The Morrison government’s supine position on Donald Trump’s war on the international trade system could do real long-term damage to an economy that heavily relies on a free global trade and open markets. Trump’s war on trade isn’t only confined to China — which is bad enough — but is expanding, like a rampant tumour, to any number of other markets.
Currently Trump is also attacking Japan and the EU, India and, late last week, Mexico, which is now being targeted with comprehensive tariffs because Trump is frustrated at his inability to get a win on his infamous border wall. Even Republicans and US businesses who normally grovel to Trump are appalled — perhaps it’s starting to dawn on Republicans that the President’s misuse of executive power under the fiction of national security will be precedent for the same misuse by a future Democrat president.
Morrison, invisible Treasurer Josh Frydenberg and Trade Minister Simon Birmingham have all gone missing in action as an increasingly erratic and unpredictable US President uses tariffs as a one-size-fits-all solution to any perceived domestic or international problem. Australia has readily fallen into line with the US war on Huawei (guilty of making the kind of surveillance-ready IT equipment for China that western governments like Australia’s want to force western IT companies to produce) and has stayed silent as Trump targets friend and foe alike with tariffs and sanctions.
Despite the commentary about how Trump has all the advantages with China in his trade face-off there, China has — unsurprisingly — refused to buckle and is now preparing a list of “unreliable” companies, countries and people that it will use to introduce sanctions of its own in the way the US has unilaterally sanctioned Iran, Russia, China and others. FedEx, the giant US freight forwarder, looks to be near the top of the list after a brawl with Huawei over diverted packages.
What’s happening here is a kind of analog to what Trump has done domestically in the US: the normalisation of irrational, self-harming and extreme behaviour that, whatever its short-term costs and benefits for the perpetrator, does long-term damage to the basic institutions, however flawed, that support our economic success.
Australia’s failure to say anything in defence of a rules-based free trade system while it is being subjected to ferocious attack only exacerbates the damage the undermining of that system will do to Australia in the long run.
Trump’s random lobbing of tariff bombs is worrying the Reserve Bank, which has been wondering about their impact on the global and Australian economies (the Productivity Commission had a look at what might happen to Australia in a trade war a couple of years ago). The question now is whether Trump’s trade policies start dragging the rest of the world towards a slowdown or worse.
The US economy is fading from the first quarter’s solid 3.1% (annual) growth; inflation is weak, 1.5% by the Fed’s preferred measure, not much more than Australia’s 1.3%. The price of key global oil futures is also falling, meaning after rising for the first four months of 2019, oil (and petrol prices) is heading lower at a time when central banks — and especially the Reserve Bank in Australia — were forecasting higher prices and higher inflation.
AMP’s Chief Economist Shane Oliver (who was early to predict the RBA would be cutting rates this year, not raising them in 2018 and 2019), now also sees wage growth remaining soft in the coming year:
The minimum wage to rise 3% from July — but that’s less than last year’s 3.5% rise. So with around 20% of workforce (those on awards) getting the minimum wage rise it actually implies a 0.1% per annum fall in overall wages growth over the year ahead (i.e. from 2.3% year on year down to around 2.2% year on year) all else equal. Expect wages growth to remain soft!
The combination of slower growth in the minimum wage, falling building approvals, soft credit growth, falling March quarter investment and likely only modestly rising capex in 2019-20 leave the RBA on track to cut rates on Tuesday by 0.25% with further cuts to follow.
Indeed, Oliver now sees the RBA cutting the cash rate to 0.5% by the middle of next year as the economy struggles to prevent a rise in unemployment — not the fall to 4.5% the RBA is hoping for.
Morrison was elected on a platform of doing nothing but mugging and smirking for the cameras. He’s likely to find that’s fine for a five-week election campaign but won’t cut it for running an economy reliant on trade.
“Morrison was elected on a platform of doing nothing but mugging and smirking for the cameras. He’s likely to find that’s fine for a five-week election campaign but won’t cut it for running an economy reliant on trade.”
