Not with a bang but a whimper: The End of the Mining Boom and the next Budget

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Shape without form, shade without colour,

Paralysed force, gesture without motion

                                                -TS Elliot

On the 12th May Treasurer Joe Hockey will present his second budget. The budget lies at the heart of the state’s efforts to reproduce capitalist society; thus understanding what is in the budget plays some role in interpreting the terrain in which we contest capitalism on. His previous budget was the centrepiece of a clear vision (a Plan A) to address the challenges facing capital accumulation in Australia and it lies pretty much in ruins. Facing the end of the mining boom and thus a drop in growth levels, profits, wages, rises in unemployment and Federal debt, the budget aimed to reduce spending on social reproduction and increase stimulative spending on infrastructure. The latter was to be financed in no small part through asset recycling (privatising state assets and reinvesting the funds). This was sold as a response to a ‘budget emergency’, a narrative that over-emphasised the size of Federal debt for political effect (just as the Left/social democratic narrative denied its existence). Added to this were efforts, coordinated on a state level, to disperse points of social contestation: the construction unions, ecological protests and community opposition.

The Federal government has failed to do this – in no small part due to the combination of the hostile composition of the Senate (which itself is a manifestation of populist anti-politics in the heart of the state) with a number of small but vocal points of opposition. The Victorian election and the cancelling of the East West Link contract and the Qld election, which kicked out the LNP government partly at least due to its plans to ‘recycle assets’, showed widespread if largely silent opposition to this Plan A and has sent the political class into elitist paroxysms of rage; which the return to normal programming of the NSW election has only partially calmed. Since then the Federal government seems to be randomly generating policies in quick succession and all the tough talk about reform seems to mainly mean review after review.

On the 15 April the Prime Minister revealed to the Australian Chamber of Commerce and Industry the overall plans for the next budget. Can we glimpse the outline of a Plan B for capital? What are its elements? In short: bullshit, blame Labor, a tax cut for small business, increase subsidies for childcare and increase work for the dole. It is clear that the government is putting its own employment prospects ahead of business of ruling for business. The budget then already shows the concurrence of the dysfunction of the political in the context of a secular crisis of capitalism.

As the Prime Minister tells it the economy is improving and his government is guided by and is enacting a coherent and logical ‘plan’. His core argument is that economic conditions are improving; he cites the following as underlying strengths ‘Fuel prices are the lowest in years, interest rates are low and stable, and we have a lower exchange rate’(2015). However all three have nothing to do with government policy and are actually part of the effects caused by the global stagnation of capitalism.

Sadly for the PM the more coherent elements of the state tasked with the job of understanding capital’s dilemmas are far more worried about the prospects for capital accumulation. Justifying the drop in the cash rate the RBA argued that growth is down and they expect it to stay down (2015b) . The ABS records that profits are down and the size of inventories are up (2015, 1). For workers wages growth has declined and unemployment is up(Reserve Bank of Australia 2015a, 10-11).

With the government blocked the RBA has moved to stimulate the economy by making money cheaper to borrow – something that they themselves are half hearted about and seems to have the main effect of increasing house prices. It is highly unlikely that housing construction can really offset the end of the mining boom; and house prices continue to outstrip income growth. ‘At around 8 per cent, housing price growth remains well above the growth rate of household incomes’(Reserve Bank of Australia 2015b, 39). Household debt is already higher than 150% of disposable income (Reserve Bank of Australia 2015a, 6) and the lions share of this is made up of mortgages.

In the context of declining company profits, wages and revenues and rising unemployment it seems beyond ridiculous to think that debt fuelled consumption can really do much (but who really knows?).

The Prime Minister, in this speech, has dropped any language of debt levels being an emergency; rather he promises that everything is well in hand and that ‘The deficit will decline every year’(2015). Unfortunately just days later the Treasurer Joe Hockey stated that the deficit might continue to grow. As the price of commodities drop so does the revenue taken by the state. So much so rather than aiming at reducing the actual amount of debt government strategy is now focused on reducing the size of deficit as a percentage of GDP (Greber 2015a). This is both an admission of defeat and an acceptance of the reality of luke-warm-at-best capitalism. Thus ‘budget repair’ seems mainly about limiting the growth of spending or shifting from one area to another rather than a wave of cuts that would reduce government expenditure overall; ‘new spending will have to be offset by responsible and fair savings’ (Abbott 2015).

