July 10, 2025 • 23 mins
What do the great war time Prime Minister John Curtin, and current Prime Minister Anthony Albanese have in common?
Well, a little bit, according to Albanese.
On the weekend the PM delivered the John Curtin Oration and set tongues wagging with hints about his newly independent stance when it comes to our relationship with the United States.
But how will this land with the Trump administration, which is currently reviewing the AUKUS pact? Is it possible they will make Australia pay more for submarines under the pact? Or pressure us into participating in a possible conflict with China over Taiwan?
Plus, the confusing matter of yet more US tariffs on Australian goods, perhaps…and what is going on with the Reserve Bank - are they misleading the public, or are they just confused themselves?
Joining Jacqueline Maley is chief political correspondent Paul Sakkal, and senior economics correspondent Shane Wright.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
S1 (00:02):
From the newsrooms of the Sydney Morning Herald and The Age.
This is inside politics. I'm Jacqueline Maley, it's Friday, July 11th.
What do the great wartime prime minister John Curtin and
current prime Minister Anthony Albanese have in common? Well, a
little bit, according to Albanese. Anyway, on the weekend, the
PM delivered the John Kershner oration and set tongues wagging
(00:25):
with hints about our newly independent stance when it comes
to Australia's relationship with the United States. But how will
this land with the Trump administration, which is currently reviewing
the Aukus pact? Is it possible they will make Australia
pay more for submarines under the pact, or pressure us
into participating into a possible conflict with China over Taiwan? Plus,
(00:47):
we discuss the puzzling matter of yet more US tariffs
on Australian goods, perhaps, and we ask, what is going
on with the reserve Bank? Are they misleading the public
or are they just confused themselves? Joining me to discuss
all this, we have our chief political correspondent, Paul Satchell,
and later we'll be joined by our senior economics correspondent,
Shane Reich. Paul, welcome back. We understand you've just returned
(01:13):
from a holiday in Bali, much enlightened. So Namaste to you.
S2 (01:17):
The Canberra winter is slowly taking away my tan. But
but your book is still fresh in my mind, Jacqui.
It was one of my favourite things I read in
my time away.
S1 (01:25):
Oh, that's so nice. I'm so glad that you took
me to Bali. I hope it was relaxing. It's good
to have you back. And you came back with a bang.
You had a really important story this week about the
review of the Aukus pact that the Trump administration is undertaking.
You did a deep dive. Tell us what you reported.
S2 (01:41):
Yeah, well, it's all pretty murky. This review into Aukus
was announced on June 12th. So about a month ago now,
it was revealed by the Financial Times and newspaper. Not the, uh,
not the administration itself. The review's been led by a
fellow called Elbridge Colby, who's a Harvard graduate, military planner,
(02:02):
really influential strategic thinker within the Trump administration. He's the
defense undersecretary, so he's effectively the policy chief who advises
Pete Hegseth, the former Fox News host, who's the defense secretary,
who's also an influential fellow in Trumpland. And Elbridge Colby's
been a long term skeptic of a particular element of
(02:22):
the Aukus deal. He's very big on the idea of
South Korea, Japan, India, Australia effectively forming this anti-China axis
in the Indo-Pacific to contain China. He believes that the
US is focused, should move from Europe and the Middle
East and stop trying to be the global cop in
those areas, and that most of its spending should shift
(02:45):
to containing China, which he sees as America's long term
adversary and kind of existential threat to US hegemony in
the Indo-Pacific, but also in the world. So he announced
this review about a month ago. And given his previous
comments about the difficulty of selling Virginia class submarines to
Australia because they are in scarce supply already in the US,
(03:10):
and shipbuilding capacity is not big enough to sustain the
amount of ships that the US needs before it even
gives any to Australia. This sparked concern in Canberra. It
sparked concern among our diplomats in Washington, sparked concern in
the UK about the possibility that Elbridge Colby might significantly
amend Aukus. There was concern that he might scrap it
or make some serious changes to it. So I spent
(03:32):
the last week or so trying to understand what this
review is, looking at, what Australia has been told about
it and where he might go. It's pretty murky. It's
pretty early stages, but effectively the two key takeouts of
the story were that one, the US might seek more
money from Australia. For US shipbuilding, we're already paying about
$5 billion, um, over the over the long run to
(03:54):
help build Virginia class subs in the US. Uh, there's
an argument that we should pay more. And the other
element is that Elbridge Colby has told Australian sources outside
and some in the political establishment, that he believes this
should be a firmer public or private declaration from Australia,
that subs would be used with the US in a
guaranteed sense, like necessarily, uh, if there's any conflagration over Taiwan,
(04:20):
which would raise a whole bunch of questions about sovereignty
for Australia.
S1 (04:23):
I mean, that that is I think that would put
the fear into any government and into the Australian public
as well, because I don't think it's by any means
assured that Australians would support military, a military conflict over Taiwan,
or sending Australian troops to to such a conflict.
S2 (04:41):
Huge questions about that. I mean, Elbridge Colby has said
previously that Australia arguably is is America's best ally since
World War two in the sense that and he's he's
quotes not mine that he says that Australia has joined
us even in our most inadvisable wars. And he's referring.
S1 (05:02):
It's a bit of a.
S2 (05:02):
Backhanded.
