by Rishabh Bhandari
Pessimism over the state of the economy seems ubiquitous wherever one looks. Dubious political elections and a banking crisis in Spain threaten to push Europe once again to the brink of a fiscal and political collapse. In America, Obama’s claims that ‘America is back’ seems increasingly spurious as the most recent jobs report showed a drastic decline in hiring. Even the once-indefatigable China has begun to sputter. As its trade surplus and investment in the manufacturing and building industries shrinks, the typically taciturn Chinese Premier Wen Jiabao has personally called for aggressive policies to ameliorate the downturn.
Yet amidst this disarray, Australia seems the strongest and healthiest economy in the world: inflation is at 2%, interest rates at 3%, unemployment at 5%, and economic growth at a robust 4+%. In contrast to other highly developed nations, Australia is in an economic empyrean. Yet bizarrely, the ruling party in Australia, the Australian Labor Party, is badly trailing the Liberal Party in the most recent public polls (53-47 if this was a head-to-head race). Given this terrific set of data, the average American may deem Australians ungrateful for not obsequiously genuflecting at the Labor altar. Yet much of the blame must be heaped upon the current leaders of the Labor Party. Julia Gillard’s character has been viewed with suspicion since she ousted former leader Kevin Rudd in a 2010 leadership contest, and the Party has made a series of embarrassing gaffes. Most recently, two influential Labor politicians, Peter Slipper (the Speaker of the House of Representatives) and Craig Thomson (another Representative) have been embroiled in separate yet equally salacious sex scandals.
Most problematic, however, has been the Labor Party’s inability to distribute Australia’s wealth fairly across the nation. Although Australia’s economic growth was above 5%, the economy has been largely driven by mineral exports to hungry and growing consumers in Asia. Western Australia, where the bulk of Australia’s reserves of petroleum, iron-ore, nickel, aluminum, and gold reside, grew by an astonishing 8.4% in just the September quarter. These remarkable numbers and the spillover effect it creates by encouraging mining companies to invest in other potential resource-rich states such as Queensland (which grew by a strong 3.5% this quarter) have papered over the cracks. Many Australia analysts believe that the country’s non-mining sectors are as weak as their American and European sectors. The country’s largest and most developed state, New South Wales, does not have considerable mineral deposits and, as such, squeezed only a tepid 0.5% growth this quarter. During the same quarter, non-resource rich states Victoria and South Australia actually contracted.
This poses several political problems for Labor. As the traditional party of social liberalism, trade unions, immigrants, and the middle class, Labor’s core constituency is meant to reside in NSW, and Victoria, and urban Australia; precisely the areas where the economy is faltering. As such, when Labor trumpets that Australians have never had it so good, their base feels alienated and resentful. The Labor Party, to its credit, have been arguing for a redistribution of mineral wealth across the nation through the form of a contentious ‘super tax’ on mining companies known as the ‘Minerals Resource Rent Tax.’ The super tax is an additional 30% levy on any iron ore and coal mining company whose annual profits exceed $75 million, and the revenues will be injected into Australian pensions, infrastructure projects, and tax cuts for small businesses. While this proposal has only recently been crystallized into policy following the Senate’s approval in March 19th of this year, any electoral or economic gain that arises from this tax, which cost Labor much of its political capital, will likely not be for four or five years. In the meantime, Labor are stuck in no-man’s land with booming Western Australia, Tasmania, and Queensland seeing their governance as nothing more than legitimized purloining while those it seeks to help in industrial New South Wales, Victoria, and South Australia grumble that they have been left behind in Australia’s economic ascent. It may seem tragic for Prime Minister Gillard that her party may fall at a time when less competent incumbents such as Britain’s Cameron will survive, yet democracies are only as good as their constituents; responsible and reasonable voters would reward the Labor Party for pursuing prudent long-term policy over short-term gains. Ousting her may only encourage future politicians to choose the latter over the former.
Rishabh Bhandari ’16 is a blogger on Australian politics and society. Contact him at rishabh.bhandari@yale.edu.