Australia on the Edge of Another Recession: What is the Strategy?

As the new year began, bleak as it was on the economic, political and environmental levels, there was no inkling of the COVID-19 epidemic threat and what it would do to the global and Australian economies.

Given the volatility on the share market and the fall in the Australian dollar in the last week, it is having a big impact, and is likely to be the trigger for a global and an Australian recession. That won’t be clear for another six months, but Australians will be feeling the pain all the way if that is what unfolds.

Technically Australia has not had a recession since 1990-91.

The recession started in the September quarter of 1990 and lasted until the September quarter of 1991. During the recession, GDP fell by 1.7 per cent, employment by 3.4 per cent and the official unemployment rate rose to 10.8 per cent. In reality it was much higher, especially in regional Australia.

A recession requires two consecutive quarters of shrinking of the GDP, so there were four in a row back then. It was big.

Since then, no technical recessions, but there were two single quarters when the GDP did shrink – December 2008 and September 2016. And there was one in December 2000 which was adjusted from negative to just positive 0.1% due to the impact of the introduction of the GST by the Howard government.

So Australia famously avoided a recession during the Global Financial Crisis – one bad quarter instead of two.

How the trade union movement and the labour movement respond in 2008-09 and what can be learnt from that for the situation Australia faces now.

In both 1990 and 2009 there were Labor governments in Canberra, and so they had to wear the economic pain but they also were able to respond with expansionary measures which softened the possible impacts to some extent. Keating’s program was ironically called “One Nation”, and Rudd’s was less poetically called “National Economic Stimulus”.

Official unemployment at the end of 2008 was 4.2 per cent, and it jumped to 5.8 per cent in 2009. With the stimulus package it came down to 5,4 per cent, but when the Gillard government began to try to bring its Budget into surplus, the unemployment rate went back up to 5.8 per cent by the end of 2013, and then we had the Abbott-Hockey horror Budget and the unemployment rate was up to 6.3 per cent by November 2014. Today, over five years later, it is 5.2 per cent and heading up again.

But inside these figures are two realities. In manufacturing in 2009 employers decided that they wanted to retain their skilled labour and unions were ready to negotiate the shock to try to protect jobs, wages and conditions. The outcome was that many workplaces went on to short time, or forced people to take paid leave, or to take unpaid leave, with the promise to repay their workers for any losses when full time production started again, and unions secured agreement that there would be no wage cuts and no loss of conditions.

Because the Rudd Stimulus Package was so big and rapid, and because China kicked in soon after with a huge stimulus package of its own, this period of shock lasted only a couple of months. By and large, employers kept to the deals, many jobs were saved and conditions were protected.

In people’s heads there was a collective sigh of relief and nobody really wanted to talk about the recession that might have been global, but wasn’t happening to us. So the opportunity to have members deepen their knowledge of the system and to gain influence with employer policies did not get taken up.

Many groups took a lot longer to recover, as the unemployment trends show. And think about the people who just retired and had their superannuation funds take a huge hit on the sharemarket. Many older workers had to go back to work or continue working, because they could not live on their super fund for several years.

The other story was in the mining industry, where just over 19 per cent of the workforce was sacked in early 2009. It was only when the Chinese stimulus package kicked in that these workers were re-hired. The big companies – BHP, Rio Tinto – then embarked on massive capacity expansion in the iron ore sector, and Twiggy Forrest, Gina Rinehart and Clive Palmer made the deals with Chinese investors to build large new iron ore mines. This began a period of skilled and unskilled labor flows to the mining sector, a significant increase in value of the Australian dollar and massive pressure on Australian manufacturing.

More broadly, the Economic Stimulus Package did not lead to a transformation of the Australian economy in terms of climate policy, innovative expansion of manufacturing and services, and related skills development. It was very good that the Rudd package poured a lot of funds into public housing construction, into government schools and tried to do the home insulation program, but this was traditional Labor, not transformative Labor. And it stopped after two years.

Since then the automotive assembly industry was shut down from 2017 and a lot of auto manufacturing as well. The TAFE sector has been pretty well smashed. And despite a surge in renewable energy investment, almost all the equipment is imported. As a result, the Australian economy is weaker, and far more vulnerable to global shocks than it was even in 2009.

A series of free trade agreements finalised under the Abbott-Turnbull-Morrison governments – with China, Japan and South Korea – have also battered the manufacturing and associated services sectors, in both metropolitan and regional areas.

What can be learnt from all this going into this next recession?

First the federal Coalition government will not be playing the same role of active stimulus that Keating and Rudd did. The Coalition deplores government intervention, wants to demonstrate that it is “fiscally responsible”, and is committed to letting “the market” work its way through the coming crisis.

Welfare payments will increase as unemployment rises, unless the government moves into austerity driven crackdowns on unemployment benefits, which are already very mean.

Second, employers, like in 2009, can be expected to be really concerned to retain skilled workers, given that the collapse of TAFE means they are even harder to come by. Like then, they have the option of Temporary Migrant Worker Visas as well, and super-exploitation of this category of worker will increase unless we have a stronger campaign about that.

So there is real scope for unions to negotiate emergency arrangements with employers which work to retain jobs, wages and working conditions, and demonstrate the value of unions for working people.

Third, China, the USA, the UK or Australia should not be expected to mobilise the kind of stimulus packages they did in 2009. When the recession hits it is unlikely to be a six month wonder, but will drag on with increasing impacts on jobs and welfare.

This means that the labour movement has to be prepared to mobilise to demand a stimulus program which will both soften the social impacts and enhance longer term economic and environmental sustainability. This really means the union movement and social activists moving into space that is abandoned by big capital – taking over productive assets which are closed due to bankruptcy or simple cost cutting by capital. This means being ready to support those skilled workers in all sectors who know how to manage a new kind of worker-owned workplace, whatever the formal ownership status.

There has to be an urgent review the free trade agreements which have crippled our economy and hemmed in what democratic governments can do to serve the needs of their peoples. Australia must have trade with the rest of the world, but trade aimed at full employment, environmental sustainability, peace and democracy, rather than the profits of a few hundred huge corporations.

And the labour movement must mobilise for the investments in carbon reduction systems and the social needs now unmet in housing, health and education, and environmental recovery, genuine reconciliation with Australia’s First Nations, real progress for women for full equality of opportunity and real equal wages and equal retirement incomes.

Underlying all this visionary stuff, a mobilised labour movement needs a vigorous education program for its members to get on top of what is likely to be a frightening situation, so that working people will no longer “let the mangers manage” since it these “managers” who have gotten Australia into this situation of global and national crisis.

That can’t be done after work or on the day off. This kind of vision means shorter working hours and much more paid time off production to enable working men and women to meet and overcome this next looming crisis. It may be called a recession, an economic crisis, but it is a social and political crisis and the labour movement will really have to race to try to meet its challenges.

  • Peter Murphy, March 6, 2020

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