S1 (05:03):
Compliment.
S2 (05:03):
Isn't it? So and if you listen, I mean, if
most experts would say that Australia is very likely to
join the US in any major, really major conflict around
the world because that's the pattern of Australian behaviour. But
you're right, Jackie, it's you know, this question about a
conflict in Taiwan is is not something that's yet had.
S1 (05:23):
Yeah. The US has been putting pressure on its European allies,
its NATO allies, to increase their military spending as a
share of their GDP. How likely is it that that
that could be a condition that's put on the deal?
Because the Trump administration has also made noises about that
with Australia, that our military spending isn't big enough.
S2 (05:41):
This the person I mentioned earlier, Elbridge Colby, is one
of the key drivers behind this, this push to have
American allies spend more on defence. His view is that
most American allies don't pull their weight and they need
to up their game. There's one school of thought in
the Australian political establishment about the the actual intent of
this review, and that is that it is purely a
(06:04):
tool to create leverage for America to create an incentive
for Australia to boost defence spending. So effectively, the the
line of thinking there goes that the US knows how
important Aukus is to us, by the way, it's also
very important to them in terms of having a Western
base that opens up the Indo-Pacific for submarine rotation. It's
crucial to American strategic interests, too. But this line of
(06:27):
thinking goes that the Americans know we need aukus. The
Americans know how us how crucial it is to the
government for the government to maintain public public support for it,
and that reviewing it and creating a sense that there
is doubt about its future would increase pressure on Australia
to agree to American demands to boost military spending, which
(06:49):
the Prime Minister has so far deflected and found ways
to wriggle out of.
S1 (06:55):
Yeah, and we know I mean, that's the that's that's
basically the M.O. of the Trump administration. And Trump himself
has sort of stand over type tactics in international diplomacy.
In the midst of all of this speculation over aukus
and how that pact might actually end up looking. Last weekend,
Anthony Albanese gave an important speech called the John Curtin Oration.
(07:15):
What did the PM say in this speech, and why
did it sort of ruffle people's feathers a bit?
S2 (07:21):
Yeah, well, the timing was fascinating. It was on Saturday
night in Sydney at the at an event to mark
the 80th anniversary of the death of John Curtin, the
labor wartime prime minister. And a week before he's about
to travel to China to meet with President XI Jinping
for the third time, at a moment when he's having
(07:41):
a bunch of different brawls with the US over tariffs,
over defence spending. With this Aukus review hanging in the air,
and at a time when the conservative press and the
opposition is putting a lot of pressure on the Prime
Minister to mate with Donald Trump, which he hasn't so
far been able to secure, You know, public polling in
Australia shows that Donald Trump is deeply unpopular. And I
think the government feels somewhat emboldened to be a bit
(08:05):
more muscular in relation to the US, in the same
way as Mark Carney in Canada and various other Western
leaders are being. But there is still a huge amount
of pressure to maintain the relationship and keep it in
a healthy state. So the opposition question whether it was
the right time to give this speech, and what did
he say in the speech? James Curran, who's a really
well regarded foreign policy expert, said that this was the
most important speech Albanese has given in office. There are
(08:28):
other foreign policy experts who were more moderate in their
thinking on it, and believe that it was not even
really a departure from previous comments from him. Effectively, the
speech was in honour of John Curtin, as we've mentioned.
And what was significant was the way in which the
Prime Minister, couched on Curtin's legacy.
S3 (08:46):
Through 124 years of our federation and 31 prime ministers
of Australia, John Curtin stands apart. No leader of our
nation has faced a sterner test. No one has known
a darker hour, and no prime minister has carried more
(09:06):
on their shoulders alone during the.
S2 (09:10):
Someone described it to me yesterday as you could effectively
take two paths on how you portray John Curtin's legacy.
He's the effective Australian founder of the US Alliance. He
shifted allegiance from Britain to the US during World War two,
which was a contentious thing at the time, but has
kind of become a pillar of our foreign policy. So
if you're on the right of the Labor Party, a
Richard Marles type who is more kind of comfortable with
(09:32):
the US alliance than perhaps some on the left, you
would look at John Curtin's legacy and say he gave
us the US alliance. That is a pillar of our
national identity now and foreign policy. And he's great. For
that reason, the Prime Minister took a different route and
said that John Curtin was a kind of more Australia first,
a person who gave more emphasis on Australian sovereignty because
(09:53):
he stood up to both Winston Churchill and the US.
S3 (09:56):
Is pushing back against two of the most powerful men
in the world, and two of the most forceful personalities
of 20th century politics. This moment is the core of
the Curtin legend.
S1 (10:11):
Two divisions just for the historic context. This is in
1941 when, um, when the Japanese were bearing down basically
on the Asia Pacific and had, you know, joined the war.
And John Curtin insisted that Australian troops come home to
Australia to defend Australia.
S2 (10:26):
And the Prime Minister quoted other labor figures, such as
Paul Keating, in saying that Curtin was the first Australian
leader to put Australian independence at the centre of foreign policy,
and this was a marker for how his government would
behave and that Australia would seek its own interests rather
than being subservient to any other ally. So it was seen.
(10:47):
It was seen as a call for independence within the
US alliance.
