The island continent of Australia holds a federal election today (Saturday) with the country stuck in the middle of the trade war between the US and China.
Around 18m Australians are eligible to vote and voting is compulsory (although the fine for not doing so is only A$20). In the last 2022 election, 11% of voters did not do so, reducing the turnout to its lowest level since compulsory voting was introduced. There are 150 seats up for winning in the all-important lower House of Representatives that decides the government. Voters have preferential votes (voting one and two preferences).
The current incumbent government is the Labor Party, which won a majority in 2022 under its leader Anthony Albanese. The opposition is a coalition of the Liberals (usually representing the richer parts of the cities and big business interests) and the National party (usually backed by the farmers and rural voters). It’s led by Peter Dutton. In 2022, Labor won 77 seats and had a two-seat majority over all other parties. The current opinion polls show Labor narrowly behind on first preference votes but ahead after second preference votes. It’s neck and neck but with a slight edge for Labor.
Albanese and the Labor Party have seen a significant drop in public support since assuming office. As Prime Minister, Albanese now holds a net approval rating of -5%, That’s because the last three years have been a rough time for average Australian households with COVID and the post-pandemic hike in the cost of living, rising interest rates; and extremely high house prices.
House prices in Australia overall have jumped 39% in the last five years – and wages have failed to keep up. It now takes the average prospective homeowner around 10 years to save the 20% deposit usually required to buy an average home, according to a 2024 State of the Housing System report. The rental market is no better, with rents increasing by 36% nationally since the onset of Covid – an equivalent rise of A$171 per week.
Labor and the Coalition have both promised to invest in building more homes – with Labor offering 1.2 million by 2029, and the Coalition vowing to unlock 500,000. These promises are just that – with a long time horizon. A 2025 State of the Land report by the Urban Development Institute of Australia says the federal government will fail to meet its target by 2029 – falling short by almost 400,000. The Coalition aims its housing policy as part of an attack on immigration – wanting to reduce the number of international students and implementing a two-year ban on foreign investment in existing properties. (But foreign buying of homes is just 1%).
Australia’s real wages are 4.8% lower than pre-pandemic levels, while across the OECD real wages over the same period have, on average, risen 1.5%.
Real wages, as measured by annual growth in WPI relative to the annual growth in CPI, did rise by 0.8 per cent in the year to the December quarter 2024. But they are forecast to grow by just ½ per cent in 2024–25 and ¼ per cent in 2025–26.
Climate change in Australia has been a critical issue since the beginning of the 21st century. Australia is becoming hotter and will experience more extreme heat and longer fire seasons.
As a result, the country is facing an “insurability crisis” with one in 25 homes on track to be effectively uninsurable by 2030, according to a Climate Council report. Another one in 11 are at risk of being underinsured.
Yet the economy depends very much on its fossil fuel exports and developing the mining industry. Non-renewable fossil fuels still account for about 85 percent of Australia‘s electricity generation. Australia is one of the world’s largest per capita emitters –producing some 1.3 percent of global carbon emissions with only 0.3 of the world’s population. For a nation so exposed to climate change, Australia remains one of the world’s biggest emitters per head of population. The Labor government has promised to reduce emissions by 43% by 2030- but that’s below the 50% recommended by the Intergovernmental Panel on Climate Change.
Australia used to be called the ‘lucky country’ where people could emigrate to and start a new and prosperous life in an economy that had not suffered a recession of any note for decades. But the signs that this was changing have been there since the Great Recession of 2008-9 and the subsequent Long Depression that ensued up to the COVID pandemic slump in 2020. Australian capital has been running out of more labour, especially as immigration restrictions have stopped net immigration expanding. Net overseas migration (NOM) has continued to decline from its peak in 2022–23, which largely reflects lower migrant arrivals. NOM is forecast to ease further with arrivals expected to continue to decline in 2024–25 before stabilising in 2025–26. The pool of working-age people has barely grown at all.
After taking into account population growth, average annual real GDP per person grew by about 2% a year in Australia up to the Great Recession. However, since then, per capita growth has averaged less than half that rate.
Source: IMF, author
Increasingly, Australian capital must rely on boosting productivity growth to expand, but productivity growth has been in a downward trend.
Source: ABS productivity measure
As elsewhere, the slowdown in productivity growth can be connected to the slowdown in productive investment growth. Business has stagnated at best since the end of the commodities boom in 2011.
Source: ABS
What lies behind the slowdown in real GDP and investment growth? It’s the same cause that applies to all the major capitalist economies in the last two decades: falling profitability of capital. The great boom and revival of profitability in Australian capital from the 1980s, led by Australia’s exploitation of resources in minerals, agricultural products and energy, and the huge expansion of a skilled workforce with ‘liberalised’ labour markets, started to falter in the late 1990s. Although there was a short uptick in profitability during the commodity boom up to 2010, driven by demand from China for Australia’s commodities, in the last decade, the decline in profitability resumed.
Source: EWPT, author
Indeed, corporate profits have been falling in the last two years.
Australia is part of the imperialist bloc of countries, if a junior partner. Up to now, it has been a satellite of US imperialism in the Asia-Pacific region, but Trump’s tantrums are causing Australia’s ruling elite headaches. Nevertheless, both Labor and the Coalition are pledged to boost arms spending under the Aukus security pact with the US and UK designed to resist the ‘threat’ of China – or to be more exact to follow the strategy of US imperialism to ‘contain’ and stop China becoming a rising economic power in the region and globally, The government plans to invest up to A$18bn (US$12bn) to strengthen “manufacturing of missiles, including making advanced guided missile systems in the country.”
The irony in the sabre-rattling against China is that Australia had been ‘lucky’ because of its close proximity to China, the fastest growing economy over the last 25 years. Australia remains heavily dependent on its exports to China and world growth in general. But Trump’s trade war with China threatens to weaken Chinese demand for Australian exports of iron, coal and other resources. In 2023, China purchased 84 per cent of Australia’s US$85.4 billion iron ore exports. Iron ore accounted for 23 per cent of Australia’s total exports in 2023. Finding alternative buyers would be difficult — China purchased 69 per cent of global iron ore exports in the same year.
Australia’s third largest export is petroleum gas, with a 13 per cent share of its export mix. China, the largest importer of petroleum gas in the world, accounts for just under a third of these exports. China is a big importer of Australian services as well as goods. In the 2024 financial year, China was the largest importer of Australian education services, with a 24 per cent share.
Australia’s trade surplus with China accounted for 4 per cent of its GDP in the 2024 financial year. The growth in the trade surplus with China also accounted for 10 per cent of the growth in GDP — measured in current prices — from 2023–24. If the trade surplus with China were to shrink or even just fail to grow, it would have a significant impact on Australia’s economy.
Trump’s tariffs on Australia’s exports to the US will also hit the economy. The direct impact from Australia’s bilateral trade with the United States is expected, in aggregate, to be limited, given the US accounted for only 4.6 per cent of Australia’s goods exports in 2024. But Australia’s external account has already slipped back into its usual deficit.
The IMF is now forecasting just 1.6% real GDP growth this year, well below previous trend growth rates.
It’s true that inflation has fallen back and the Reserve Bank of Australia finally cut interest rates for the first time in four long years. Even so, voters are still suffering from the losses in their living standards in those years and with little prospect of much improvement ahead. Whichever party wins will face serious challenges in increasing national output, living standards and in protecting the environment. And Australia is trapped between supporting US imperialism in its war with China and trying to sustain its markets in China and east Asia.