The Russian invasion of the Ukraine, ongoing uncertainty around our bilateral relationship with China, the opening of the ‘big door’ with India and the re-emergence of relationships with the UK and Europe all make for a dynamic and fluid outlook for Australia’s trade and investment opportunities and international relations.
As the Federal Election campaign passes the halfway mark, it is useful to look at the Government’s trade agenda and what the Opposition is saying on defence and national security, trade and investment.
It has been several decades since foreign affairs and geopolitics have had such a high profile in a Federal Election. Australia’s tense diplomatic relationship with China spilled into the campaign with the signing of a security pact between the Solomons Island and the Chinese Government which set off alarm bells about national security.
The election is also being held against the backdrop of Russia’s invasion of Ukraine — the impact of both the war and a pandemic-related economic policy have fed into the highest inflation seen in Australia since the 1970s.
As a result, both major parties are jostling over who will have the best defence and security in place to manage the rise of a more assertive China.
Federal Labor supports the Morrison Government’s AUKUS defence pact with the US and UK but is critical of the cancelled submarine deal with France that cost $5 billion. It is also generally critical of the Government’s management of defence and security relationships in the face of rising assertiveness by China, particularly with the Pacific Islands.
Federal Labor has committed to $500 million to deepening our Pacific policies: they will establish a new Australia-Pacific Defence School, increase the Pacific aid budget, commit more money for climate change adaptation, and overhaul the Pacific Island worker programs.
China’s new ambassador in Canberra has declared that he wants to reset the relationship with Australia. However, Beijing has not ended its two-year long freeze on top-level meetings with political leaders, nor eased any of the many trade sanctions it has imposed on a long list of Australian products.
If Labor wins Government, there will be strong interest in how an Albanese Government might respond to any olive branch extended by Beijing post-election. Federal Labor’s position is one of continuing the current Government’s major international alliances (such as AUKUS) but seeking greater engagement in Asia.
After ten years in negotiation, last month Australia and India signed an Economic Cooperation and Trade Agreement with India. Australian resources, energy and education sectors are clear winners from the agreement. Australian LNG, wine and a full suite of critical minerals will have tariffs removed upon implementation.
The next step will be to secure a full Free Trade Agreement (FTA) with India and its burgeoning middle-the class market.
As the first country to enter into a free trade agreement since leaving the EU, the Australia-UK Free Trade Agreement puts Australia in the box seat to benefit.
Global Britain, as promoted by Prime Minister Boris Johnson, has successfully attracted $50 billion in Australian FDI for major infrastructure, technology and clean energy projects across the UK as a result of the trade agreement. This includes planned investments by Macquarie Group, Lendlease and Fortescue Future Industries with long time horizons as the UK transitions to a net-zero energy base and completes essential infrastructure upgrades.
The Russian invasion of Ukraine has had a mixed impact on the Australian economy. It has set off a commodities boom in our coal and iron ore, but also triggered sharp increases in oil, food and other basis commodities due to supply chain and sanctions disruptions. The Federal Government has halved fuel excise rates until 29 September 2022 to give consumers relief.
In response to a request by Ukraine President Zelensky, the first three of twenty Australian-produced Bushmaster armoured troop carriers recently departed Australia to assist Ukraine. The Federal Government has also organised for 70,000 tonnes of thermal coal to be sent to Ukraine, in partnership with Whitehaven Coal.
After the recent passing of the late Mr David Irvine AO, Mr Bruce Miller AO has been appointed Chair of the Foreign Investment Review Board for a five-year term. Our former Ambassador to Japan, Mr Miller, brings over 30 years of experience working in the National Intelligence Community.
Following the May 21 election, expect to see international relations return to the spotlight of the new Government which will need to navigate unprecedented geopolitical challenges in defence, security and trade.
Matt Williams, Associate Partner, SEC Newgate Communications – Matt.Williams@secnewgate.com.au
Nick Maher, Special Counsel, SEC Newgate Communications – Nick.Maher@secnewgate.com.au
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