S3 (10:51):
And a supporter of Aukus. Uh. That's important, but that
doesn't mean that we are subservient to any other country,
you know.
S1 (11:04):
Of course, Albanese is going to China next week to
meet with President XI Jinping. Some of his critics say
the speech would have been very welcome in China. Is
that true, do you think?
S2 (11:13):
Well, the language towards China has been pretty stable for
years now. But there is no doubt that Chinese diplomats
around the world, and we saw this earlier this week
with the Chinese ambassador to Australia suggesting that we should
expand our free trade agreement with China, start doing technology sharing,
(11:33):
and effectively go past this period of what has been
widely described as stabilization to a point of actually enhancing
the relationship even further. There's no doubt that Chinese diplomats
would look at the way Australians and Canadians and Brits
are talking about the US at this moment, and look
(11:53):
at it favourably. Favorably. Um, there's no doubt that a
kind of global scepticism about the US's reliability is good
for China. Yeah, but practically what it means is hard
to know, because the agenda for this China trip is
six days. But it's not not clear yet whether the
government does want to take any further step in the
direction of growing the China relationship, or whether it's just
(12:15):
more of the same in terms of stabilisation.
S1 (12:26):
I want to talk about tariffs now, and for that
we will need our special guest star, our esteemed senior
economics correspondent Shane Risch. Shane, how are you?
S4 (12:34):
All the better for seeing you, Miss Maley.
S1 (12:36):
That's so kind of you. Let's talk about tariffs just
super quickly. Can we? I'd love to. Yeah. Let's let's.
I feel like we need a live tariff ticker like
they have on, you know, on news channels just to
keep us constantly updated. It's like it's.
S4 (12:51):
A bit like the election, you know, when counting how
many seats one side of. Yeah.
S1 (12:54):
It's so confusing. I feel like just sort of like
turning off the TV until they decide one way or
the other. But we can't because we're journalists. So this week,
Trump has threatened more tariffs on copper and pharmaceuticals. And
the latter is particularly worrying for Australia. Right.
S4 (13:09):
Oh yeah. That's well 200% tariff if and when maybe
next year. Like there's so much, uh, hairiness around this
one from Donald Trump. The 50% tariff on copper, which
Australia doesn't sell much copper directly to the United States,
but BHP and Rio Tinto run the world's biggest copper
(13:33):
mine in Chile. That's of some importance to the United States.
And as our ticker is ticking over, there is another
seven nations who got a special letter from Trump.
S1 (13:46):
I want to talk about the pharmaceuticals and the threat
on tariffs there, because in Australia we have the Pharmaceutical
Benefits Scheme, which is quite beloved, I think, of most
Australians because it heavily subsidises about 1000 approved medicines for
Australian people. But the Trump administration has made no secret
of the fact that it absolutely hates our PBS, and
I think it's even been called socialized medicine. Why doesn't
(14:07):
the Trump administration like the PBS?
S4 (14:10):
I think it's the pharmaceutical lobby of the United States
that hates the PBS. And the pharmaceutical pharmaceutical lobby of
the United States hates every nation, starting with Canada and
across to Europe, that acts as a single buyer of drugs.
S1 (14:25):
So it gets a bulk, a bulk deal, a.
S4 (14:27):
Big bulk deal. And that's what really upsets pharmaceutical companies that,
you know, like to trade off or bargain off against
individual buyers and are able to increase their prices or
not follow through with big breakthrough drugs. So yes, Australia's
looking at this big hit, but this is going to
be another problem, say for Mark Carney in Canada. This
(14:49):
is a problem for the National Health Service in the
in Britain. This is a problem for the French health system,
the German health system, because every other almost every other
developed country in the world has this sort of model,
except for the United States, which has some of the
highest priced drugs in the world, and which, if you
can't afford them, you die. Like, that's slightly what it is.
(15:11):
There's a lot of focus on it. But of course,
with Donald Trump, we're trying to work out how real
is the threat because he the we talk about Taco
Trump for a reason.
S1 (15:23):
Yeah that's Trump always chickens out.
S4 (15:25):
Yeah. Whether he would go through with this because like
you start saying to the consumers of the United States,
your drugs are going out, getting up very expensive very quickly.
S1 (15:36):
Yeah, yeah. Treasurer Jim Chalmers says the new tariff threat
was very alarming because Australian pharmaceutical companies are so deeply
exposed to the US market. But he also said that
our pharmaceutical benefits scheme is not something that we're willing
to trade away. Healthcare and subsidised healthcare is obviously a
very key part of the Labour platform, but nonetheless it
could end up hurting the Australian consumer because it'll have
(15:59):
a big hit on our economy, won't it?
S4 (16:00):
No, no, it actually hits the Australian producers selling. And
this is the whole problem with Donald Trump's and his
understanding of tariffs. Americans pay for it. So if you're
going to put a 200% tariff on Australia's 2 or
$3 billion worth of pharmaceutical exports to the United States,
you are hurting American consumers. Australian producers would then go, right.
(16:22):
Can we still keep sending them to the United States?
Are Americans willing to keep paying for it, or do
we find another market?
S1 (16:29):
Yeah, Paul, tell it to us straight, because there's a
lot of criticism still of the Prime Minister, particularly from
the opposition, that he hasn't been able to secure a
meeting with Donald Trump to discuss tariffs and other matters.