This is likely the most pertinent point facing ScoMo and Co in Government. They spent 6 years doing little, won off the back of promising little and are now looking to govern by focusing on a few pet issues, namely flattening the tax bracket, targeting dole bludgers and fixing the few social ills that don’t 100% benefit them.
I highly doubt they have a trade plan beyond signing more meaningless free-trade deals with nations so they can continue to mug and smirk for the camera.
Whilst recessions are bad news, I hope it smashes them hard so it can break this myth that this pack of cronies are ‘good’ economic managers.
Trouble is Lefty, those who will be smashed will be those who have no protection from the storm, me included.
The conservatives have only one policy agenda and thats trickle down economics, a failed science but they have nothing else to offer and when the economy starts falling down around them they`ll resort to the age old conservative answer to everything, austerity, cutting and slashing everybody`s incomes (except their own) this is the tactic they`ve used since time immemorial and guess what, it does`nt work, like cutting your leg off because you have an infected toe instead of curing the infection, this ideology is the direct cause of the last GFC and every recession/depression in history and these selfish greedy dumb bastards just keep repeating history world wide and whats worse the dumb stupid voters keep voting for them like turkeys voting for xmas and then sharpening the farmers axe for him, dumb and dumber, the conservatives and the fools voting for them.
After 6 years of this pants down, brains suspended, inbred and infighting shower of backwards looking drongos in charge of the economy, it couldn’t be more obvious that the economy runs itself…for better or worse.
Morrison simply has hold of the tail of the tiger….If he’s lucky things will run along OK, if he isn’t, then there is stuff all he’ll be able to do about…..even blaming the ALP is pretty much out of the question at this stage.
He better hope there is a God and he better hope that he looks favourably on tongue talking snake handlers.
How goods trade wars!
He he he How goods trade wars?! Nice wrap up!
And blaming Labor for a struggling economy three years hence will be unthinkable, no one will swallow it. It’s hard to find any positives in the election result but there is one: after almost a decade the Coalition will be solely responsible for the Australia of 2022, economy et al.
Labor will be off the hook.
The Oils used to sing of “Short Memories” but this lot get by on false memories.
Lies are up & running before reality gets its laces done up, mainly coz people prefer them to Truth.
Zut “blaming Labor for a struggling economy three years hence will be unthinkable, no one will swallow it” I admire you optimism. I’m not so sure given the last election the LNP maggots now know that many Australian voting sheeples are in the fool me once, fool me twice, and we’ll vote for you again if the LNP come up with a smug sloganeering smirking fool in a baseball cap, FOOL ME ALL THE TIME!
Whilst I agree with the articles Points around the election and a Scott Morrison administration I think it misses the wider view. DJT has just spent 4 days negotiating deals with Shinzo Abe in Japan. The announcements from those four days are to my mind significant for Australia and the Indo-Pacific region. Japan is back, Shinzo Abe has succeeded in achieving his grandfather’s, father’s and his own ambitions to see Japan leave the Unconditional defeat of 1946 behind. https://www.whitehouse.gov/briefings-statements/remarks-president-trump-prime-minister-abe-japan-joint-press-conference-3/
A less diplomatic translation runs thus.
“Standing side by side aboard the JS Kaga, which will serve as Japan’s first carrier since World War II, Japanese Prime Minister Shinzo Abe and US President Donald Trump declared to their domestic and international audiences that the Japan-US relationship had been upgraded to a “global military alliance.”
The two leaders’ confirmation of a plan for the Japan Self-Defense Force (JSDF) to operate alongside the US military in a wide arena, ranging from the West Pacific Ocean to the Indian Ocean, and the specific ways of achieving that marked the effective end of Japan’s exclusively defense-oriented military policy (the principle that military force can only be used for defending Japan), which has been guarded by Japan’s so-called “peace constitution” for more than seven decades.”
The spotlight now turns to India.
That sounds good. Japan muscled up, India and Pakistan shaking their nuclear fists at each other and a loose cannon in the White House. What could possibly go wrong.
The Shaky Isles have never seemed more stable, with a sane government to boot.
