Nosedive: Government fiddles while dollar melts

by Anna Pha

Australia's foreign debt has skyrocketed to more than $300 billion — a 
record 46 percent of Gross Domestic Product. The Australian dollar is at a 
record low, unemployment remains high, investment is slack, enterprises are 
closing down, there is a crisis of overproduction, consumer and business 
confidence are low. The economy contracted in the last three months of 
2000. This situation will be worsened by corporate mergers and takeovers, 
but Prime Minister Howard simply oozed enthusiasm at this week's 
announcement of the $57 billion merger of BHP and the British resources 
giant Billiton.

So what is the Government doing about the economic situation? Howard 
describes the growing crisis as it being only natural that currency 
speculators should rush to the US dollar, because he says, "America has the 
strongest economy in the world".

And the Billiton-BHP mega merger? "This is a great resource opportunity for 
Australia", he said. "We are going to have centred in Melbourne the largest 
resource company in the world."

On the contrary, the merger will be a massive profit opportunity for the 
new giant entity's major shareholders. And its odds on that its 
headquarters will, in the not-too-distant future, be moved to Britain.

Furthermore, the merger deal, which took place with the Government's 
blessing, has put thousands more BHP jobs on the chopping block.

The headline on the front page of "The Australian" newspaper got the gist 
of it: "Mining giant quits steel-making to invest offshore".

So, no matter how hard Howard talks up the economy, it will not prevent the 
looming recession — or more likely depression.

Privatisation, tax cuts for the rich, real wage reductions, employer theft 
of workers' entitlements, cuts to government spending, rising unemployment 
and the GST have all contributed to the present crisis.

The GST, in particular, has significantly reduced the capacity of people to 
purchase goods and services.

As a result of these policies, the anarchy of the "free markets" now 
determines the value of our currency and capital flows in and out of 
Australia. They decide what industries Australia will have, what we import 
and what we export.

Governments, including Australia's, have conceded the key economic levers 
to the transnational corporations. The Australian dollar has fallen against 
the yen, the euro and the pound, not just the US dollar. The dollar has 
fallen by around 20 percent against major currencies since early 2000.

While exports such as wheat, wool, coal, meat, and gold become cheaper on 
international markets, imports will be more expensive.

Australia is heavily reliant on imports, spending $27 billion in 2000 on 
imports for capital equipment (computers, telecommunication equipment, cars 
and trucks, etc) and $57 billion for production inputs such as parts, fuel, 
chemicals and paper.

Consumer imports — clothes, books, electrical goods, food, etc — cost 
another $34 billion.

Many of these products were once manufactured in Australia, but economic 
rationalist policies and lack of government planning has left Australia 
dependent on imports and heavily exposed to international developments.

The world is awash with commodities amidst a crisis of "overproduction"  
there are not the consumers with the means to buy what is produced. 
Globally, manufacturing is operating at around 60 percent of capacity, 
enterprises are being closed and workers laid off.

The US economy lost around 142,000 jobs in January on top of 133,000 last 
December.

Its stock market is already faltering. The Nasdaq Index — an indicator of 
the high tech sector of the economy — has shrunk by more than 50 percent 
in the last 12 months.

Business, the financial sector and household debt have rocketed. The US's 
foreign debt and balance of payments are also at record levels, and 
accelerating.

The big question is: what will happen when investor confidence subsides, 
when the stock market falls further?

Australia is not going to be able to rely on trade with the US to stave off 
recession or depression. It is far more likely that when the US economy 
takes a nosedive, which is appears to be poised to do, then Australia will 
be underneath when it lands.