Is it a big deal that we can't get that meeting?
Should he take it personally, or is it just evidence
of how mercurial Donald Trump is?
S2 (16:49):
I think it's probably an element of both, which I'm
fencing in a bit there. If you look at the
way the government first approached the the Trump administration for
the for the immediate period after the inauguration in January,
the government was in election mode. It made political sense
for the government, and they were having political success in
tying Trump's unpopularity to Peter Dutton. So you couldn't it
(17:12):
was hard for them to at that time when they
were making those anti-US points in political debate to then,
for example, say, oh, and we're also traveling to Washington
to try and meet Trump. It was incongruous. But I
think that delay in actually fronting up to the question of, okay,
we disagree with this administration on a whole bunch of
(17:33):
issues and values, but they are still our most critical alliance.
How do we bridge that gap and try and create
a relationship with this president? The delay in having to
wait till the election was over and then get better
down in terms of staff and thinking about the strategy,
meant that the government was was not front footed on
how to deal with Trump. And I think they've now
been left in a little bit of a tricky scenario
(17:53):
where they've spent a lot of time making barbs against
the US, but now they've got issues on defence spending,
on aukus, on tariffs. And it's not we're not at
the front of the queue in terms of having these negotiations.
But having said that, even the countries who have had negotiations,
such as Keir Starmer in the UK, have got deals
that are being criticised in their own countries as not
(18:14):
being worth much. Yeah. And just a very quick point.
The Productivity Commission came out with an interesting report earlier
this week which suggested Shane wrote this story, that because
we are at the lowest 10% baseline in an average sense,
we are the least worse off in terms of trade
with the US, which means that we're at a kind
of comparative advantage and we might actually benefit from that.
(18:35):
The risk is that the global trade war actually reduces
growth everywhere, and that causes negative.
S1 (18:41):
Growth and takes the global economy. I can't believe you
just cut Shane's grass by talking about the Productivity Commission there.
I mean, he'll probably fight you about that.
S4 (18:48):
No, I'm just impressed that he's used the term comparative advantage.
S1 (18:52):
I like that. I really like.
S4 (18:53):
That. I didn't know he was a fan of David Ricardo. Uh,
for our economic nerds who are listening and, uh, Paul's
looking at me saying, who the hell's David Ricardo? But anyway.
S1 (19:02):
We don't get enough David Ricardo on this.
S2 (19:04):
Not the only one who reads Shane.
S1 (19:06):
Yeah, you probably read it in one of Shane's stories.
But anyway, um, on on Tuesday, just quickly, the RBA
had Michele Bullock and her colleagues dashed all our hopes,
and she kept rates on hold at 3.85%. You know,
as a Sydney mortgagee, how devastating this was to me personally.
Pretty much all the banks and the economists were predicting
a rate cut. Is the RBA misleading us or are
(19:29):
they just confused themselves.
S4 (19:31):
Or they're confused with their communication skills, which is one
of the a key issue that's coming up.
S1 (19:37):
Wasn't wasn't the sort of the revamp of the RBA
and these news press conferences that they're giving and the
sort of new transparency that was supposed to be all
about better communication.
S4 (19:46):
You're exactly right. But whether they've mastered it is a
completely different question at this point, and it was during
the press conference. One of the most interesting bits was
a reporter said, right, um, given that what everyone was expecting,
are you happy with the communication? Oh, no. We're communicating. Well.
S5 (20:05):
Um, I think communication generally actually has been going pretty well.
I think what was the difference was that, um, reasonable
people can differ in their interpretations of data. And I
think there was a couple of.
S4 (20:18):
Investors, people who've got hundreds of millions of dollars in
the market, had bet you were going to cut rates.
Every major bank economist in the country said you were
going to cut rates. I think that's the evidence that
the communication.
S1 (20:31):
Has pretty incontrovertible.
S4 (20:32):
Down to to quotes, uh, LED Zeppelin there. Um, so
I think that's like they're still working on it. Even
her explanation saying, look, we do speeches, we do speeches.
And which is how they they try to give signals
to the, to the to the public and to investors.
They had done speeches, but those speeches had stopped before
(20:55):
these these really key, uh, monthly inflation figures that forced
everyone to go, what the hell's going on? The bank
has to cut. We've got more Donald Trump tariff craziness.
You've got to cut. You've got to protect the economy.
But no, Bullock gets up and says, well, hold on,
just hold on.
S5 (21:11):
Five weeks by our next meeting in five weeks, we
will have the June quarter. CPI another labor market reading
further information about international developments and an updated set of forecasts.
So the board decided to wait a few weeks to
confirm that we're still on track to meet our inflation
and employment objectives.
S4 (21:30):
And she's giving us wink wink, nudge nudge probably will
cut at our meeting. Uh.
S1 (21:35):
Well, they kind of have to cut now because she
pretty much promised it to us right on on Tuesday.
S4 (21:40):
Yeah. And this is a look. The bank. And it's
what they call forward guidance. Everyone in Sydney and Melbourne
will know. Remember when Phil Lowe said, oh, look, we
don't think we don't think rates need to go up
until 2024.
S1 (21:52):
I'll never forget it, Shane. I'll never forget it. Hashtag
never forget.
