This appeared last week:
Australia is trying to pretend the world hasn’t changed
Trump’s revolution has upended politics in the US, Canada, Germany and the UK. Neither Labor nor the Coalition has seriously confronted the difficult policy responses required.
Michael Stutchbury Editor-at-large
Mar 15, 2025 – 5.00am
Donald Trump’s new world disorder is gate-crashing Australia’s now-prolonged election campaign just as it is upending politics on both sides of the Atlantic. But will Labor and the Coalition face up to what this means?
Wall Street has been spooked into a correction-sized sell-off over Trump’s preparedness to let an escalating global trade war trip the American economy into recession. For Australia, that’s just the start of it.
The Queensland and NSW floods have forced Anthony Albanese to delay a pencilled-in April 12 election to May. Treasurer Jim Chalmers will now hand down a March 25 election budget that wasn’t supposed to happen.
That will give Labor an opportunity to set an election narrative. But a decade of looming budget deficits amid stalled productivity will expose the old assumptions that have underwritten Australia’s envied prosperity.
First, that Chinese demand for Australia’s iron ore, coal and gas will readily finance the politicians’ elect-me promises, such as Albanese’s Medicare bulk-billing policy costing $8.5 billion over the next four years.
And, second, that Australia can keep free riding on the American alliance that has kept the peace in the Asia-Pacific.
Neither Labor nor the Coalition has seriously confronted the dismantling of these foundations of Australia’s modern prosperity.
A probable post-election minority government would lack the stability to take the difficult policy responses required.
Trump’s willingness to favour authoritarian Russia over democratic Ukraine and to risk the NATO-led Western alliance signals Australia’s need to ratchet up defence spending amid the forecast decade of fiscal deficits.
UK Labour Prime Minister Keir Starmer has announced a sizeable increase in defence spending, financed by cuts to foreign aid.
In Berlin, new centre-right Chancellor Friedrich Merz seeks to exempt Germany’s military budget from the nation’s constitutional debt limit. It would be a historic development.
Germany’s centre-left-led coalition collapsed hours after Trump’s November 5 election and amid the rise of the anti-immigrant far-right Alternative for Germany party.
Shortly after Germany’s February 23 election, Merz said his absolute priority would be to strengthen Europe so that it could “really achieve independence from the USA”.
“I never thought I would have to say something like this on a television program,” he said.
While Germany is surrounded by like-minded European states, the circling of Australia by Chinese warships exposes the nation’s vulnerability in the absence of the American security blanket.
The popular backlash against Trump is testing the Albanese government’s support for the American alliance and the Coalition-inked AUKUS nuclear-powered submarine deal opposed by a broad progressive front from the Greens to Paul Keating and Bob Carr, to Malcolm Turnbull.
The global cost-of-living squeeze is prompting pro-growth deregulation and smaller government, such as through Elon Musk’s controversial Department of Government Efficiency.
Push to smaller government
In the UK, Starmer vows to cut the cost of business by 25 per cent and trim the “flabby” British state.
“We’ve created a watchdog state completely out of whack with the priorities of the British people and that is unfit for the volatile and insecure world we live in,” he said overnight Thursday AEDT.
This includes abolishing NHS England, the “bloated” bureaucracy that runs the National Health Service, at the cost of 13,000 jobs. Imagine the Mediscare if the Coalition proposed that in Australia.
Australia’s government spending blowout has been driven more by in-kind programs such as the NDIS, childcare and Medicare than by means-tested transfer payments.
That has left the government spending less targeted on lower income earners, according to a report this week from the e-61 economic research institute and the University of NSW.
US Treasury Secretary Scott Bessent says America’s biggest banks are being weighed down by “unduly burdensome regulatory requirements” and “backward looking policies in response to an undercapitalised system predating the global financial crisis almost two decades ago”.
Starmer announced plans to axe the UK Payments System Regulator by folding most of its functions into the Financial Conduct Authority. UK Chancellor of the Exchequer Rachel Reeves says that post-financial crisis banking regulations have “gone too far”.
Threats by the New Zealand government to wind back increased post-GFC capital requirements to help revive economic growth were a factor in Kiwi central bank governor Adrian Orr’s sudden and unexplained exit last week.
There is no such push from Australian Labor, which forced the previous Coalition government to set up the pro-regulation Hayne royal commission into banking misconduct.
Shadow treasurer Angus Taylor vows to attack “excessive regulation and compliance costs” exceeding $1 billion annually for some big financial firms.
That would include requiring the Australian Prudential and Regulatory Authority to emphasise competitive access to finance as well as financial system stability.
“Over-regulation has left Australians under-insured, under-advised, and under-banked,” Taylor said last month. But the Coalition’s commitment is undermined by Peter Dutton’s populist threats to wield the big stick on insurance companies.
Pro-growth deregulation
Trump’s “drill, baby, drill” withdrawal from the Paris climate accord is mirrored by new Canadian Prime Minister Mark Carney’s immediate dumping this week of a consumer carbon tax on petrol, diesel and gas scheduled to rise to $C170 ($187) per tonne of carbon emissions by 2030.
Australia’s still-rising energy costs were confirmed by this week’s Australian Energy Regulator’s ruling that benchmark household power bills could increase by up to almost 9 per cent because of a more-expensive and renewables-driven electricity network.
Labor’s political response in the March 25 pre-election budget is set to be a Band-Aid debt-financed repeat of its $300 energy bill rebate to households and small businesses.
Australia’s clean energy transition is more costly than promised, undercutting the cheap energy advantage needed for Albanese’s Future Made In Australia hopes to become a so-called green energy superpower. The Coalition’s ambitious nuclear energy policy lacks a mechanism to bring down energy costs in the next decade.
While energy costs remain high, increased green, red and black tape is closing down parts of Australia’s industrial processing base and eating away at the nation’s comparative advantage in resource development. Trump’s America is overtaking Australia as an LNG exporter.
Labor’s empowering of trade unions and increased workplace regulation is undermining workplace-level productivity.
In his prime ministerial acceptance speech this week, Canada’s Carney vowed to “win” the trade war with Trump. “These are dark, dark days brought on by a country we can no longer trust,” he said.
Even though not even in parliament, the former Bank of England governor won the Liberal Party ballot to replace the unpopular Justin Trudeau as leader of Canada’s ruling centre-left government.
Like in Germany, Canada’s leadership change was Trump-induced. Trudeau resigned on January 6 in the face of looming defeat by populist Trump-lite Conservative Opposition Leader Pierre Poilievre.
Since Trump launched his trade war on Canada, however, the government’s patriotic tariff counter punches have clawed their support back to level-pegging with the Conservatives.
Unlike in Canada, though, Albanese rightly rules out tit-for-tat trade retaliation against Trump’s refusal to exempt Australia from his 25 per cent global aluminium and steel tariffs. That would be self-defeating for a medium-sized commodity-exporting economy at the foot of Asia.
But there is more to come, including Trump tariffs on beef and pharmaceutical imports. And, from April 2, the big one of global “reciprocal” tariffs.
Trump’s new global disorder will require Australia to compete more sharply. If the election campaign does not recognise this, the next government will lack the mandate needed to deal with the world in which we live.
Here is the link:
All I can say is that we look to be in for a pretty rocky ride while ever Trump is in the White House so we need to get used to living “on the edge”!
We would do well to watch Mark Carney in Canada and learn what we can from him as he also manages Trump.
Stand by for fireworks and instability!
David.
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