By Denis Bright

Australians are still waiting for a real response from the Shadow Treasurer Angus Taylor to Jim Chalmers’s economic statement. Angus Taylor’s media site released a political statement on the forthcoming economic statement on the day prior to the delivery of Dr Jim Chalmer’s economic statement:

“The former Coalition Government left Labor with the toolkit to continue Australia’s strong economic position. Record low unemployment, strong GDP growth, historically low interest rates and the largest turn around to the budget bottom line in 70 years.

“Anthony Albanese needs to provide Australians with a plan to help them deal with this cost of living crisis, not a list of excuses.”

Ironically, the Treasurer’s economic statement on 28 July 2022 delivered precisely what the Opposition suggested. With the support of Treasury, Jim Chalmers has three months to develop a responsible approach to inherited problems from the coalition years and new projections just released from the IMF. Nostalgia for the old order left by the federal LNP is increasingly irrelevant as the weeks tick by to the new budget in late October.

There should be a lot of common ground between the Albanese Government and the Opposition to work at addressing an inherited mess of weak private sector capital investment, a trillion dollars of federal debt and an even higher debt burden for the states and territories as shown in the latest Reserve Bank (RBA) Charts which extend only to the March Quarter of 2022.

The bright spot is the resources sector of exports and the steadying influence of a moderating Australia dollar.

New capital inflows have been on a downward spiral since the election of the Abbott Government in 2013 as shown by the trendlines from the RBA charts.

Fortunately, the new government is working on repairing economic and investment ties with China. Foreign Minister Penny Wong met with her Chinese counterpart Wang Yi during the G20 summit in Bali in early July. DFAT offers a good synopsis of our economic ties with China. Eroding this relationship will make the preparation of the new budget even more challenging.

China is Australia’s largest two-way trading partner in goods and services, accounting for nearly one third (31 per cent) of our trade with the world. Two-way trade with China declined 3 per cent in 2020, totalling $245 billion (Australia’s global two-way trade declined 13 per cent during this period). Our goods and services exports to China totalled $159 billion in 2020, down 6 per cent compared to 2019. This decline largely reflects reduced services exports as a result of the COVID-19 pandemic (down 36 per cent in 2020). A series of trade restrictive measures by China has also impacted Australian goods exports to China, which were around 7 per cent lower in the second half of 2020, compared to the second half of 2019.

The China–Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015. ChAFTA is an historic agreement that is delivering enormous benefits to Australia, enhancing our competitive position in the Chinese market, boosting economic growth and creating jobs. Businesses have taken advantage of lower tariffs under the agreement, with a utilisation rate of over 90 per cent in both directions.

The opportunistic trip by US House Speaker Nancy Pelosi to Taiwan is probably geared to a quest for better polling numbers for the US mid-term elections on 8 November 2022. The slender working majority of the Biden Administration could be challenged by this election in both houses of congress to leave the US in charge of an ageing lame-duck president.

It is in Australia’s interest to work at repairing the damage caused by faulty economic diplomacy to please our allies in the Australia-US Global alliance. China is not a model democracy but neither is Saudi Arabia with its mass executions or Israel which refuses to accept the nuclear proliferation treaty and installs nuclear field, air and submarine weapons.

Without a more independent economic diplomacy from the Australian government, the economic updates in the Treasurer’s economic statement over pre-election forecasts may be a trifle optimistic particularly in the imbalances between employment growth and unemployment as well as GDP forecasts.

There is nothing in the text of the ANZUS Pact to require Australian governments to follow the prevailing US Administration in developing our own sovereign economic, trading and investment issues. Way back in 1951, Labor supported the ANZUS pact which was negotiated by the Menzies Government with these important caveats:

Regrettably, both the LNP and Labor have drifted into an All the Way with the USA approach to international relations regardless of the economic cost to Australians. Already the new government has paid $6 billion to France for our breach of contract on the submarine deal negotiated by Malcolm Turnbull. Fortunately, Tory Shepard of The Guardian (14 December 2021) was brave enough to deliver some home truths relating to the Morrison Government’s defence purchases from Britain and the USA.

Australia’s eight planned nuclear submarines will cost $70bn at an ‘absolute minimum’ and it’s ‘highly likely’ to be more than that, defence analysts say. With inflation, the cost could be as high as $171bn, according to a new report from the Australian Strategic Policy Institute.

When it comes Angus Taylor’s references to Labor’s so-called extravagant spending to implement election promises on a change agenda in the late October Budget, readers should be demanding more protection against the cost of greater involvement in the US trade and investment wars with China.

France made the mistake of extending too much trust to the integrity of the US Global Alliance as covered by my reference to the extended deployment of the ageing nuclear submarine Émeraude on an extended mission to the Indian Ocean, Perth and onto the South China Sea to test the capacity of the Chinese navy to detect a submarine operating in stealth mode in my article on the eclipse of Henry Kissinger’s effects to promote peaceful engagement with China (The AIM Network, 22 July 2021). Such stealth operations in contested waters are dangerous to the lives of naval personnel on both sides of the strategic divide.

Meanwhile, Jim Chalmers’s Treasury is working on responsible preparations for a budget in October 2022. Opposition Treasury spokesperson Angus Taylor could do much more to assist with these processes to extend bipartisan goodwill generated by the complex election results from 21 May 2022.

Working to restore full trade and investment ties with China is not incompatible with a continued dialogue on human rights issues in China and stronger relations with neighbouring ASEAN and Pacific Island countries with their largely more non-aligned trading and strategic policies.

A more stable Indo Pacific Basin is essential for improved Australian living standards through savings on those unproductive strategic manoeuvres in the Taiwan Strait and the South China Sea. Despite all the sabre rattling clips on eyewitness news services, Chinese tourists regularly visit Great Kinman Island just off the Chinese city of Xiamen for outings to an outpost of Taiwan where fortifications shelled the mainland during the worst years of the Cold War while the leaders of the US and Taiwan took full advantage of tension building visits.

Image: Taiwan Times 16 June 1960 showing US President Eisenhower and President Chiang Kai-shek in Taipei

Will Australian leaders have the courage to reject repeat performances by Nancy Pelosi and Taiwan’s President Tsai Lng-wen as contemporary domestic election gimmicks to impress voters on both sides of the Pacific if such visits stoke up international tensions and economic costs to Australian Governments of all persuasions?