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Following pointed comments by Beijing’s ambassador, and in light of growing concern about Australia’s continuing economic stability and prosperity, diversifying economic development with a focus on the national security aspect can position the nation for greater success and stability in the Indo-Pacific.
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Australia has enjoyed a record setting three decades of uninterrupted economic growth buoyed by the voracious appetite of a growing China, however all good things come to end as the political, economic and strategic competition between the US and China enters a new phase placing both the global and Australian economies in a precarious position.
Further compounding these emerging challenges is the growing period of economic and strategic competition between Japan and South Korea, equally important US and Australia allies, which have long-standing, robust links to Australia's economic security.
As this vortex of competition continues to devolve into a game of economic brinkmanship, resulting in trade tariffs and hindered supply chain access, many within Australia's political, economic and strategic policy communities have sought to redouble the nation's exposure to volatile and slowing economies.
Australia's earliest economic and strategic relationship with the British Empire established a foundation of dependence that would characterise all of the nation's future economic, defence and national security relationships both in the Indo-Pacific and the wider world.
As British power slowly declined following the First World War and the US emerged as the pre-eminent economic, political and strategic power during the Second World War – Australia became dependent on 'Pax Americana' or the American Peace.
The end of the Second World War and the creation of the post-war economic and strategic order, including the establishment of the Bretton Woods Conference, the International Monetary Fund and the United Nations, paved the way towards economic liberalisation and laid the foundation for the late-20th and early-21st century phenomenon of globalisation.
While the collapse of the Soviet Union and the end of the Cold War cemented America's position as the pre-eminent world power. This period was relatively short lived as costly engagements in Afghanistan and Iraq, peace-keeping interventions in southern Europe and enduring global security responsibilities have drained American 'blood' and 'treasure' – eroding the domestic political, economic and strategic resolve and capacity of the US to unilaterally counter the rise of totalitarian regimes and peer competitors in both China and Russia.
Strategic and economic dependence
This strategic dependence is mirrored by the nation's continuing economic dependence on China and to a lesser extent the broader Indo-Pacific is placing the nation at the centre of a rapidly closing economic and strategic window of opportunity fraught with equal opportunities and challenges.
Recognising this, Australia is consistently told that as a nation we are torn between our economic relationship with China and the long-standing strategic partnership with the US, placing the country at the epicentre of a great power rivalry – but what if it didn’t have to be that way?
This rapidly evolving global environment, combined with the increasing instability of the US administration and its apparent apprehension to intervene or at least maintain the global rules-based order following the radical shift in US politics, also forces Australia to reassess the strategic calculus – embracing a radically new approach to national security strategy and policy.
The efforts of former Major General and senator for NSW Jim Molan to implement a National Security Strategy have been well documented and while it is a critical component of the nation's response to the rise of the Indo-Pacific, without a bipartisan agreement on the role of Australia in the region, a National Security Strategy will miss a key component.
Despite the enormity of the economic, political and strategic potential presented by the rise of the Indo-Pacific, Australia seems to be edging ever closer to an economic slowdown and decline towards a recession.
A cohesive National Security Strategy incorporating every aspect of the public policy debate from infrastructure and energy supply, through to manufacturing, water security and export strategies, will serve to position Australia well within the coming decades of increased geo-political, economic and strategic competition in the region.
1. Address Australia's $230 billion critical infrastructure short fall
As Australia edges ever closer to the possibility of economic down turn, the nation needs to rapidly respond with a stimulus package that will stimulate economic growth, while supporting long-term, sustainable employment and economic competitiveness into the early years of the 2030s.
The nation is currently facing a critical infrastructure back log, with the nation's major cities clogged and bogged down by congestion on major transport corridors. Reserve Bank governor Philip Lowe has also pleaded with the Commonwealth government to lift infrastructure spending to address the G20 identified $230 billion shortfall, while also putting downward pressure on unemployment.
The G20 in particular found that while Australia's road infrastructure investment was adequate, the nation faced significant shortfall in major investment in ports and railways – this was further reinforced by former RBA governor Bernie Fraser, who stressed the importance of extra infrastructure expenditure to support the government's agenda to deal with the growing strain on the economy.
