The Other Side of Economics...

We hear a lot about the Liberal Party's economic credentials - arguably, it is these, in addition to a perceived superiority in matters of 'national security' and the all-important (for the blue-rinse set) 'border protection' that constitute the Party's strengths. Matters such as IR, health, education, and the environment tend to be seen as the Labor Party's traditional strengths, relatively speaking.

News Ltd economics hack Terry McCrann was busy extolling the virtues of the Australian economy the other day, in spite of a slump:

The economic numbers looked fantastic. The overall economy was zipping
along and the jobless rate was heading towards and potentially below 4 per
cent.
Yet the sharemarket trembled and then plunged $20 billion on Friday.
Does it makes sense? Short answer: Yes. Is the market telling us something -
challenging, if not unpleasant - about the future? Short answer: No.

McCrann explains that the economy is being kept in check by the fact of workers' wages generally not increasing. Why is this a problem?

The strong economy and especially the big jump in jobs raised fears of
further interest rate rises, something that is generally not a positive for
share prices. If there is one thing that is going to cause the Reserve Bank to
sit up and take notice, to move from being alert to alarmed, is if it sees any
sign of a worker-shortage starting to push up wages generally.

In short, interest rates will rise if working Australia, supposedly in conditions of nearly full employment, receives a pay rise. Ignoring the colossal piece of ideology that this implies, when we can reasonably expect that working Australia couldn't give a flying about the Dow Jones, I was struck by yesterday's article in the SMH, portraying the flipside of the 'economic boom':

Hundreds of families have been forced to sell their homes, or lenders have repossessed and auctioned them, in Sydney's west and south-west in the past year, property experts say.

Mr McNamara and Mr Dhillon estimate that hundreds of families in western
and south-western Sydney had been forced to sell their homes, or had had homes
repossessed and auctioned by lenders, over the past year.
Meanwhile, the
total debt burden on Australian households topped $1 trillion for the first time
last month, Reserve Bank figures published yesterday showed.
Debt on housing
accounts for about 86 per cent of household debt, with the remainder personal
debts like credit cards and personal loans. The ratio of household debt to
household income has reached 160 per cent, one of the highest in the world.
Interest payments now soak up a record 11.9 per cent of household income, nearly
three percentage points more than in 1989 when mortgage rates were 17 per
cent.

Obviously, one of the explicit aims of the Workchoices legislation was to keep wages low, one effect of this being that interest rates are supposedly kept under control. So on the one hand, we have an increased emphasis on individualism in industrial relations, a divide-and-conquer approach whereby corporate profit is relatively unaffected by workers getting pay increases. On the other hand, we have debt-driven consumerism, to the point that, rather cruelly, people are in hock to their eyeballs, and cannot withstand even minor increases in interest rates. Paradoxically, workers under the Howard/Costello doctrine need to keep their wages low (overall), or face repossession when interest rates rise, and mortgage payments can't be made. And this delightful situation is what we see when we are in the midst of a 'boom'.

Hopefully, some people out there in voterland assess the Liberal Party's economic credentials by the state of their own wallets, rather than just swallowing Costello's rhetoric wholesale. And it is unlikely that the above SMH article will figure prominently in the Liberal Party's thinking: after all, those who lose their homes have only themselves to blame for over-extending (to some extent); rampant consumerism is a good thing, (if not The Good Thing) in and of itself; and those whose homes were lost were mostly 'Westies', and were not likely to vote Liberal in any case.

With any luck, perhaps some readers will cite the above article when confronted with the typical free-market magical thinking of the neo-liberals and the libertarians. Clearly, the worst is yet to come for Australia's workers. The twin Right-Thinking virtues, of individualism and consumerism, may yet expose their ugly side. If the Federal Liberal Party is re-elected, we can expect yet more of this fundamentalism masquerading as economic theory, for as Costello himself recently said:

And I cannot stress enough, any movement away from Australian Workplace
Agreements; back to collectively bargained outcomes with unions moving wage
claims across the whole economy could undermine everything.

Work longer for less, Australia, and spend, spend, spend. Think of yourself, not your comrades. Sure, some poor folk will be found hanging in their outer-suburban McMansions. But what are a few lives worth, compared to the miracle of economic growth?

After all, Costello needs you.