The (geo)politics and (geo)economics of Australia’s election
4 Apr 2022|

‘Tonight, as we gather, war rages in Europe. The global pandemic is not over. Devastating floods have battered our communities. We live in uncertain times.’

— Treasurer Josh Frydenberg, budget speech, 29 March 2022

The federal budget is the starter’s flag for the race to Australia’s May election.

Cash splash is prelude to campaign dash.

Or—less slang, more formality—the national accounts are presented as the government prepares to account to the voters.

As prefigured by the budget, the election race is a deeply domestic affair with those well-tried horses Costa Living, Jobs ’N’ Growth and Pet-Roll Prices dominating the form guides.

This year, though, the Four Horsemen of the Apocalypse round the bend close on the heels of the domestic nags.

Before turning to Costa and Pet-Roll, Josh Frydenberg started his budget speech with that nod to war, conquest and disaster, and ‘the biggest economic shock since the Great Depression’.

The introductory thought to the government’s ‘vision and plan for a stronger future’ was the need to be ‘realistic about the growing threats we face’. The section on national security began with rumination on the reality of a ‘world less stable’, confronting ‘aggression’ and ‘coercion’.

The election race will gallop across domestic terrain with a constant eye over the shoulder at the (geo)politics and (geo)economics.

Russia’s war on Ukraine, the budget predicts, will cut global growth by three-quarters of a percentage point in 2022 and increase global inflation by about 1.5%. Treasury is relatively sanguine about what Ukraine will mean for the Oz economy:

As an energy and food exporter with very limited direct trade exposure to Russia, Australia is better placed than most countries to absorb the economic effects of the conflict and associated disruptions. Higher fuel and other prices will negatively affect consumers and dampen consumption growth, but higher commodity prices will provide a positive boost to national income through higher export earnings.

The state-of-the-world survey offered by the Department of Foreign Affairs and Trade gives a flavour of the ‘incoming government brief’ DFAT will offer after the May election. The added benefit with the portfolio budget papers is that swathes of pages aren’t ‘redacted’ in the way that the government brief is cut when it dribbles out through freedom of information requests.

A ‘deteriorating strategic environment’ confronts Australia, DFAT reports: ‘Many Indo-Pacific countries remain vulnerable following the COVID-19 pandemic, while great power strategic competition is intensifying. The rules, norms and institutions that support Australia’s prosperity and security are under persistent pressure.’

The linking of China and Russia—what Prime Minister Scott Morrison calls ‘a new arc of autocracy’—gets this DFAT judgement: ‘Growing alignment between Russia and China, with its increasing military capability and growing assertiveness, has significant geo-strategic implications and underlines the importance of established rules and norms instead of a “might is right” approach.’

For the Department of Defence, the money keeps rolling in, as promised. See ASPI’s Marcus Hellyer on the 2022–23 defence budget: ‘In key ways it acknowledges and responds to a changing world, but in others it is a relic of an earlier time.’

In the cyber domain, Australia is going to spice it up with REDSPICE, which stands for Resilience – Effects – Defence – Space – Intelligence – Cyber – Enablers. The promise is $9.9 billion over the next decade for new cyber and intelligence capabilities and 1,900 new people at the Australian Signals Directorate. The supernerds of Defence’s cyberworld think it ‘the most significant single investment’ in ASD’s 75 years.

The celebration of ASD’s 75th birthday was why Jeremy Fleming, head of Britain’s signals and cyber intelligence agency, GCHQ, was in Canberra to give a speech on ‘a period of generational upheaval’—pandemic, the ‘dominance of technology and cyber’, the rise of China, the end of the Afghanistan campaign, and Russia’s invasion.

From deep inside the secret world, Fleming emphasised ‘a remarkable feature’ of the Ukraine conflict—how much Western intelligence has been so quickly declassified to get ahead of Russian President Vladimir Putin’s actions:

From the warnings of the war. To the intelligence on false flag operations designed to provide a fake premise to the invasion. And more recently, to the Russian plans to falsely claim Ukrainian use of banned chemical weapons.

On this and many other subjects, deeply secret intelligence is being released to make sure the truth is heard. At this pace and scale, it really is unprecedented.

Fleming said Putin’s massive miscalculation produced exactly what Russia didn’t want, galvanising NATO and triggering ‘an unprecedented international response’.

Russia’s choices narrow, while China has big choices to make, Fleming noted:

We know both Presidents Xi and Putin place great value on their personal relationships. But Xi’s calculus is more nuanced. He’s not publicly condemned the invasion, presumably calculating that it helps him oppose the US. And, with an eye on retaking Taiwan, China doesn’t want to do anything which may constrain its ability to move in the future …

But there are risks to them both (and arguably more for China) in being too closely aligned. Russia understands that long term, China will become increasingly strong militarily and economically. Some of their interests conflict; Russia could be squeezed out of the equation.

And it is equally clear that a China that wants to set the rules of the road—the norms for a new global governance—is not well served by close alliance with a regime that willfully and illegally ignores them all.

As the flag went down in Canberra in budget week, Trade Minister Dan Tehan was in Washington to launch an annual strategic economic dialogue with US Commerce Secretary Gina Raimondo. The talks covered economic coercion, critical minerals and regional supply chains.

Australia repeats with the US what it’s doing with Japan and India in the Supply Chain Resilience Initiative, to ‘counter China’s dominance as trade and geopolitical tensions escalate across the region’.

In creating the strategic economic dialogue with the US, Canberra repurposes the title of an agreement it reached with China. The signal to Beijing is sent using China’s own codes.

Australia’s strategic economic dialogue with China was born in 2013 as part of the ‘comprehensive strategic partnership’. The strategic language was part of Beijing’s price for getting an annual leaders’ summit. These days, Beijing won’t take ministerial phone calls, much less do summits.

Morrison bid adieu to the strategic partnership with China in February 2021. In May, Beijing suspended the China–Australia Strategic Economic Dialogue (already moribund since 2017), denouncing Australia for disrupting normal exchanges and cooperation ‘out of Cold War mindset and ideological discrimination’.

Heading to Washington, Tehan’s headline was ‘Strategic Economic Dialogue’, but by the time of the joint statement, Washington codes were injected, so it became the Australia–US Strategic Commercial Dialogue; when the treasurer and treasury secretary join future meetings, expect ‘economic’ to creep back into title.

For Australia, this dialogue will be the geoeconomics complement to the geopolitics of AUSMIN, the annual meeting between Australia’s foreign and defence ministers and the US secretaries of state and defence.

For the US, the dialogue is another piece of President Joe Biden’s attempt to create a new ‘Indo-Pacific economic framework’.

The US is in the strange position of having to build a framework because it trashed its own previous creation. The Trump administration dumped the Trans-Pacific Partnership, an impressive effort to build a US version of what the Indo-Pacific trade future should look like.

Biden can’t join the replacement model Comprehensive and Progressive TPP, now in its fourth year of operation. The politics of free trade treaties is toxic in Washington; frameworks will have to do.

That’s what happens when domestic nags gallop in competition with ‘geo’ steeds.

Now off and racing towards May, Australia knows the feeling.