S4 (21:55):
And Michelle Bullock has almost every press conference she's done
since taking the job. I'm not giving you forward guidance,
but saying, oh, June 30th, those figures, they'll be really important.
It's all about the timing. It's all the directions. In
one way you go, oh come on, that's forward guidance.
Just with a roadmap.
S1 (22:12):
I mean, it's like trying to pass the kind of,
I don't know, the tea leaves or something. The economic
tea leaves, which you do very, very well for us. Shane.
S2 (22:20):
To be fair to Bullock on on on forward guidance
like in her defence, she's not forecasting years into the
future here.
S4 (22:26):
I'd agree with you. Except she has said I don't
give forward guidance. Five weeks in the reserve Bank world
is it can be an eternity. Look, given what we've
seen this even this year, like only the last meeting was,
they discussed whether they should have half a percentage point
cut because of what was going on with Donald Trump. Like,
things are moving very quickly in this space.
S1 (22:48):
They are. And speaking of forward guidance, we must end there, chaps.
We've we've moved from LED Zeppelin to that Ricciardo guy
that you mentioned. We will meet again.
S6 (22:58):
We'll meet.
S1 (22:59):
Again.
S6 (23:00):
We will, Miss Maley. We will.
S1 (23:02):
Um. And I hope very soon. Thank you both for
joining us today.
S2 (23:06):
Thanks, guys.
S4 (23:07):
Thanks, Matt.
S1 (23:11):
Today's episode was produced by Kai Wong. Our executive producer
is Tammy Mills, and Tom McKendrick is our head of audio.
To listen to our episodes as soon as they drop,
follow Inside Politics on Apple, Spotify or anywhere else you
listen to your podcast. And to stay up to date
with all the politics, news and exclusives, visit The Age
and The Sydney Morning Herald websites. To support our journalism,
(23:34):
subscribe to us by visiting The Age or. Subscribe. I'm
Jacqueline Maley. Thank you for listening.
From the newsrooms of the Sydney Morning Herald and The Age.
This is inside politics. I'm Jacqueline Maley, it's Friday, July 11th.
What do the great wartime prime minister John Curtin and
current prime Minister Anthony Albanese have in common? Well, a
little bit, according to Albanese. Anyway, on the weekend, the
PM delivered the John Kershner oration and set tongues wagging
(00:25):
with hints about our newly independent stance when it comes
to Australia's relationship with the United States. But how will
this land with the Trump administration, which is currently reviewing
the Aukus pact? Is it possible they will make Australia
pay more for submarines under the pact, or pressure us
into participating into a possible conflict with China over Taiwan? Plus,
(00:47):
we discuss the puzzling matter of yet more US tariffs
on Australian goods, perhaps, and we ask, what is going
on with the reserve Bank? Are they misleading the public
or are they just confused themselves? Joining me to discuss
all this, we have our chief political correspondent, Paul Satchell,
and later we'll be joined by our senior economics correspondent,
Shane Reich. Paul, welcome back. We understand you've just returned
(01:13):
from a holiday in Bali, much enlightened. So Namaste to you.
S2 (01:17):
The Canberra winter is slowly taking away my tan. But
but your book is still fresh in my mind, Jacqui.
It was one of my favourite things I read in
my time away.
S1 (01:25):
Oh, that's so nice. I'm so glad that you took
me to Bali. I hope it was relaxing. It's good
to have you back. And you came back with a bang.
You had a really important story this week about the
review of the Aukus pact that the Trump administration is undertaking.
You did a deep dive. Tell us what you reported.
S2 (01:41):
Yeah, well, it's all pretty murky. This review into Aukus
was announced on June 12th. So about a month ago now,
it was revealed by the Financial Times and newspaper. Not the, uh,
not the administration itself. The review's been led by a
fellow called Elbridge Colby, who's a Harvard graduate, military planner,
(02:02):
really influential strategic thinker within the Trump administration. He's the
defense undersecretary, so he's effectively the policy chief who advises
Pete Hegseth, the former Fox News host, who's the defense secretary,
who's also an influential fellow in Trumpland. And Elbridge Colby's
been a long term skeptic of a particular element of
(02:22):
the Aukus deal. He's very big on the idea of
South Korea, Japan, India, Australia effectively forming this anti-China axis
in the Indo-Pacific to contain China. He believes that the
US is focused, should move from Europe and the Middle
East and stop trying to be the global cop in
those areas, and that most of its spending should shift
(02:45):
to containing China, which he sees as America's long term
adversary and kind of existential threat to US hegemony in
the Indo-Pacific, but also in the world. So he announced
this review about a month ago. And given his previous
comments about the difficulty of selling Virginia class submarines to
Australia because they are in scarce supply already in the US,
(03:10):
and shipbuilding capacity is not big enough to sustain the
amount of ships that the US needs before it even
gives any to Australia. This sparked concern in Canberra. It
sparked concern among our diplomats in Washington, sparked concern in
the UK about the possibility that Elbridge Colby might significantly
amend Aukus. There was concern that he might scrap it
or make some serious changes to it. So I spent
(03:32):
the last week or so trying to understand what this
review is, looking at, what Australia has been told about
it and where he might go. It's pretty murky. It's
pretty early stages, but effectively the two key takeouts of
the story were that one, the US might seek more
money from Australia. For US shipbuilding, we're already paying about
$5 billion, um, over the over the long run to
(03:54):
help build Virginia class subs in the US. Uh, there's
an argument that we should pay more. And the other
element is that Elbridge Colby has told Australian sources outside
and some in the political establishment, that he believes this
should be a firmer public or private declaration from Australia,
that subs would be used with the US in a
guaranteed sense, like necessarily, uh, if there's any conflagration over Taiwan,
(04:20):
which would raise a whole bunch of questions about sovereignty
for Australia.