There isn’t a great deal of content in the PM’s speech. Channelling one of Campbell Newman’s old metaphors, the Prime Minster stated that: ‘Our plan is for a strong five pillar economy: with manufacturing, agriculture, education, and services – as well as mining – because there’s strength in diversity; in our economy no less than in our society.’ The path to this five pillar economy is ‘Besides budget repair…reducing business costs, opening up opportunities through free trade agreements, cutting taxes and, of course, building vital infrastructure.’

But reducing business costs and the free trade agreements refer to actions already in process, preceding the forthcoming budget; and whilst Abbott touts infrastructure work already under way it is unclear how, without the passage of the asset recycling bill and the political capacity on a state level to sell assets, they can proceed. There maybe the possibility of accessing some of the new global infrastructure funds and the possibilities of new forms of infrastructure asset securitisation – something that Hockey recently touted at a speech to Morgan Stanley (2015b).

This then leaves the core of the Budget to be: a 1.5% tax cut to small business, a families plan focusing on increasing childcare subsidies, and the new ‘jobactive system’ which is a complete over hall of the employment services aimed at the unemployed and which involves the intensification of mutual obligation, work for the dole and the generalized intervention of the state into the lives of the unemployed. The tax cut will be funded by dropping the paid parental leave scheme and the expansion of subsides for childcare is contingent on other savings being found – whether this refers to measures from last year’s budget not yet passed or new cuts is unclear.

At best this represents a hope that facing less taxation small business will increase business activity and that the increased subsidy for childcare and more intensive intervention into the lives of the unemployed will mean an increase in the labour supply and a larger and more competitive ‘reserve army of labour’(Marx 1990). The Productivity Commission thinks that the increase in the supply of labour will be fairly minimal from increased childcare subsides: ‘Shifting to the recommended approach is nevertheless estimated to increase the number of mothers working (primarily of low and middle income families) by 1.2 per cent (an additional 16 400 mothers)’ (2014, 2).

Unemployment is already increasing, and whilst every individual employer would like cheaper workers, the stagnation of growth in wages is already holding down aggregate effective demand.

All this looks fairly consistent with the global picture. The IMF at the recent IMF/WB Spring meeting advocated a strategy based on making debt sustainable rather than austerity, unorthodox monetary policy and infrastructure as stimulus and structural reforms in the labour, product and services markets. As did the G20 Finance Ministers and Central Bank Governors Meeting. So too the RBA governor Glen Stevens also supports debt reduction to take a measured pace, which considers broader economic impacts (Greber 2015b).

As for the Treasurer he has also been making speeches – and they are mental. Gone too is any talk of debt crises and the need for belt tightening. Rather his addresses to Morgan Stanley in New York and the IPA in Melbourne present a panglossian vision of the future of capitalism, a kind of revamped Californian Ideology(Barbrook and Cameron 1995) where the rise of the digital disruption in form of Uber, AirBnB, etc promises endless rewards if only government gets out of the way. This reversion to ideological hyperbole is evidence of the end of a concrete political project.

But beyond this frothy craziness Hockey is also converted to the line that deficit reduction must be calibrated to growth levels and in concordance with the unorthodox monetary policy:

 It(the Budget) will endeavour to get the balance right between the economic accelerator of    lower interest rates and the pace of Budget improvement. As a result, we will continue to get back to surplus as soon as possible but we will do so without hurting families or the broader Australian economy. That’s why our savings measures are structural and phased in rather than dramatic and immediate. It is no use having the Reserve Bank lowering interest  rates and putting its foot on the accelerator if, at the same time, the Government is   slamming its foot down on the brake by immediately and dramatically cutting spending.

(Hockey 2015a)

Beyond this forthcoming budget it is worth paying attention to the government’s many reviews – it is unclear how much of them will ever see the light of legislation (who remembers the Commission of Audit?) but it is perhaps in them that the real efforts to unearth a path for capital exists. Comrades may find it a useful task to start reading and thinking about these documents. Of particular interest could be the Productivity Commission into Workplace Relations (coupled with the war by Royal Commission against the CFMEU) and childcare and early childhood learning and the reviews on competition policy , tax and welfare. Also of importance are the shifts in the provision of social services to a procurement model with increased competition between third party provision and the funding of services through social impact bonds and the like.

All this seems very underwhelming; it’s clear that the government is putting its survival before the immediate needs of capital. So much so that earlier in April, in reaction to what is perceived as a forth coming ‘dull’ budget, nine organizations of business leaders published a statement in the popular press for more aggressive reform: reductions in sovereign debt and changes to ‘workplace reform’ even if such reform is ‘hard and often unpopular in the short term’ (2015).

