Aussie Rules for an Economic comeback

When it comes to infighting, the Australian Labour Party can certainly show the UK Labour Party a thing or two. While we had the long running Blair v Brown psychodrama, in Australia there was the equally enticing Julia Gillard v Kevin Rudd leadership squabble.

But this week’s economic figures from Australia demonstrates that there are lessons for our Labour Party – as well as exposing the hollowness of the “austerity or bust” orthodoxy of George Osborne .

This week, markets across the world have marvelled at the Australian economy. GDP rose 1.3% in the first quarter of 2012 – more than double the 0.5 % increase that many pundits had forecast. Growth was a robust 4.3% higher compared with the first quarter of 2011 – the fastest pace in Australia for more than four years.

And all this against the eurozone debacle, the slowdown in Chinese manufacturing, hiccups in US economic recovery and problems in earthquake hit Japan. And when compared to zero growth in the eurozone and a 0.3% contraction in the British economy, it seems Labour’s Australian Government must be doing something right.

For – while in the UK – cuts are planned in tax credits and disability benefits – the opposite is happening in Australia. There will be a AUS$1.8 billion boost for families via the Family Tax Benefit which will equate to a million families each receiving an increase of at least AUS$300. Tax cuts have already been delivered for people earning up to AUS$80,000 per annum.

Severely disabled people and their carers will get support from a new National Disability Insurance Scheme. The scheme is intended to provide practical care and support in the home. Compare this to the UK where a Tory-led Government has kicked the Social Care Bill into some very long grass.

Critical infrastructure investment has also not been forgotten. AUS$711 million was earmarked for road projects – while, in the UK, Justine Greening has made cuts in funds which merely helps to keep up with road maintenance. AUS$1.2 billion is also being spent on developing the rail network – while, in the UK, the Tories are sitting on the High Speed Rail Bill – petrified at the sight of their MPs from the Chilterns.

While some fiscal retrenchment is taking place, the Labour Government in Australia are determined to boost consumer confidence by addressing the rising cost of living. By actions already taken and other policies that are in the pipeline – combined with Keynesian pump priming with infrastructure investment – Australia is now in a better shape to weather the economic storm than many of its near neighbours in the Asia Pacific as well as its competitors in Europe.

The success of this Keynesian approach is being denied by some laissez faire economic commentators – with one pundit telling Bloomberg TV this week that Australia’s success is all down to a revival in the country’s mining sector. But the figures are clear that it is the overall improvement in domestic consumption that is pushing up Australia’s growth rates.

Much of the Australian approach towards a stronger economy echoes the prognosis of Ed Balls in his now prophetic City of London speech of August 2010. The Australian example gives the lie to the Osborne recipe that only cuts, cuts and more cuts can deliver the UK out of its economic morass.

But for the UK Labour Party, there is more to learn from Australia than just economic success. For these significant results are happening off the back of what looks – at first glance – as a shaky minority Labour Government. For Australian Labour can only maintain power thanks to the support of three independent MPs and a Green MP – in effect giving Labour a one vote advantage in the Australian Parliament. This is just as well as the Osbornite tendencies of Liberal Party leader, Tony Abbott, would have led to a cuts first approach to the country’s economy.

These positive economic indicators demonstrate that a Keynesian approach to restarting a stalled economy can occur – despite the need to cobble together a working majority in Parliament.

This is a critical lesson for our Labour Party with the fear that the polls may tighten the nearer we get to the 2015 election – and the consequent need that we might have to grit out teeth and work with other parties.

For Australia’s Labour Party there is still some way to go. The media environment, as in the UK, is generally not well disposed to a Keynesian economic strategy and the self inflicted wounds (due to back biting within the Australian Labour Party) has hit the party’s poll numbers. There is also a raging controversy regarding the Australian Government’s efforts to combat climate change.

But continued economic success may well give renewed confidence to Prime Minister Julia Gillard’s Government.

Australia’s success should also provide new impetus to the belief that that the economic line, enunciated by Ed Balls and Ed Miliband, can really lead to electoral success – and economic recovery.

James Watkins is a member of the Unite the Union National Political Committee. This article is written in a personal capacity.