Lat night’s ABC 7.30 Report had a segment titled Australian economy resilient in tough times. It was so bad I was prompted to write to the ABC complaining of their neo-liberal bias. All the commentators were the usual coterie of investment bankers and private consultants all of who have particular vested interests which are not disclosed when they are held out by the ABC as so-called experts! Not one independent researcher was included in the segment. In another world, this might have been the way the show evolved.

In response to criticism that the Federal government has failed to do anything significant for the unemployed or those about to become unemployed they have announced they will provide an extra $300 million funding for Job Network providers to help the retrenched workers get jobs. This initiative confirms my worst fears that this is a government that has failed to learn the lessons of the past.

As a follow up to my blog on underemployment this afternoon, I was interviewed on national ABC radio programme PM this evening. You can read the transcript here PM Transcript. You can also listen to the podcast (courtesy of the ABC) from the CofFEE podcast site. The discussion also had Ian Harper from the Fair Pay Commission on. You will not be surprised to hear that I totally disagree with him on minimum wage setting.

Today the Australian Bureau of Statistics released its underemployment data for September 2008 and it shows a major deterioration in the quality of employment since September 2007. The data shows that there are now 687,700 part-time workers (about 23 per cent of part-time workers) who want to work more hours but are unable to find them. The gender breakdown is 447,100 women and 240,600 men. There are some alarming trends in this data.

The US Bureau of Labor Statistics released underemployment data for the US overnight. The results are disturbing and follow the same trend that is now common in Anglo countries – these economies, even in good times are increasingly generating marginal employment with low pay and job security, and, most importantly, deficient hours of work relative to the preferences of the workforce. But underemployment presents an added danger as we enter this current downturn.

A good way to understand the origins of the current economic crisis in Australia is to examine the historical behaviour of key macroeconomic aggregates. The previous Federal Government claimed they were responsibly managing the fiscal and monetary parameters and creating a resilient competitive economy. This was a spurious claim they were in fact setting Australia up for crisis. The reality is that the previous government created an economy which was always going to crash badly.

The ABS published the January Labour Force Survey data this morning which is the monthly indication of how the labour market is faring. All expectations were that with other indicators such as the NAB Business Confidence Index and the ANZ Job Advertisements count all heading south very rapidly in the last month that the Labour Force data would be equally grim and signal the slide into recession. How wrong we all were. But should we believe the data?

In an article in the Melbourne Age today (February 11) entitled Taxpayer trillions fuel a monster mess, columnist David Hirst writing on the massive injection that the US Congress has approved quotes President Obama who said

“Only the stimulus package to be approved this week, the $US700 billion Troubled Asset Relief Program passed four months ago and $US168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $US8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.”

His issue is that the secrecy of the arrangements is troublesome given their magnitude. With that I agree.

Opposition leader Turnbull has decided to go to the wall in opposing the $42 billion package. In particular, they want tax cuts rather than the $12.7 billion in cash handouts. He said they will not be provide economic stimulus and that December’s $10.4 billion in handouts had not worked. Soon after Turnbull provided these conclusions the ABS released the latest retail trade figures which showed that consumer spending shot up by 3.8 per cent in December, the highest monthly increase since August 2000 (since the GST came in).

Various estimates about the size of the federal budget deficit are starting to emerge. The Government has acknowledged that the data shows that tax receipts have fallen dramatically and now their budget is in deficit. For me that is a time of national rejoicing … finally … the federal government is doing what it should … resuming its crucial role in financing non-government (in this case) domestic private savings. Finally, there is a net injection of financial assets coming from the excess spending over receipts. Finally, the drain on private wealth that the creation of budget surpluses requires is at an end.

Australian Prime Minister Kevin Rudd has written an essay extolling the virtues of a new era in public policy which he calls “social capitalism” which is based on a strong guiding role for government and an abandonment of self-regulation by corporate interests which was the hallmark of the neo-liberal era. He sources the current global economic meltdown to the neo-liberal takeover which began more or less in the mid 1970s after the first OPEC oil price rise. The problem is that his new vision is still tainted with the worst elements of the neo-liberal era.

Today in the Fairfax press, economics writer Ross Gittins in an article entitled No good reason to feel depression claims that we should not be too worried about the looming recession because after all things aren’t likely to be that bad. Well from my perspective recessions are episodes that wreak havoc on the most disadvantaged citizens in our society and should never occur.

The Sydney Morning Herald is running a series at present looking at the labour market prospects in the coming year. It is a welcome return of emphasis to the massive labour wastage that this country endures given that the major media has up until now largely bought the erroneous “we are at full employment” rhetoric pumped out by the previous federal government.

The story entitled Statistics point to hard time on job front, written by Andrew West and Jessica Irvine and published today (January 24, 2009) began with:

AS MANY as 2 million Australians could be jobless or working fewer hours than they would like by the next federal election – the highest rate of “labour wastage” in a generation …

An analysis by a leading labour economist, Professor Bill Mitchell of the University of Newcastle, predicts the total rate of labour wastage could rise to about 20 per cent of the workforce by mid-2010.

The extraordinary events in world financial markets which have undermined the basis of capitalism have led to equally amazing Government responses – massive injections of public spending, nationalisations of banks and bailouts of huge financial institutions with little regard for the relevant shareholder interests.

A major paradigm shift is occurring in economic thinking away from the free market deregulation era that has dominated since the 1970s. All the logic that justified government cut backs; the run down of public infrastructure; the harsh treatment of welfare recipients; the wasteful privatisations, and the rest of the neo-liberal litany that served to transfer wealth from poor to rich and create an disadvantaged underclass has been destroyed by these events.