Are the economic fundamentals really sound?

Vanguard July 2012 p. 2
Ned K.

On June 6, both Prime Minister Julia Gillard and Treasurer Wayne Swan claimed that the Gross Domestic Product increase of 1.3% for the March quarter, and predicted increase of 4.3% for this year, was a sign that the “fundamentals of the Australian economy” are sound.

This is questionable on two counts. On the ABC News that evening, it was revealed that the GDP growth of Western Australia and Northern Territory was over 7%, while other states and the ACT were either in negative GDP growth or a moderate 2%.

The GDP variation between different states is a reflection of the uneven development of capitalism in Australia. The overall figure of 4.3% GDP per annum hides the grim reality of high unemployment of up to 20% in the traditional manufacturing suburbs of major cities, such as Elizabeth in Adelaide’s northern suburbs. It hides the hundreds of job losses in the collapse of engineering contractor Hastie, and the move off shore of hundreds of Qantas maintenance engineer jobs.

Current account deficit out of control

Even the high GDP of WA of 7.6% is only half the story. In the Adelaide Advertiser on 6 June in the business section, there was an article headed “Mining imports drive up deficit”. The article said, “Australia’s seasonally adjusted current account deficit widened to $14,892 billion in the March quarter, from a deficit of $9,639 billion in the December quarter.”

The main cause of this huge increase in the current account deficit was the import of high cost mining equipment and machinery which Australia does not produce locally. This occurs as manufacturing jobs and skills are destroyed in other parts of Australia, and sacked workers are then criticised for not wanting to uproot their families and lifestyle to go and do a ‘Grapes of Wrath” style trek to the north-west in search of work in the mining industry, not as a manufacturer of mining equipment, but as an operator of an imported machine or truck or train (if they haven’t been automated yet).

So, just how sound are the economic fundamentals, Julia and Wayne? Take a trip to Elizabeth and ask some of the 20% unemployed in a suburb where the biggest car multinational, General Motors, has just been promised another multi- million dollar hand out of tax-payers’ money.