Critical infrastructure expands beyond simple road, rail and port infrastructure and includes a considered, nationally consistent approach to critical energy and water security infrastructure – both of which provide extensive value adding for the national economy across a range of sectors ranging from advanced and heavy manufacturing, through to agriculture and placing downward pressure on cost of living for Australians.
2. Identify nationally significant heavy industries and implement a National Strategic Industries Act
Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent's wealth of natural resources including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War.
However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term, nation building policies implemented by these nations has enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing.
Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations who continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of the past and the limitations of Australia's past incarnations of heavy industry.
Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act – using the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea – which leverages the industrial development policies of export oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse.
3. Develop and implement a national export-orientated industry development plan
While still in the early stages of its implementation, the government's Defence Industrial Capability Plan and Defence Export strategy provide the perfect basis for developing and implementing a similar strategy for the broader national economy.
Australia's unrivalled resource wealth, combined with proximity to the voracious markets of the Indo-Pacific and the disparate, yet high-specialised and increasingly competitive manufacturing companies across the nation require policy consistency and stability to develop a globally competitive advanced manufacturing powerhouse.
Supporting the next stage of industry development requires a unique policy approach, as well as combining the existing elements of Australia’s existing innovation and science agenda with a suite of grant allocation and targeted, contractual tax incentives (signed between the Commonwealth and the company as a memorandum of understanding) linked to a combination of long-term, local job creation, foreign contract success, local industry content, and research and development programs – in specialised export-oriented industry clusters.
Developing centres of excellence supporting export growth in partnership with Australian and international primes can leverage the policy levers used to develop other national facilities and integration within global supply chains and programs to support the development and rehabilitation of local naval shipbuilding capabilities, with a focus on capitalising on the growing demand for warships in the Indo-Pacific and Middle East in particular.
Despite Australia’s widely recognised position as providing a world-leading research and development capacity – supported by both private and public sector research and development programs driven by organisations like the CSIRO – traditional areas of high wage costs and low productivity in Australia’s manufacturing industry, exemplified in the failure of Australia’s domestic car industry and in the series of cost overruns and delivery delays on both the Collins and Hobart Class programs, have characterised Australia’s reputation as a manufacturing economy.
This is done through a range of government-driven incentives for industry, including corporate tax incentives, employment incentives and payroll tax incentives. Australia’s now firm commitment to develop a robust domestic defence capability requires innovative and adaptive thinking in order to expand the capabilities and competitiveness of the domestic industry.
4. Establish a water security strategy and national strategic resource reserves
As the driest permanently inhabited continent, Australia is dependent on reliable access to water both for consumption and industry use, particularly the agricultural industry, which is responsible for feeding both Australia's growing population and increasingly the populations of the Indo-Pacific's rising powerhouses.
Both agriculture and water security serve as pivotal components of a truly holistic nationally strategic industries policy and the broader introduction of a National Strategic Industries Act – embracing the potential of these factors, particularly water security infrastructure and the flow-on economic impact on traditional heavy industry and manufacturing, combined with the environmental and broader national and regional economic opportunities, should necessitate the inclusion of both in the development of a national policy platform.
Furthermore, the growing importance of strategic resource reserves is another area of critical importance within the confines of a national strategic industry support and development platform.
Contemporary Australia has been far removed from the harsh realities of conflict, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the socio-political and economic impact such rationing would have on the now world-leading Australian standard of living.
Additionally, the limited supplies of munitions, spare parts and critical energy resources for the ADF serve as a major Achilles heel for the nation's capacity to actively protect its national interests in the event of a high-intensity, peer competitor confrontation – therefore any national strategic resource reserve needs to incorporate a dedicated fund to support the ADF's tactical and strategic needs.
Your thoughts
Australia's position and responsibilities in the Indo-Pacific region will depend on the nation's ability to sustain itself economically, strategically and politically. Despite the nation's virtually unrivalled wealth of natural resources, agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual, yet complementary public policy strategies to support a more robust Australian role in the region.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.
Shifting the public discussion away from the default Australian position of "it is all a little too difficult, so let’s not bother" will provide unprecedented economic, diplomatic, political and strategic opportunities for the nation.
However, as events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power or does it need to embrace a larger, more independent role in an era of increasing great power competition?
Let us know your thoughts and ideas about the development of a holistic national security strategy in the comments section below, or get in touch with
Stephen Kuper
Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.