S1 (04:23):
I mean, that that is I think that would put
the fear into any government and into the Australian public
as well, because I don't think it's by any means
assured that Australians would support military, a military conflict over Taiwan,
or sending Australian troops to to such a conflict.
S2 (04:41):
Huge questions about that. I mean, Elbridge Colby has said
previously that Australia arguably is is America's best ally since
World War two in the sense that and he's he's
quotes not mine that he says that Australia has joined
us even in our most inadvisable wars. And he's referring.
S1 (05:02):
It's a bit of a.
S2 (05:02):
Backhanded.
S1 (05:03):
Compliment.
S2 (05:03):
Isn't it? So and if you listen, I mean, if
most experts would say that Australia is very likely to
join the US in any major, really major conflict around
the world because that's the pattern of Australian behaviour. But
you're right, Jackie, it's you know, this question about a
conflict in Taiwan is is not something that's yet had.
S1 (05:23):
Yeah. The US has been putting pressure on its European allies,
its NATO allies, to increase their military spending as a
share of their GDP. How likely is it that that
that could be a condition that's put on the deal?
Because the Trump administration has also made noises about that
with Australia, that our military spending isn't big enough.
S2 (05:41):
This the person I mentioned earlier, Elbridge Colby, is one
of the key drivers behind this, this push to have
American allies spend more on defence. His view is that
most American allies don't pull their weight and they need
to up their game. There's one school of thought in
the Australian political establishment about the the actual intent of
this review, and that is that it is purely a
(06:04):
tool to create leverage for America to create an incentive
for Australia to boost defence spending. So effectively, the the
line of thinking there goes that the US knows how
important Aukus is to us, by the way, it's also
very important to them in terms of having a Western
base that opens up the Indo-Pacific for submarine rotation. It's
crucial to American strategic interests, too. But this line of
(06:27):
thinking goes that the Americans know we need aukus. The
Americans know how us how crucial it is to the
government for the government to maintain public public support for it,
and that reviewing it and creating a sense that there
is doubt about its future would increase pressure on Australia
to agree to American demands to boost military spending, which
(06:49):
the Prime Minister has so far deflected and found ways
to wriggle out of.
S1 (06:55):
Yeah, and we know I mean, that's the that's that's
basically the M.O. of the Trump administration. And Trump himself
has sort of stand over type tactics in international diplomacy.
In the midst of all of this speculation over aukus
and how that pact might actually end up looking. Last weekend,
Anthony Albanese gave an important speech called the John Curtin Oration.
(07:15):
What did the PM say in this speech, and why
did it sort of ruffle people's feathers a bit?
S2 (07:21):
Yeah, well, the timing was fascinating. It was on Saturday
night in Sydney at the at an event to mark
the 80th anniversary of the death of John Curtin, the
labor wartime prime minister. And a week before he's about
to travel to China to meet with President XI Jinping
for the third time, at a moment when he's having
(07:41):
a bunch of different brawls with the US over tariffs,
over defence spending. With this Aukus review hanging in the air,
and at a time when the conservative press and the
opposition is putting a lot of pressure on the Prime
Minister to mate with Donald Trump, which he hasn't so
far been able to secure, You know, public polling in
Australia shows that Donald Trump is deeply unpopular. And I
think the government feels somewhat emboldened to be a bit
(08:05):
more muscular in relation to the US, in the same
way as Mark Carney in Canada and various other Western
leaders are being. But there is still a huge amount
of pressure to maintain the relationship and keep it in
a healthy state. So the opposition question whether it was
the right time to give this speech, and what did
he say in the speech? James Curran, who's a really
well regarded foreign policy expert, said that this was the
most important speech Albanese has given in office. There are
(08:28):
other foreign policy experts who were more moderate in their
thinking on it, and believe that it was not even
really a departure from previous comments from him. Effectively, the
speech was in honour of John Curtin, as we've mentioned.
And what was significant was the way in which the
Prime Minister, couched on Curtin's legacy.
S3 (08:46):
Through 124 years of our federation and 31 prime ministers
of Australia, John Curtin stands apart. No leader of our
nation has faced a sterner test. No one has known
a darker hour, and no prime minister has carried more
(09:06):
on their shoulders alone during the.
S2 (09:10):
Someone described it to me yesterday as you could effectively
take two paths on how you portray John Curtin's legacy.
He's the effective Australian founder of the US Alliance. He
shifted allegiance from Britain to the US during World War two,
which was a contentious thing at the time, but has
kind of become a pillar of our foreign policy. So
if you're on the right of the Labor Party, a
Richard Marles type who is more kind of comfortable with
(09:32):
the US alliance than perhaps some on the left, you
would look at John Curtin's legacy and say he gave
us the US alliance. That is a pillar of our
national identity now and foreign policy. And he's great. For
that reason, the Prime Minister took a different route and
said that John Curtin was a kind of more Australia first,
a person who gave more emphasis on Australian sovereignty because
(09:53):
he stood up to both Winston Churchill and the US.
