VEEP pitches a Straya busy selling itself to China

Advertisement

VEEP, Joe Biden, wants us to know he values ANZUS via Fairfax:

Mr Biden’s speech was billed by organisers as significant coming against the back drop of China’s disputed claim in the South China Sea but he made no major new commitments.

“Anyone who questions America’s dedication and staying power in the Asia-Pacific simply is not paying attention,” he told an audience including three former Australian prime ministers in Tony Abbott, John Howard and Bob Hawke.

“Our commitment to our military strength is unparalleled. We continue to outpace our competitors spending more on our overall defence than the next eight nations in the world combined.

“We have the most capable ground forces in the world and unmatched ability to project naval and air power to any and every corner of the globe, and simultaneously.”

…”Because of the commitment of our citizens to our most fundamental value, because of you we move inexorably forward,” he said.

“So don’t worry about our election … the better angels in America will prevail.

“At a time like this, in the force of xenophobia and demagoguery and what is being trumpeted around the world, we have to remember who we are as Australians and Americans and reflect our best selves back to the world.”

“That is the core of who we are,” he said.

“The partnership between Australia and America is at the core of our vision for the region’s future,” he told the audience at Paddington Town Hall.

“It’s not what we can do for Australia, it is what we can do with Australia.

I’m afraid, Mr VEEP, you’re addressing the wrong problem. The ANZUS alliance is not under pressure from the US side, it’s under pressure from the Australian side. At the same paper just today:

Independent MP Bob Katter has accused the NSW Liberal government of “giving away ownership and sovereignty” in pursuing the potential $10 billion-plus sale of electricity distributor Ausgrid to giant Chinese utility State Grid Corporation.

He said that leasing the majority of Ausgrid to State Grid would give the Chinese government the right to “flick the switch off” on the country’s largest city and its stock exchange, something that would never be allowed in the US or UK

Advertisement

And that is just the tip of the iceberg. Every asset in the country is now for sale to Chinese interests as policy makers enthusiastically embrace the McKibbin Doctrine as a path to growth:

Australia is better placed than most countries to benefit from long-term global trends – such as population ageing, fiscal adjustments and the shift in economic clout from Europe to Asia, Professor McKibbin says.

…”If you have got something like a fixed asset in a country and you are globalising the entire world then location becomes a valuable asset.”

“Real estate on Sydney harbour for example is also from a national point of view attractive. But for foreign investors it’s also very attractive because there’s billions of dollars of wealth being generated in China.

“The middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”

But it will also drive up the real exchange rate, hurting the competitiveness of trade-exposed industries such as tourism – currently enjoying good growth with a lower Aussie dollar – and manufacturing. A stronger dollar means Australian goods and services are more expensive for foreigners while competing foreign goods and services are cheaper for Australians.

Selling your fixed assets to China instead of running productive businesses is great for now. But it comes with strings attached and circumscribes your strategic choices. Fixed assets can always be nationalised in open war but up to that point the owner of your standard of living dictates choices both at the level of political force and suasion over the polity.

Advertisement

If I were you, Mr VEEP, I’d be asking your Australian partners what the they are going to do if it comes to conflict in the South China Sea and China threatens an instant Depression Downunder.

As Hillary Clinton once asked “how do you deal toughly with your banker?” In Australia’s case that should be finessed to the more unnerving “how do you deal toughly with your landlord?”.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.