So, what does Paul Keating’s Sinostralia look like?

Given the old bullyboy’s unhealthy hold over the national imagination regarding the future of Chinese ties, let’s explore where his vision would take us.

Paul Keating would like to see Australia’s commitment to ANZUS modulated versus Chinese interests. That will mean a much more insecure commitment by the US to Australia so the first implication is that Australian military spending will have to rise materially. This will be made all the more pressing by the arms build up in our region as Keating’s reduced US influence triggers an Asian arms race, including nuclear.

There’s no easy way to put a figure on it but let’s say it will need to rise at least from the current 2% of GDP to something closer to 3%.  An additional $200bn per year give or take. Even before we consider getting the bomb.

To raise that kind of dough we’ll need higher taxes to the tune of 3-4% on everything. That doesn’t seem too bad. But no business is going to volunteer to pay for it, and given they have all the power these days, it’s likely the expense will fall mostly on households so it is probbaly more likely to be a 7-8% tax hike for them.

Thus, the first thing to consider is a material and permanent drop in disposable income as Australia arms itself for a much more volatile and uncertain region.

You can probaly argue we will see increased Chinese investment in everything so there is some kind of GDP boost in that though, again, it is unlikely to benefit households much.

Moreover, as the Chinese model of growth intensifies Downunder, the gap between rich and poor will get much wider with the vast majority of Australians much worse off as wages fall towards parity with China, house prices rise endlessly and building new cities becomes the ONLY game in town.

Along with that investment we can expect a higher immigration rate of Chinese nationals. As Keating’s embrace of all things Chinese filters through universities, Beijing will take the opportunity to funnel migrants Downunder to embed its new found influence via more students leading to migrants.

This will debauch universities considerably further. Pedagogical standards will be corrupted steadily as XI Jinping thought permeates various course via all poweful Confucion Insititutes that move to the centre of campus life. Student unions will become Chinese national monopolies, training grounds for future generations of CCP-sympathetic leaders.

This is the beachhead for the transition of Australian politics, which will take decades, so will not be visible day-to-day. It will plod on pretty much in the same fashion, with rampant corruption by interests, but now it will do nothing to upset Beijing. In the very long run it will become Chinese dominated either directly or by implication as the number of Chinese electorates grows and the diaspora occupies the positions of power with the approval of Beijing.

You can see the marginalisation of the other Australian peoples from their own democracy here. So it will not be smooth. Indeed, it is likely to generate a lot of civil strife from time to time, especially among local youth as they watch their notion of Australian culture and liberalism drain away. A kind of slow motion Hong Kong is the best analog. Right along with the the thin-slicing of freedoms, including a dimishing free press and free speech, most espeically for those with any kind of view different to that of Beijing. An extradition treaty is likely to ensure all wrong thinking folks end up in Xinjiang re-education camps, or perhaps some built closer to home, in the Pilbara, by diversifying Ausssie mining firms.

At a certain point this sinofication is likely to run afoul of ANZUS and our military as well as security agencies. The criticial point might come when China seeks to annex Taiwan around 2040, or earlier. Australia will refuse to join the fight and the US will be confronted with a crisis in its Western most empire. If a liberal democratic ally so central as Australia has abandoned the US alliance network then it seems likely to me that all Asian allies will do likewise. Taiwan will sink in a brief war never to be seen again.

But that will not be the end of it. Chinese imperialism will now be feared by all in North Asia, as well as the US itself. Having been forced to withdraw from Taiwan, the US won’t simply give up and slip home. It will embark upon a merciless proxy war across the entire Chinese front, from Australia to Japan. For the US, it is much better to arm those with Chinese enmities, to keep it busy in endless insurrections at and near home, than it is to let its political dominance mushroom outwards into the Western Pacific. That way lies a true threat to the US way of life. Taiwan may be beset with US armed insurgencies. We’ll see coups across Asia as various militaries see the chance to seize power backed by one great power or the other.

Think of Africa or South America in the Cold War. It may well include Australia where the schism between the strategic arms of the executive and the sinophilic legislature boils over.

You may think that is all a bit extreme. But it is merely an extrapolation of trends already visible today. It is an incredible gamble with our chirldren’s future unworthy of any government with its people’s interests at heart.

This is particulalry the case when we consider the counter factual. What happens if Australia does not kow tow its way into CCP affections and instead stands up to it. This scenario must be considered in the harsh light of the realities of the Chinese economy. It is smaller than is being made out. Perhaps as much as one third but most certainly material. It does not calculate GDP in the same way that we do. It inflates it.

Moreover, it is not yet rich and is unlikely to become so as it slumps into the middle income trap along with dreadful demographics that are a perfect match with those of Japan. Sure, it will keep growing, and will probbaly appear to grow much faster than elsewhere for a long while yet. But if it is growing at 4-5% and 2% of that is phony then it is no longer catching up or passing anybody. This limits its scope on a number of fronts:

  • it will become more difficult to hold the homeland together;
  • military outreach is constrained;
  • soft power growth is capped.