S3 (09:56):
Is pushing back against two of the most powerful men
in the world, and two of the most forceful personalities
of 20th century politics. This moment is the core of
the Curtin legend.
S1 (10:11):
Two divisions just for the historic context. This is in
1941 when, um, when the Japanese were bearing down basically
on the Asia Pacific and had, you know, joined the war.
And John Curtin insisted that Australian troops come home to
Australia to defend Australia.
S2 (10:26):
And the Prime Minister quoted other labor figures, such as
Paul Keating, in saying that Curtin was the first Australian
leader to put Australian independence at the centre of foreign policy,
and this was a marker for how his government would
behave and that Australia would seek its own interests rather
than being subservient to any other ally. So it was seen.
(10:47):
It was seen as a call for independence within the
US alliance.
S3 (10:51):
And a supporter of Aukus. Uh. That's important, but that
doesn't mean that we are subservient to any other country,
you know.
S1 (11:04):
Of course, Albanese is going to China next week to
meet with President XI Jinping. Some of his critics say
the speech would have been very welcome in China. Is
that true, do you think?
S2 (11:13):
Well, the language towards China has been pretty stable for
years now. But there is no doubt that Chinese diplomats
around the world, and we saw this earlier this week
with the Chinese ambassador to Australia suggesting that we should
expand our free trade agreement with China, start doing technology sharing,
(11:33):
and effectively go past this period of what has been
widely described as stabilization to a point of actually enhancing
the relationship even further. There's no doubt that Chinese diplomats
would look at the way Australians and Canadians and Brits
are talking about the US at this moment, and look
(11:53):
at it favourably. Favorably. Um, there's no doubt that a
kind of global scepticism about the US's reliability is good
for China. Yeah, but practically what it means is hard
to know, because the agenda for this China trip is
six days. But it's not not clear yet whether the
government does want to take any further step in the
direction of growing the China relationship, or whether it's just
(12:15):
more of the same in terms of stabilisation.
S1 (12:26):
I want to talk about tariffs now, and for that
we will need our special guest star, our esteemed senior
economics correspondent Shane Risch. Shane, how are you?
S4 (12:34):
All the better for seeing you, Miss Maley.
S1 (12:36):
That's so kind of you. Let's talk about tariffs just
super quickly. Can we? I'd love to. Yeah. Let's let's.
I feel like we need a live tariff ticker like
they have on, you know, on news channels just to
keep us constantly updated. It's like it's.
S4 (12:51):
A bit like the election, you know, when counting how
many seats one side of. Yeah.
S1 (12:54):
It's so confusing. I feel like just sort of like
turning off the TV until they decide one way or
the other. But we can't because we're journalists. So this week,
Trump has threatened more tariffs on copper and pharmaceuticals. And
the latter is particularly worrying for Australia. Right.
S4 (13:09):
Oh yeah. That's well 200% tariff if and when maybe
next year. Like there's so much, uh, hairiness around this
one from Donald Trump. The 50% tariff on copper, which
Australia doesn't sell much copper directly to the United States,
but BHP and Rio Tinto run the world's biggest copper
(13:33):
mine in Chile. That's of some importance to the United States.
And as our ticker is ticking over, there is another
seven nations who got a special letter from Trump.
S1 (13:46):
I want to talk about the pharmaceuticals and the threat
on tariffs there, because in Australia we have the Pharmaceutical
Benefits Scheme, which is quite beloved, I think, of most
Australians because it heavily subsidises about 1000 approved medicines for
Australian people. But the Trump administration has made no secret
of the fact that it absolutely hates our PBS, and
I think it's even been called socialized medicine. Why doesn't
(14:07):
the Trump administration like the PBS?
S4 (14:10):
I think it's the pharmaceutical lobby of the United States
that hates the PBS. And the pharmaceutical pharmaceutical lobby of
the United States hates every nation, starting with Canada and
across to Europe, that acts as a single buyer of drugs.
S1 (14:25):
So it gets a bulk, a bulk deal, a.
S4 (14:27):
Big bulk deal. And that's what really upsets pharmaceutical companies that,
you know, like to trade off or bargain off against
individual buyers and are able to increase their prices or
not follow through with big breakthrough drugs. So yes, Australia's
looking at this big hit, but this is going to
be another problem, say for Mark Carney in Canada. This
(14:49):
is a problem for the National Health Service in the
in Britain. This is a problem for the French health system,
the German health system, because every other almost every other
developed country in the world has this sort of model,
except for the United States, which has some of the
highest priced drugs in the world, and which, if you
can't afford them, you die. Like, that's slightly what it is.
(15:11):
There's a lot of focus on it. But of course,
with Donald Trump, we're trying to work out how real
is the threat because he the we talk about Taco
Trump for a reason.
S1 (15:23):
Yeah that's Trump always chickens out.
S4 (15:25):
Yeah. Whether he would go through with this because like
you start saying to the consumers of the United States,
your drugs are going out, getting up very expensive very quickly.
