The burden of power and the challenge for Labor

Meanwhile, expensive new infrastructure projects (including public-private toll roads, communications and water desalination plans) are seeing massive increases in the cost of basic utilities. Proposed new communications infrastructure (a fibre-optic network), in particular, are set to comprise a part-private monopoly.

To tackle poverty, the spectre of unemployment, and the cost-of-living crisis, there are a number of responses the Australian Labor government must now consider.

Responding to the crisis: ideas for Labor …

Having committed to hold down taxation as a proportion of GDP (Gross Domestic Product), Rudd Labor now finds itself in a difficult position, unable to pursue major reform in health, aged care, education, infrastructure and welfare, without going beyond its mandate.

It is an important ideal for all democratic governments to aspire to remain true to an established mandate. But there must also be flexibility in the event of unforseen contingencies, especially those involving powerful practical and moral imperatives.

Here, the global meltdown in financial markets - and its consequences - must be considered.

Importantly, given the likelihood that US financial woes - including a severe liquidity crisis - lead to a global recession, there will be flow-on effects for the world economy.

Australia’s resource boom depends largely on the Chinese market, and has fed a massive increase in company tax receipts. It is only this surge that has made possible the regressive restructuring and lowering of tax elsewhere, under both Rudd Labor and the previous Coalition government.

Importantly, there are some who foresee a slowing of Chinese growth, with predictions that iron ore shipments will slow and that “iron ore and coal prices could fall by 20 per cent next year”.

But even if China maintains strong growth in its domestic markets, Australia cannot avoid the flow-on-effect of a recession in the US, Japan, and elsewhere.

Again, in such circumstances flexibility is essential. All governments must face the prospect of unplanned-for contingencies. And under conditions of global recession, budget surpluses simply do not make sense.

In order to maintain programs and fund nation-building projects, which themselves provide a counter-cyclical boost, the Australian government has signalled its intention to fast-track such initiatives.

Specifically, there is talk of drawing upon the Building Australia Fund - to bring forward $20 billion in infrastructure investment.