- by William Briggs
- The Guardian
- Issue #2119
Photo: Michael Coghlan – flickr.com (CC BY-SA 2.0)
A quiet desperation is gripping Australia’s bourgeois economists and political leaders. The economy, virtually flatlining, is about to be hit with the effects of a potentially destructive and long-term fall in the price of iron ore. Not only has the price dropped, but exports have collapsed. The price for iron ore has tumbled to just $133 a tonne, a fall of 20 per cent since May. The Chinese market has contracted and the demand for Australian ore has dropped.
Shipments from Port Hedland have fallen by more than 20 per cent. The bulk of the ore sold is normally destined for China. Iron ore and the Chinese economy have been keeping Australia afloat for decades. Australia survived the GFC of 2008 almost entirely because of China’s boom economy. Last year, iron ore injected $136 billion into the Australian economy.
China’s economy, while not at the levels of the last few years, remains set to grow by about five per cent this year, making it the most resilient and stable economy in the world. That is of little comfort to Australian economists, government officials or capital. The unpalatable truth for Australia is that China is cutting imports.
If the rivers of Chinese gold begin to dry up, it will mean a massive shortfall in tax revenue. The loss of revenue will, according to many analysts mean a rise in taxes and a cut to services. It will not affect the burgeoning military budget. Those who will pay the price will be the poor, the working class, and the struggling.
There have been desperate attempts to increase exports to other markets, but none of these can come close to compensating for the cuts in exports to China. Even with a ‘slowdown’ in the Chinese economy, it still produces more than half of the world’s steel. The second biggest user of iron ore is India which has huge reserves so does not need to buy from Australia.
Another iron-ore crisis is on the horizon in the form of what is being described as a ‘mega-mine’ in Guinea. There is already a global surplus of iron ore. The price will continue to fall.
The situation facing people in Australia is already grim. The economy is in recession in all but name. The spectre of added crisis from a drop in revenue from ore sales is a disaster in the making.
Pawn shops are doing a roaring trade, in a tragic echo to the dark days of the 19th century and of the depression years. Pawn shop proprietor Rob Herron has reported that people are increasingly pawning personal possessions in order for them to pay household bills. He is seeing more people selling personal possessions and taking out loans at high interest rates. Cash Converters has revealed that across the country they have received a massive 780,000 loan applications. These are driven by cost-of-living pressures. These are people already in serious debt to banks and other lending institutions. There are reports of the most vulnerable being forced into prostitution in order to survive.
The world that Engels wrote of in the Condition of the Working Class in England, or that of Dickens is no longer an historical document or a work of fiction. The RBA governor might casually say that ‘some people will have to sell their homes’ because of the failure of the economy. Nearly 20 per cent of mortgagees or 975,000 homes fall into the ‘extreme risk’ category.
Over 30 per cent of Australians are renters. Anglicare Australia Executive Director Kasy Chambers has called the crisis “the worst it’s ever been … this is not hyperbole. It is Australia’s new normal. We’ve never seen such bad results for people on the minimum wage, with affordability halving for a single person in the last two years. Even couples with both partners working full-time are locked out of nearly 90 per cent of rentals. People on Centrelink payments are being pushed out of housing altogether. A person on the age or disability support pensions can afford less than 1 per cent of rentals. For a person out of work, it’s zero per cent – and that includes the highest rate of rent assistance.”
These figures reflect just one aspect of a failing economy and a failed state that can’t provide for its people.
The abject failure of capitalism and our state structures to meet the most basic needs of the people is there for all to see. The loss of revenue that will come from a downturn in mineral prices simply makes that failure greater. Australian capitalism and the Australian state blithely drifted, in a fantasy world where the good times would continue to roll and Australia could live the good life from digging up and selling on.
The working class will be made to suffer for the crimes and neglect of capitalism. Australia is just one country, one economy in a capitalist world. The story is no better in any of the ‘developed’ capitalist economies. The crisis that is reaching into the very heart of the Australian economy will hurt capital but have disastrous effects on the Australian people.