Why would the US give up its Western empire to this? It won’t. Through various fits and starts it will arm its allies and push China to ever further extremes of capital misallocation. China will certainly be a great power, and may even be strong enough to grab Taiwan, but its economic woes will end its expansion there and the globe will settle into a long and difficult Chinese containment in north Asia.  But one that is far more peaceful than the alternative.

Australia may or may not be asked to fight in this war or that. But it will be free. Sure, we’ll still have CCP-bribed and Canberra scum to deal with but at least they’ll be our scum, and we’ll be able to fight them with hope of considerable success.

This is a far superior outcome to Keating’s alternative path which guarantees enslavement one way or another.

Houses and Holes

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.

Comments

  1. I think this might be an example of the type of strategic thinking that Keating was lamenting was missing from government circles.

  2. The Chinese are exploiting the liberal immigration policies of AUS, CAN and NZ to colonise the strategic coastal cities of Sydney, Melbourne, Auckland and Vancouver so as to deny these cities as anchorages and bases for USN operations in the Pacific Ocean. They’ve achieved this in Australia and NZ by exploiting the unregulated student visa program. The Chinese Govt are funding the operation of Chinese owned and managed private colleges that exclusively enrol and employ Chinese, they’re creating a parallel society and these colleges will not only allow China to colonise Australia and NZ by stealth, they will also allow it to create a parallel society that is self-sufficient in all the services for such a society to function. One only has to look at the signing of the One-Belt One-Road initiative by Manchurian Dan to see the consequences of allowing China to influence our civic society, culminating in the treason that was the hoisting the Chinese flag over Box Hill Police Station on October 1 2019 in celebration of 70 years of Communist rule in China.

    • The Chinese students are paying $$$$ to study here, so our universities is the one doing the exploitation by selling out Australia.

  3. I’ve been predicting this for years and Australian people thought I was crazy. You get what you deserve and you’re going to get it good and hard.

    • Stewie GriffinMEMBER

      Yup – it will be well deserved. But then its not going to go any easier in the US either as you lot tear yourself apart in the upcoming Juedo-Christian cultural civil war.

    • During the cold war years, Straya was seen by many Americans as a place to go if ever a nuclear confrontation. Coming here was nearly a fait accompli as the people and beliefs were so similar. Now, with ‘that’ threat reduced, and Straya committed to redefining itself to become another ‘asian’ nation, I reckon that Canada or Mexico would be a much preferred and welcoming destination if events cause major upheaval and the corresponding movement of people. There will be a point when everyone realizes the much heralded AUS-USA bond is no more and the big brother type protection that we enjoy currently in the So Pac will surely end.

  4. We need 3 nuclear subs now
    Cost 10 billion. Lease them from the u.s if needed and crew them from there if needed.

    Screw diesel 4 knot per hour bath tubs. They are rubbish. Dont see the chinese navy making diesel subs

    • Straya has the finest swimmers in the world. We just need to train them in boxing, karate and other martial arts.

    • Too late for nuclear. The only people benefiting from the new subs (providing they can go down and come up again) is the French contractor and assorted hangers-on here who have taken a cut (including bribes).

  5. Stewie GriffinMEMBER

    Keating loves being embraced by Asians. Cellists have such long arms for ‘reach arounds’

    • Stewie GriffinMEMBER

      Honestly – given that Arabic is now the most spoken 2nd language in Australia, and the dearth of other quality immigration alternatives, I’m 100% with you Reuschtige.

      My question is, if ever a serious war kicks off between China and Japan, and the world gets flooded with Asian women seeking refuge while their men stay and fight (as opposed to run away) – will hairy legged Australian feminists remain so tolerant of immigration, when we get flooded with cute, young Asian chicks wanting to move to Australia rather than dreamy doe-eyed Behrouz Boochani types from the cover of their favorite Mills and Boon novels?

      • Stuff the feminists — all these virtue signalling 1diots and everyone that voluntarily associates with an identity group are going to get a huge dose of reality come crashing down on them soon enough. When unemployment is high and race and class riots are raging the ‘virtue era’ will be consigned to the dustbin of history.

      • “If ever a serious war kicks off ….. – will hairy legged Australian feminists remain so tolerant of immigration, when we get flooded with cute, young Asian chicks wanting to move to Australia”

        There was a shooting war in the Ukraine not that long ago, legitimate refugees… I can’t think of any of the western world keenly taking in thin Ukrainian female refugees.

    • John Howards Bowling Coach

      That crew look like a cohort of the most boring but demanding beings on the planet. Starfish Airlines, business class prices for not even the service equivalent of the pack of peanuts. Talk em up all you like, most of them are the most forgetful experience ever.

  6. “You may think that is all a bit extreme. But it is merely an extrapolation of trends already visible today.”

    An astute investor knows that extrapolating today’s visible trends for 20 years to the future is a bad idea.

    • An astute investor knows that extrapolating today’s visible trends for 20 years to the future is a bad idea.

      True, with the exception of investing in Australian property in specific years as listed below:
      1965,1966,1967,1968,1969, 1970,1971,1972,1973,1974,1975,1976,1977,1978,1979, 1980,1981,1982,1983,1984,1985,1986,1987,1988,1989, 1990,1991,1992,1993,1994,1995,1996,1997,1998,1999, 2000,2001,2002,2003,2004,2005,2006,2007,2008,2009, 2010,2011,2012,?,?,?,?,?,?,?

