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Issue #1598      June 19, 2013

Editorial

Job creation remains a priority

More bad news on the jobs front as governments and employers continue to sack workers. The positive media headlines that unemployment declined from 5.6 to 5.5 percent in May covered up the grim reality of what is an ongoing deterioration in job opportunities. The number of unemployed rose in May by 4,700. The number of employed rose by 9,900 (one hour’s work in a week qualifies as “employed”), but there was a drop in full-time jobs of 5,300 and an increase in part-time work of 6,400 continuing an ongoing trend of underemployment through casualisation, part-time and contract work.

While these changes might sound relatively small, they should be taken in the wider context as continuing a pattern of insecure work and declining wages and working conditions. Sackings are set to continue. Ford, Target, other retail outlets, the banks, insurance companies, manufacturers, mining corporations, universities, TAFE, and state and federal governments have announced job cuts.

These public sector cuts include 15,000 in NSW, 14,000 in Queensland and 1,200 in Western Australia. It is not just Liberal state governments. The federal government is also taking the axe to jobs. With jobs also drying up in the private sector of the economy, the prospects for the unemployed, parents attempting to return to the workforce and future school leavers is far from rosy.

The loss of every job results in a loss of tax revenue for the government and a reduction of spending on goods and services which has a contractionary impact on the economy. This is at a time when all the signs suggest Australia is heading towards a deep recession. New investment in the mining sector has slumped, commodity prices have fallen and there is speculation about China’s growth rate holding up. Even the most conservative and optimistic pundits are warning of the crisis to come and the need to stimulate the economy. The Reserve Bank of Australia’s (RBA) recent interest rate cuts reflect concerns about domestic and international economic developments.

The Australian economy has not fully recovered from the global financial crisis and subsequent economic crisis. Now it is facing another and possibly more serious crisis. Pre-emptive actions are required now to create jobs which in turn will create demand for goods and services and more jobs. This situation is increasingly being acknowledged by some of the most ardent neo-liberals, worshippers of deregulation and “free market” gods who are now calling for government intervention to stimulate the economy.

One such high profile neo-liberal economist and former RBA member (Howard appointee), Warwick McKibbin, is proposing a stimulus to the economy through the issue of billions of dollars of Commonwealth government infrastructure bonds with the aim of attracting foreign investors. Bonds are used to borrow money. The lenders are paid a fixed interest rate for the life of the bond and guaranteed the return of their investment at the expiry date. He talks in terms of 50-year bonds on three percent interest per annum to help fill what he suggests is a $700 billion infrastructure gap. While it is possible to argue with some of McKibbin’s reasoning and the details of how this money might be invested (eg roads), the concept of raising cheap capital for infrastructure investment has merit.

There are huge unmet needs in regard to public infrastructure, including maintenance after years of neglect, as well as new projects such as rail freight, public transport, development of renewable and environmentally sustainable energy sources, public housing, hospitals, schools and for new housing developments and regional development. It could also be used for research and the development of the manufacturing sector. The government needs capital for these investments which would provide a much needed stimulus to the economy, create jobs, increase taxation revenue and in some instances (eg housing) provide future income.

Of course, this is not the only means by which governments could be raising additional capital for investment and stimulation of the economy. It could increase corporate tax rates, end corporate tax rorts, cut the diesel fuel rebate for mining corporations and slash military spending. Superannuation funds should be required to invest a certain percentage of their funds in public programs that would also contribute to job creation and guarantee the security of their savings. The Communist Party of Australia is calling for a national superannuation scheme, democratically run and guaranteed by government. Such a fund would provide retirees with a guaranteed fortnightly income for the remainder of their life – what is known as a defined benefit – at the same time as capital to invest in job creation and public infrastructure.

Next article – On the federal election – Statement from the CPA

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