The link ought to be compared with the result of a search that takes the form “China and the Indian Ocean”. A range of publications are returned. India is out of the picture in regard to its own back yard which is controlled by the PRC through to the Middle East.
This from two years ago would suggest otherwise,
https://timesofindia.indiatimes.com/india/India-seeks-to-snip-string-of-pearls/articleshow/52628276.cms
In addition India controls access to the Malacca Straits via its Nicobar and Andaman Island territories. It can also force project from Gujarat to interfere with seaborne traffic arriving at and departing from the Persian Gulf. Naval Stations in Kerala and Tamil Nadu also exert significant capabilities. The very shape of India as a huge projection into the Indian Ocean allows it influence from Home Bases without the need for distant facilities and the logistical challenges that go with them.
The following from a month ago John; along with the some interesting info contained the “also read” box.
https://www.theweek.in/news/world/2019/05/03/china-building-capability-offensive-operations-indian-ocean.html
Control over the Indian ocean is a principal component of the Silk & Belt. We’ll see just how “non-aligned” the PJP is over the following year.
It was your statement “India is out of the picture in regard to its own back yard which is controlled by the PRC through to the Middle East.” that I was challenging Kyle by pointing out that India is in pole position by virtue of its very geology and geography. If you check my very last sentence of my June 3rd posting I referenced India as it seems obvious to me that the Quad is far from dead and with the incorporation of Japan, India is the final piece. The US is currently mounting significant pressure on the returned Indian Govt to become that fourth and final piece. Any Chinese submarines operating in the Indian Ocean for some considerable future period will be the equivalent of the German U boat U862 and the German merchant raiders of WWII. There are considerable other forces well established in the Indian Ocean well capable of dealing with any potential Chinese challenge in distant waters.
India’s Operational fleet
as of March 2018,
1 aircraft carrier
1 amphibious transport dock
8 landing ship tanks
11 destroyers
13 frigates
22 corvettes
1 mine countermeasure vessel
2 nuclear submarines
14 diesel submarines
29 patrol vessels
4 replenishment oilers
other auxiliary vessels
I’m tempted to list (from Janes) the armament for the PRC for the regioin but I won’t bother but it certainly compares with the list that you have provided. My point is that India has only just “snapped out of it” but its a tad too late.
We’ll see where it goes but my money is on the Silk & Belt. Over population will come to crush India and it will exceed China’s in a matter of years. Just in civil infrastructure (visit both places for yourself) the PRC is years ahead.
I agree the PRC is years ahead and India has immense problems arising within itself, not least of which will be a substantial movement of people out of Bangladesh from sea level rise and even possibly Pakistan as the Indus dries.. Water and the lack of it will beat India before population numbers. Currently the sub continents rivers are experiencing the benefit of Himalayan Ice melt, at some point that will turn into deficit. The subcontinent has seen millions die in earlier famines so mass populations deaths will not be a new phenomena.
I am aware of what the PLN has and more importantly what it has in the pipeline but those numbers are not going to appear in the Indian Ocean,, a presence Yes. The PLN’s principle concern is much closer to home, currently it’s Home Waters are susceptible to blockade as all access to the High Seas is under the control of potentially hostile forces. The recently agreed deal with Japan means that Japan will undertake a significant naval buildup and its navy will operate jointly with the USN, add in the RAN, French and British contribution and you have Naval dominance as far as the eye can see. At some point that dominance will be challenged and then the fur will really fly.
When I wrote “years ahead” I did contemplate the word “decades”. Secondly, while we’re gaping into our crystal John, my gut suggests that Trump is in the UK to tell Boris in particular : fuck europe and join me.
Trump would be quite happy with being able to get the UK off the European tit after 40 odd years even it such a marriage is met with some gnashing of teeth by Rees Mogg et al.
Very definitely is Trump courting Japan as a counter to the South China Sea issue but *I* can’t foresee any enthusiasm from Europe for the region especially when the objective is so plainly American. The longer term involvement by the RN is, I suggest (and I agree with you), just what Trump is endeavouring to achieve.
