October 15, 2012
Ross Gittens has a succinct account of the way that Australia's economy has been hit by two powerful, but opposing economic shocks: the expansionary shock from the resources boom and the contractionary shock from its accompanying very high exchange rate:
It's reasonable to attribute the Aussie's remarkable strength since the start of the resources boom predominantly to our high commodity export prices and vastly improved terms of trade.That makes it reasonable to expect the fall in export prices would lead to a commensurate fall in the Aussie, thus reducing its contractionary effect on our export and import-competing industries. But the historical correlation between our terms of trade and our exchange rate, while strong, can also be quite loose for fairly long periods. So it's not surprising the Aussie has held up so well.
Gittens says that is the Australian dollar could stay much where it is for years to come because those countries with the best growth prospects tend to have strong exchange rates whereas those with poor prospects tend to have weak exchange rates.
Australia has a changing economy in a low growth global economy and the latter means lower economic growth for Australia. So the Reserve Bank lowers interest rates to stimulate the economy whilst the Gillard Government's attempts to save the budget surplus will contract the economy.
That contraction will provide more grist to the mill of the conservative populist movement as this movement stems largely from a decline in the economic and social status of the white lower middle classes and working classes which has been gathering pace sharply over the past five years.
Globalization has seen the squeeze on the middle class economic that is helping drive the conservative populist movement and increasing its volatility. Each right-wing populist wave--eg., Pauline Hanson--- as it recedes, leaves the Coalition Party several notches to the right from where it had been previously. Their rhetoric is built around a desire for a return to an idealized past, of a culturally and ethnically purer nation, a stable, traditional society, and a “moral economy” in which decent, hardworking people are guaranteed a decent job.
The white middle class feels embattled and threatened both economically and culturally with respect to the cultural world of conservative Christianity (both Protestantism and Catholicism). This culture is, to a very great extent anti-Enlightenment, and for convinced adherents of this tradition, much of modern Australian mass culture is a form of daily assault on their passionately held values.
The class resentments on the part of lower middle class and working class whites have largely been channelled into cultural hatred of the “liberal elites” and the increasing contempt for scientists and experts of every kind.