policies are consigning the secure to the ranks of the insecure, causing a sharp decline in household confidence and expenditure, which is fuelling further job losses. 

Greece, Spain, Italy and Portugal now risk being trapped in a downward economic spiral if fiscal austerity policies persist in Europe. On the back of a credit crisis, major cuts in government expenditure, wages and conditions are magnifying the problem, generating growing community hostility towards governments. Communities increasingly view austerity programs as scapegoating them for a crisis generated by corporate irresponsibility and excess.

While the turmoil reaches its crescendo in the US and Europe, forces closer to home appear to have learnt nothing from the crisis and its obvious causes. They offer an Australian variant of austerity as a solution to a ‘crisis’ that has been averted so far by stimulus – Howardian neo-economic liberalism morphs into Abbottonian ‘Aus’ terity.  

As night follows day Tony Abbott and the Coalition will introduce an austerity program inspired by European experiments, if they are elected next year. They have already announced that they will establish a ‘Commission of Audit’ to deliver them an austerity blueprint. Commissions of Audit always comprise zealous conservative ideologues that energetically deliver a radical austerity program – a smorgasbord of neo-liberal economic and social policies to choose from. The result is predicable. An Abbott Coalition government would adopt a multi-billion dollar program of public service cuts, outsourcing and privatisation, building on the Howard years. The cuts to public service employment would be very substantial – probably in the order of 8000 to 10,000 with flow on impacts of around 3:1. A sharp reduction in government investment in public infrastructure would be introduced with particularly damaging impacts on slower growth states like South Australia.

Beware the peddlers of austerity for they are on the ascendancy in Australia. They are emboldened both by the resurgence of post-Thatcherite policies in Europe and their successful use of fear as a potent political weapon against the Gillard Government. Tony Abbott’s negative campaign has inflicted enormous damage to the Government and it will continue to do so until the Government launches a cleverly targeted counter attack. What might be the focus of this? Well, many Australians are extremely nervous about an Abbott/Hockey led government. They fear a return to WorkChoices industrial relations policies and an erosion of their job security and working conditions. Many remember the Howard years and appreciate how radical the neo-liberal austerity program of Abbott and Hockey is likely to be. 

As the weeks pass by and the reality of the carbon tax compensation scheme plays itself out in household budgets, minds will turn to the alternative vision for Australia over the remainder of this decade. Stripped back to its bones they will discover that nothing much has changed in the Coalition since the Howard years, giving rise to Abbottonian austerity – a form of neo-liberalism on steroids. 

So read up as much as you can on European austerity and its likely progeny in Australia and ask yourself, what would really harm Australia’s future prosperity – Abbottonian austerity or a price on carbon? Take a quick look at the Australian Treasury’s report on the impact of the introduction of a carbon tax to put the debate in some perspective. It indicates that the price impact of the introduction of the carbon tax will be around one-quarter to one-third that of the GST, adding less than $520 per annum to average household bills. Unlike the GST most households are more than fully compensated for this. Compare this to the price of austerity – over 25 million ‘officially’ unemployed in Europe and rising. Double this to find the real number of people unemployed and underemployed. 

All of this might read like Labor Party sycophancy to some. Long time readers of my columns know otherwise. So, watch this space for something a little different next month – a perspective on the verbal stoush between the ALP and the Greens. All I can say now is that it might be a good idea for wiser heads in the ALP and the Greens to prevail to try and head off the prospect of the Coalition controlling both houses of the national Parliament. Give Tony Abbott a majority in both houses and Abbottonian austerity is assured.

 

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