But capital and the state suffer the same problem: there is a simultaneous rise in debt and a drop in growth and profits all of which are expressions of a deeper failure in the capitalist mode of production. There is thus a desire to spend more and spend less, to cut and stimulate: this seems relatively impossible and also ineffective.

And finally whilst it will be foolish to revert to simple economic reductionism is important to remember other elements of the current conjuncture. The end of the mining boom and the failure of the state’s capacity to implement its Plan A is complemented by the state’s simultaneously increase of repressive and authoritarian behavior: the return of soldiers to Iraq, the metadata laws, the effective decriminalization of state (or its private agents) murder of refugees in camps, and the massive police operation against teenage terrorism subjects. As capital accumulation falters, as the state proves ineffective as a planner for capital, there is an aggravated assertion of sovereignty and the expansion of the state of exception.

Who knows how much of this Budget will make it through the senate and who knows at what speed capital accumulation will continue to slow and what impact if any the state can have on this. For a Left, largely social democratic in inclination, which has built a rhetorical narrative about the Coalition’s neoliberal root and branch attack on society this small target will be hard to hit. However the end of the mining boom will continue to impact on all our lives; the deal offered by Australian capitalism, to many if not all workers in Australia, consisting of rising incomes, rising consumption, and rising access to credit is becoming unstuck. Rather now unemployment is up, incomes are slowing, the cost of living is growing, the growth of debt is becoming more unsustainable and often personally crushing. What points of opposition may emerge along these lines? Childcare and welfare, and the activity of those involved in them, are cut by lines of tensions, dysfunction and ‘personal’ crisis as well as refusal, solidarity and defiance: what kinds of self-activity can we put in place? Do they intersect with the other struggles that are rolling across Australian society – against the closure of Indigenous communities in WA, against the border régime and CSG for example – and what might this intersection generate?

  1. It Is Time to Stand up for Our Future. dailytelegraph.com.au [cited 22nd April 2015]. Available from http://www.dailytelegraph.com.au/news/opinion/it-is-time-to-stand-up-for-our-future/story-fni0cwl5-1227293340707.

Abbott, Tony. 2015. Address to Australian Chamber of Commerce and Industry Luncheon, Sydney. pm.gov.au [cited 20th April 2015]. Available from http://www.pm.gov.au/media/2015-04-15/address-australian-chamber-commerce-and-industry-luncheon-sydney.

Australian Bureau of Statistics. 2015. 5676.0 – Business Indicators, Australia, Dec 2014. Australian Bureau of Statistics [cited 17th March 2015]. Available from http://www.ausstats.abs.gov.au/ausstats/meisubs.nsf/0/B673F9E508D30262CA257DF9000E1BB8/$File/56760_dec 2014.pdf.

Barbrook, Richard, and Andy Cameron. 1995. The Californian Ideology. Mute: culture and politics after the net, http://www.metamute.org/en/content/the_californian_ideology_0.

Greber, Jacob. 2015a. “Deficiet Could Get Bigger, Hockey Hints.” Australian Financial Review, Monday 20 April 2015, 1& 4.

Greber, Jacob. 2015b. “Rba Backs Slow Deficit Cut Strategy.” The Australian Financial Review, Tuesday 21 April 2015, 1 & 6.

Hockey, Joe. 2015a. Address to the Australia-Israel Chamber of Commerce, Crown Towers, Melbourne. joehockey.com [cited 22nd April 2015]. Available from http://www.joehockey.com/media/speeches/details.aspx?s=168.

Hockey, Joe. 2015b. ‘The Next Wave of Global Economic Growth’: Speech to the Morgan Stanley Event in New York [cited 21st April 2015]. Available from http://www.joehockey.com/media/speeches/details.aspx?s=167.

Marx, Karl. 1990. Capital: A Critique of Political Economy. Translated by Ben Fowkes. Vol. 1. London: Penguin Classics.

Productivity Commission. 2014. Childcare and Early Childhood Learning: Overview, Inquiry Report No. 73: Canberra.

Reserve Bank of Australia. 2015a. The Australian Economy and Financial Markets Chart Pack: March 2015. http://www.rba.gov.au [cited 12th March 2015]. Available from http://www.rba.gov.au/chart-pack/pdf/chart-pack.pdf.

Reserve Bank of Australia. 2015b. Statement on Monetary Policy: February 2015.

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5 thoughts on “Not with a bang but a whimper: The End of the Mining Boom and the next Budget

  1. Pingback: Not with a bang but a whimper: The End of the Mining Boom and the next Budget | Workers BushTelegraph

  2. Pingback: Four theses on ‘green bans’ and the contemporary right to the city – The Word From Struggle Street

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