Academic journal article Journal of Australian Political Economy

Reflections on the Long Australian Boom

Academic journal article Journal of Australian Political Economy

Reflections on the Long Australian Boom

Article excerpt

We begin by identifying three distinctively Australian characteristics of the long boom that began in 1992 and may (or may not) now be coming to an end. These are the minerals boom, the surprising robustness of the financial system, and the collapse of trade union power. However, since Australia is a small open economy, its performance must be assessed in the context of the global economy, so we next consider explanations of the rapid growth in world capitalism. In the third part of the paper we outline five ways in which the world boom might end, three of them drawing on aspects of Marx's writings on economic crises (the falling rate of profit, over-accumulation and underconsumption) and two coming from Post Keynesian theory (Hyman Minsky's financial instability hypothesis and Nicholas Kaldor's North-South model of global accumulation). We conclude by speculating on the implications for Australia, returning to the three distinctive features of the Australian boom with which we began.

What is Distinctively Australian about the Long Australian Boom?

Australia is more fully integrated into the world economy than it has ever been, and the fundamental causes of the 16-year Australian boom derive from the impressive (and very largely unexpected) success of global capitalism since 1992. None the less, there are local peculiarities. We begin by discussing three of them. We make no appeal to neoclassical ideas about cyclical fluctuations in their monetarist, new classical or 'real business cycle' versions because all omit the main (Marxian-Keynesian) point that crises involve effective demand failures. (However, we recognise that neoclassical ideas can be used in a different way to shed light on crises more generally, as we show in Howard and King 2001 and 2002).

The Minerals Boom

Unlike most OECD countries, Australia is a major exporter of primary products. The importance of the minerals boom, especially since 2000, is too obvious to need much emphasis. In Western Australia it has produced something close to full employment, for the first time in 35 years. Whether this reliance on exports of primary products is a healthy situation for an advanced capitalist economy to be in, and whether it is sustainable, are questions that we shall return to at the end of this paper.

The Robust Financial System

A second distinctively Australian phenomenon has been the quite surprising strength of the financial system, which few would have predicted at the time of the Pyramid and Tricontinental disasters in the late 1980s. The collapse of these companies caused great distress to individual depositors, in the first case, and to the careers of a number of Victorian Labor politicians, in the second case, but had no broader economic consequences. Even Westpac's near-death experience proved to be salutary rather than debilitating. Unlike, say, Japan or Sweden, asset price bubbles did not burst but instead deflated gradually, and there were no serious broader effects of the real estate slump of the early 1990s. Australia came through the East Asian financial crisis of 1996-7 unscathed, and even escaped the repercussions of the Wall Street 'correction' of 2000-1. It is not clear how far all this was the result of more sensible risk-management practices by the banks, combined with intelligent regulation by APRA and the Reserve Bank, and how far it was simply good luck. It was certainly a necessary condition--if far from sufficient--for the long Australian boom

The Collapse of Australia Unionism

The third distinctively Australian characteristic of the long boom once again took everyone by surprise. As little as 20 years ago the Australian labour market was tightly regulated and the ACTU was a major power in the land, effectively determining macroeconomic policy in alliance with the federal Labor government. Today unions count for very little. Union density peaked at 60% in 1951, and was still 49% in 1982 (Bray et al. …

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