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2012: the Australian Situation

By Peter McMahon - posted Monday, 16 January 2012


This will be a critical year for Australia, partly because of the global changes discussed in my previous piece but also because of certain national events and trends. The core institutional arrangements that have shaped our national political and economic affairs are all under major stress; there will be major change ahead and the coming year will tell us much about what kind and how serious those changes will be.

The national economy has so far escaped most of the global problems that began with the 2008 global financial meltdown, partly because of some effective fiscal and stimulatory efforts by the Labor government but mostly because of the ongoing rise of China and to a lesser degree India and the demand they generate. How long the Chinese economy can continue to grow is a moot point, but there are already signs that the boom is slowing down.

The Australian political system is now in a bad way. State politics is dominated by mediocrities whose primary concern is keeping basic infrastructure functioning, in the southern states as their economies grind along and in the northern states as resource exploitation generates increased distortionary pressures.

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At the national level the political situation is dire, and 2012 will see whether we begin to really slide towards the abyss or reconsolidate. Firstly, we are led by arguably two of the worst leaders in our history, both of whom look decidedly temporary. But the rise to leadership of Gillard and Abbott also represents a real crisis for their respective parties, as well as the two-party system as such.

Labor leader Julia Gillard is exactly what you get if you opt for power over all else, a machine politician devoid of real principles. She is an insider focused on internal Labor processes and that strategy has given her ALP and national leadership. Her capacity for deal-making worked to get the numbers in a fragmented parliament to form government, but she is a known quantity now and whether or not she can become a genuine leader able to carry out major reforms is a big question.

Tony Abbott is a lurch backwards by a Liberal Party also increasingly unsure of its identity or values. Turnbull’s stumble allowed him in, but Abbott shows no capacity to respond to the real threats, especially climate change and the global economic crisis.

Gillard and Abbott have been in many ways a double act, each making the other look better than they are. Despite their apparent mutual hostility, they both represent the bankruptcy of the two major parties and their rise to power signifies big problems for the Australian political system.

Both leaders have potential successors waiting, the self-promotion juggernaut Bill Shorten an obvious option but more interestingly Greg Combet in the case of Labor, and of course Malcolm Turnbull in the case of the Liberals. Shorten would mean more of the same pragmatic power focussed leadership but Combet promises something more. His handling of the difficult carbon tax issue was highly competent after Penny Wong’s dithering.

Perhaps more important overall is the damage both parties have done to the political system as such. Abbott’s remorseless negativism has demolished the notion of the ‘loyal opposition’, and his refusal to recognise parliamentary tradition, such as pairs, has undermined that institution’s credibility. Similarly, the seduction of Peter Slipper into the speaker’s job by Labor has weakened that role and parliament itself as a place of genuine debate.

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We have seen an attempt to crystallise some kind of populist right movement in the mould of the US Tea party, mostly focussed on opposition to a carbon tax, but aside from looking too much like One Nation, there is not the same religious core that exists in the US to push this concept far. The National Party and its spin-offs will suck up much of this incoherent rage but it is hard to see a viable political program emerging from it.

The Greens on the other hand have continued to prosper but they also face some major challenges. Most importantly they must manage the transition from fringe ginger group to serious political power and this will cause painful changes within the party. Inevitably, the true believers who worked so hard for so long will feel betrayed as compromises are made and careerists arrive. Bob Brown must retire soon, and the leadership succession process will be tricky. One thing the Greens have going for them is their relative cleanskin image, and this would be tarnished if some ugly factional or even personal dealing were to emerge.

Then there is the entirely unhealthy relationship between the national mass media and politicians. Between them the mass media and the major parties will serve up more puerile garbage to the Australian people in 2012 and pretend it is real politics, but perhaps the ongoing shift to online activity will eventually have a positive effect. Maybe the post-Murdoch focus on media in Australia will help generate a genuine improvement in standards.

So what does it all mean for the coming year? In 2012 Australia will probably get caught up in the global financial cum economic crisis, especially if Chinese growth declines. Under the most likely scenario unemployment will rise and the dollar fall, but financial matters will be affected by particular events overseas that may have unexpected results for us. Overall, a period of lower growth is likely which will place more pressure on political and social matters.

This likely volatility will be compounded by growing pressures in international relations. For starters, Australia has to find the best place in what looks like a growing rift between the declining global hegemon, the US, and the rising power, China. With the agreement to base marines in the Northern Territory Gillard has consolidated our pact with the US, while our own defence posture is shifting to face up to potential growing threats to our resources in the north.

This all relates to the emerging energy crisis which will see oil and gas prices rise and become more volatile. As a nation we will increasingly face the need to ensure reliable supplies, but energy costs will inevitably rise because of supply issues, infrastructure issues and carbon tax issues.

As energy prices rise along with water prices, cost of living will become an increasingly trenchant political issue that will only get more traction as unemployment grows when global economic forces bite. Cost of living rises hit the most vulnerable hardest, become hot button issues and can become major electoral influences in a short time.

In addition, 2011 was a bad year for weather extremes, as it was around the world. Australia saw flood, fire, drought and storms of unusual severity, all of which are consistent with predictions related to global warming. These events certainly affect economic conditions, but they also generate a sense of unease that can quickly turn into political pressure.

So in 2012 some core structural tensions will become ever more obvious. We have seen the rise and rise of massive transnational resource companies in national life, so powerful now that their advertising has a major impact on public opinion. They were arguably instrumental in removing a prime minister and rejigging a mining super-profits tax. Their think tanks and tame journalists are busy in various media activities, well-resourced in dealing with an array of increasingly complicated issues. What role will they play in the great debates about how we respond as a nation to emerging challenges? Similarly, the ongoing financial chaos has only acted to place the banks in a more central role, so how will they and the financial markets respond as the economic problems unwind?

And perhaps most importantly, can the national political system recover and generate the confidence Australians will need to have in it to back the reforms that must be made sooner rather than later?

One way or another, 2012 will be an interesting year. Here in Australia our main institutional structures will be further tested by forces within and without, and we will see how they stand up to the pressure.

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About the Author

Dr Peter McMahon has worked in a number of jobs including in politics at local, state and federal level. He has also taught Australian studies, politics and political economy at university level, and until recently he taught sustainable development at Murdoch University. He has been published in various newspapers, journals and magazines in Australia and has written a short history of economic development and sustainability in Western Australia. His book Global Control: Information Technology and Globalisation was published in the UK in 2002. He is now an independent researcher and writer on issues related to global change.

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