Australian capitalism is still relatively profitable by international standards. But the structural adjustments underway to compensate for the end of the mining boom are already having a dire impact on poor and middle income people.
The budget deficit is expected to rise from $88 billion to $122 billion. Government debt is expected to reach 40% of GDP in 2017, which is still at the lower end compared to other developed capitalist nations. This is because while the mining bubble deflates, the property sector has undergone a boom — since 2012 property prices in Sydney have risen by 49% and in Melbourne by 21%.
Investors have driven this boom, especially in Sydney, where they account for nearly half of all new housing loans. In contrast, first-home buyers are responsible for just one in seven new housing loans.
Foreign investment has become an important factor in the building of inner-city apartments in Sydney and Melbourne, in anticipation of continuing strong immigration and high international student enrolments. The revival of building has also helped to push up employment in the construction industry, more than enough to compensate for the loss of jobs in mining.
Two phenomena are promoting a housing bubble: the Australian tax structure — negative gearing — and the shift of international capital, particularly Chinese investors, from sectors of low profitability to higher ones, in a pattern reminiscent of the origins of the Global Financial Crisis.
When returns on investment are low, capital prefers fictitious schemes to make money. In 2013–14, the largest single contributor to GDP was property ownership, totalling $182 billion. Australia is a world leader in mortgage lending, with 60% of lending going to mortgages and 40% of mortgage loans over the last few years being interest-only loans.
The aim of the structural adjustments to compensate for the end of the mining boom is to assist the 1% to maintain its profit margins. The budget determines that the top 1% will get 47% of the income tax cuts, starting with those people earning more than $80,000 a year — Treasurer Scott Morrison's “average wage”. Five thousand people will receive a $315 tax cut a year. This may seem like small change, but the Coalition has a further plan to reduce company tax from 30% to 25% by changing the definition of what constitutes a small business. Now, a business can turn over $27,000 a day and still be classified “small”.
From next April, job seekers under 25 who are receiving payments such as Newstart and have been looking for a job for at least six months, will have to take part in intensive pre-employment skills training within five months of registering with Centrelink.
Under this scheme, interns will be required to work for 15 to 25 hours a week and will receive $200 a fortnight on top of their usual payment. Businesses that take on interns will receive an upfront payment of $1000. The hourly rate for this program works out to around $4 an hour — which can only be described as the super exploitation of young people. The budget has turned unemployed people into a source of below minimum wage labour.
The budget has also cut the carbon tax compensation scheme to welfare recipients and is continuing to roll out the Basics card, where 80% of recipients' payment is restricted to a card that can only be used at specific retailers such as Coles to buy specific goods such as food.
Attacks on the social wage
The budget also attacks the welfare safety net which is vital for millions to survive.
The government has backed off on some, but not all, of the cuts to Medicare, after a strong campaign by unions. If the changes are approved, people will have to pay to see a doctor for vital services such as blood tests, X-rays and pap smears. This will lead to more poor people skipping visits to the doctor, and vital tests costing the social system more in the long run.
The budget also cut $53 billion from the education system and reneged on the promises not to cut funding for the Gonski scheme.
To recover the lost revenue for its welfare measures and its tax cuts for the corporate rich the government is attempting to raise extra revenue by raising the excise on cigarettes by 12%. This is a direct tax on workers. There is no increase in the tax on high-end wines, spirits or other luxury items.
Morrison has talked about a crackdown on tax avoidance, but this is yet to materialise and is unlikely to have any impact on the amount of tax a corporation will pay. Behind the rhetoric, the changes to negative gearing will be marginal.
Labor proposed to restrict negative gearing to newly-constructed houses after 2017. However, investments made before that time will still be able to be negatively geared. Labor has promised to reduce the capital gains discount from 50% to 25%.
Labor says it wants a royal commission into the banks. But given its weak tax changes, it is hard to have confidence that such an inquiry will result in much change. The banks should be nationalised, but this is not what Labor has in mind.
The Coalition government's attacks on the Construction Forestry Mining Energy Union (CFMEU) is its attempt to resurrect a Howard-era bogeyman to divert attention from the worsening economic situation for workers.
While the royal commission into the trade unions has not come up with much, that has not stopped the corporate media from running a major campaign against the CFMEU. The corporate media screams that some union organisers have used foul language, but nothing is done to stop the deaths and injuries in the construction industry, which are the worst for a decade.
So far this year there have been 10 deaths in the construction industry and 37 workers are injured every day, a reflection of the different standards of safety. At the same time, there are wide variations in the wage system: some workers are paid $5 or $10 an hour, while others are on a good wage.
The re-institution of the Australian Building and Construction Commission (ABCC) — the official reason for this election — will allow its officials coercive powers, like a police force that unionists will not be able to question. The ABCC will not be interested in preserving safe working conditions on the job: its role will be to police the union movement and unions' right to oppose unsafe working conditions.
This is capital's push back as the mining boom fades and the construction boom continues.
[Liam Cohrs is a member of the Maritime Union of Australia.]