As to “fur flying” : indeed – a real scenario. On the other hand Jutland was not much more than a few uncoordinated swings by a couple of drunks in a front bar. The capacities of the two navies were formidable but neither unleashed, completely, their fire-power on one another or on either country.
Kissenger’s book “World Order” is to be taken seriously but not necessarily literally. In addition to “a tall dark stranger” I see Asian (PRC) hegemony within 35 years in the region. The West (I am very sorry to say) has garotted itself in regard to jettisoning classical ethics, empiricism and an independent public service in exchange for identity politics, post-structuralism (or modernism – not the same) and post-truth. “Mackers” : I’m loving it.
I have recommended to Crikey that specific topics be listed for informed discussion but NONE of my suggestions, on a range of matters, have been acknowledged – much less accepted. I’m only here for another week or two. ho hum.
I think for DJT the UK is just another profit opportunity plus it has some useful armed Forces that help to spread the cost. All quite sad really, with the benefit of hindsight the outcome for the UK of ‘winning’ in WWII turned out to be a Pyrric victory. France is keen to retain influence in both the Indian and Pacific Oceans via its Department Territories. The French aircraft carrier with fleet support is currently in the area showing the flag. Agreed there will be Asian hegemony and that has consequences for Oz, it will be interesting to see how and when those adjustments come about.
Just read this in relation to DJT’s dealings with the UK and Europe.
“President Trump has exposed pitilessly the fact that, while might may not be right, might generally wins.”
Just read this in relation to DJT’s dealings with the UK and Europe.
“President Trump has exposed pitilessly the fact that, while might may not be right, might generally wins.”
“Pyrrhic” is probably laying it on a tad thick John. More to the point, American
productive capacity won the war (in Europe and the Pacific) rather than anything the Brits did strategically.
Along with strategy one needs equipment even if the Packard Merlins were thrown together in a matter of hours. Ditto for the Cruisers that could be chucked together (with an arc-welder) in five weeks and were presumed to
have a life of six weeks.
At the risk of digressing the Russians ought to have been shelled shitless and Stalin overthrown; moles in MI6 and the infant CIA notwithstanding. Dammed odd irony to go to war over Poland and the now Czech Republic when, at Potsdam, these countries were given to Russia!
I accept the presence of France in the Indian Ocean but not as a pact with the USA or anything like it. That was my point. Irrespective, its small change. Keep in mind that Putin has received the ONE and ONLY Friendship Medal from the PRC (which occupied the entire front page of the China Daily when the investiture occurred).
As for the “adjustment” neither batch of prats (of either side of the House) has thought about the short and long term consequences or is in any way familiar with the background detail.
Britain finished the war broke, indebted to the eyeballs and its productive capacity exhausted. I’ve just been reading on Australia’s Dominion status and it’s ending post war . A period full of emergency Finance minister meetings, Heads of State and the winding up of the Sterling area. The winds of change and Suez put the cap on that entire period. Yes Patton could afford to lose five of his tanks to the Germans one in Western Europe but it was the Eastern Theatre that did for the Thousand Year Reich.
the “might generally wins” remark is consistent with my “bugger Europe : Join a real Club” hypothesis that will be presented to Boris.
Spot on Kyle.
Both President Trump and Prime Minister May said they are committed to securing a strong trade deal after Brexit. Mass protests against the president’s visit also took place, though Trump dismissed them as “very small.”.
Spot on Kyle.
Both President Trump and Prime Minister May said they are committed to securing a strong trade deal after Brexit. Mass protests against the president’s visit also took place, though Trump dismissed them as “very small.”.
When you are too stupid to know what to do, do nothing.
Sound sense, which is why the stupid do not heed it and charge pell mell into disaster.
Sounds best actually. Last time these clowns decided to do “something” they gave us 50% capital gains and the franking credits debacle. As a result, industry became heavily involved with domestic housing, so house prices trebled, and a handful of pensioners now think it’s their right to steal $6000,000,000 (soon to be almost double that) from the public purse.
Best these bastards do nothing. Their current proposed tax cuts will leave the government unable to provide reasonable services in a few years and any other government coming in after them will be unable to make amends. I’d use the “C”-word but even that pales…