  7. The politicians do not decide what the future of Australia is, their sponsors do. It has always been that way in the corrupt little colony called Australia. Because of this those who have the most money call the shots, and as China gets richer it will have a greater say over the future of Aus.
    The best way to counter China’s influence over Australia is to become an actual democracy with the public making the decisions rather than a small number of corrupt representatives, i.e. direct democracy.
    P.S. How awesome is the ‘liberal democratic’ coup in Bolivia. For a while it looked like the poor indigenous majority of the country was going to use the mineral wealth and resources of the country to improve their quality of life. It should be an eye opening experience for some to see the western beacons of liberal democracy go all in with their support of the coup.

  8. Jumping jack flash

    “Australian military spending will have to rise materially. This will be made all the more pressing by the arms build up in our region as Keating’s reduced US influence triggers an Asian arms race, including nuclear.”

    Apart from the fact that “Asia” already has nuclear weapons, a bit of public industry and higher taxes is what we need right now.

    Higher taxes would cause deflation at face value because everyone’s spending capacity is tied up with debt, but hopefully that is countered by the extra fulltime jobs created by the government investment into building weapons. As long as this wasn’t a PPP.

    This is *exactly* the solution we need to the current economic malaise. Personally I would stay away from the weapons, but history shows they are an obvious choice for the government when looking at things to build.

    Couple that with a reversal of Thatcherism and the buyback of essential goods and services from the private sector and we would be well on our way to recovery!

    We need to get on board now! Talking about it does nothing.

  9. Will China make the mistake of trying to take over New Zealand first as a test run and expose their true ambitions, or will NZ get mopped up after Australia?

    Either way, our idiot politicians in both countries have sold us out, screwed us over and exposed us to a downward spiral that’ll be almost impossible to recover from.

    Sad to say it but we need a nationalist leader who lays all the cards on the table, instead of a shifty power hungry liar like Scomo or a kumbaya warbler like Jacinta

    • No matter how well or effectively the truth is laid out by any leader, the Australian people will hate and deride them for it. Australians live in deep denial. They have been lied to for so long and so often that they prefer pretty lies over ugly truths. This is the nature of sheeple. If they all follow each other over a cliff to a collective death it’s quite ok with them.

    • Jumping jack flash

      “Sad to say it but we need a nationalist leader who lays all the cards on the table, instead of a shifty power hungry liar like Scomo or a kumbaya warbler like Jacinta”

      Alas, too soon.

      On average everything is still going well. The people are well fed and still have access to as much debt as they can eat.

      The drift to nationalism is still a while away.

  10. No doubt where our loyalties lie. Check the record migration and student stats. China is 1 or 2.

    But when Labor wooed China-heavy electorates, with unlimited parent visas, they were rebuffed.

    • John Howards Bowling Coach

      The parental Visa honeypot is most attractive to the Indians, they yearn to wedge that door open a little further.

  11. Plastique Bertrand

    Put his name at the top of the list.

    When your grandchildren are compulsorily being taught Mandarin, being shamed for their un-Xi thoughts, when no media outlet will question the actions of China, when you are serf in your own country.

    Think back on that list of people who brought us there. Who sold this country out for their own private financial self-interest.

  12. Luckily, Keating isn’t the PM. He really needs to be put out to pasture though and not receive so much air-time. Fortunately, our actions over the past 18 months or so suggest we are pushing back. Could we be more forceful? Yes, but I think the penny has dropped.

    • Even StevenMEMBER

      Agreed. For a while there, there was scarcely even an acknowledgement of China’s influence in Australia.

      At least now the influence is acknowledged. The discussion is around what to do with it – roll over and die? Or push back.

      I am 100% in the push back camp. If indeed China responds punitively through trade, I say lower GDP growth is a small price to pay for your freedom.

      • Well said.
        The evidence suggests a push back.
        – Banning Huawei
        – Blocking sale of critical gas pipeline
        – Appointment of China hawks to key governmental advisory roles
        – Development of strategic military assets with US in NT
        – Steps being taken to address foreign influence in politics
        – Increase in student visa rejections
        – Hastie, Paterson et al
        – Huang Xianmo visa cancellation
        – An acknowledgement that Australia needs to diversify its economy and trading partners.

      • John Howards Bowling Coach

        There is a limit to the pushback from China. China only buy from foreigners what they have to buy they do not give you anything they don’t have to, they are nobody’s friend. They talk a much bigger game than their reality. Their supposedly massive middle class earning a combined household income of around USD$12k per annum is really of little economic power as a customer for Australia for example. They are still essentially a very poor consumer group and only a small portion can afford what we want to sell them. Commodities, they only buy as we’re the best suppliers. BUT they will always do their very best to take over the supply chain, hence the growth of Fortescue given their share register.

    • Plastique Bertrand

      A Board position on a CCP owned entity might do that for you. Coupled with a dose of mild senility

      • John Howards Bowling Coach

        MILD senility you say????

        Yes they must smile till next week at the value they get from owning so many ex MPs in Australia including the former PM