S1 (15:36):
Yeah, yeah. Treasurer Jim Chalmers says the new tariff threat
was very alarming because Australian pharmaceutical companies are so deeply
exposed to the US market. But he also said that
our pharmaceutical benefits scheme is not something that we're willing
to trade away. Healthcare and subsidised healthcare is obviously a
very key part of the Labour platform, but nonetheless it
could end up hurting the Australian consumer because it'll have
(15:59):
a big hit on our economy, won't it?
S4 (16:00):
No, no, it actually hits the Australian producers selling. And
this is the whole problem with Donald Trump's and his
understanding of tariffs. Americans pay for it. So if you're
going to put a 200% tariff on Australia's 2 or
$3 billion worth of pharmaceutical exports to the United States,
you are hurting American consumers. Australian producers would then go, right.
(16:22):
Can we still keep sending them to the United States?
Are Americans willing to keep paying for it, or do
we find another market?
S1 (16:29):
Yeah, Paul, tell it to us straight, because there's a
lot of criticism still of the Prime Minister, particularly from
the opposition, that he hasn't been able to secure a
meeting with Donald Trump to discuss tariffs and other matters.
Is it a big deal that we can't get that meeting?
Should he take it personally, or is it just evidence
of how mercurial Donald Trump is?
S2 (16:49):
I think it's probably an element of both, which I'm
fencing in a bit there. If you look at the
way the government first approached the the Trump administration for
the for the immediate period after the inauguration in January,
the government was in election mode. It made political sense
for the government, and they were having political success in
tying Trump's unpopularity to Peter Dutton. So you couldn't it
(17:12):
was hard for them to at that time when they
were making those anti-US points in political debate to then,
for example, say, oh, and we're also traveling to Washington
to try and meet Trump. It was incongruous. But I
think that delay in actually fronting up to the question of, okay,
we disagree with this administration on a whole bunch of
(17:33):
issues and values, but they are still our most critical alliance.
How do we bridge that gap and try and create
a relationship with this president? The delay in having to
wait till the election was over and then get better
down in terms of staff and thinking about the strategy,
meant that the government was was not front footed on
how to deal with Trump. And I think they've now
been left in a little bit of a tricky scenario
(17:53):
where they've spent a lot of time making barbs against
the US, but now they've got issues on defence spending,
on aukus, on tariffs. And it's not we're not at
the front of the queue in terms of having these negotiations.
But having said that, even the countries who have had negotiations,
such as Keir Starmer in the UK, have got deals
that are being criticised in their own countries as not
(18:14):
being worth much. Yeah. And just a very quick point.
The Productivity Commission came out with an interesting report earlier
this week which suggested Shane wrote this story, that because
we are at the lowest 10% baseline in an average sense,
we are the least worse off in terms of trade
with the US, which means that we're at a kind
of comparative advantage and we might actually benefit from that.
(18:35):
The risk is that the global trade war actually reduces
growth everywhere, and that causes negative.
S1 (18:41):
Growth and takes the global economy. I can't believe you
just cut Shane's grass by talking about the Productivity Commission there.
I mean, he'll probably fight you about that.
S4 (18:48):
No, I'm just impressed that he's used the term comparative advantage.
S1 (18:52):
I like that. I really like.
S4 (18:53):
That. I didn't know he was a fan of David Ricardo. Uh,
for our economic nerds who are listening and, uh, Paul's
looking at me saying, who the hell's David Ricardo? But anyway.
S1 (19:02):
We don't get enough David Ricardo on this.
S2 (19:04):
Not the only one who reads Shane.
S1 (19:06):
Yeah, you probably read it in one of Shane's stories.
But anyway, um, on on Tuesday, just quickly, the RBA
had Michele Bullock and her colleagues dashed all our hopes,
and she kept rates on hold at 3.85%. You know,
as a Sydney mortgagee, how devastating this was to me personally.
Pretty much all the banks and the economists were predicting
a rate cut. Is the RBA misleading us or are
(19:29):
they just confused themselves.
S4 (19:31):
Or they're confused with their communication skills, which is one
of the a key issue that's coming up.
S1 (19:37):
Wasn't wasn't the sort of the revamp of the RBA
and these news press conferences that they're giving and the
sort of new transparency that was supposed to be all
about better communication.
S4 (19:46):
You're exactly right. But whether they've mastered it is a
completely different question at this point, and it was during
the press conference. One of the most interesting bits was
a reporter said, right, um, given that what everyone was expecting,
are you happy with the communication? Oh, no. We're communicating. Well.
S5 (20:05):
Um, I think communication generally actually has been going pretty well.
I think what was the difference was that, um, reasonable
people can differ in their interpretations of data. And I
think there was a couple of.
S4 (20:18):
Investors, people who've got hundreds of millions of dollars in
the market, had bet you were going to cut rates.
Every major bank economist in the country said you were
going to cut rates. I think that's the evidence that
the communication.
S1 (20:31):
Has pretty incontrovertible.
S4 (20:32):
Down to to quotes, uh, LED Zeppelin there. Um, so
I think that's like they're still working on it. Even
her explanation saying, look, we do speeches, we do speeches.
And which is how they they try to give signals
to the, to the to the public and to investors.
They had done speeches, but those speeches had stopped before
(20:55):
these these really key, uh, monthly inflation figures that forced
everyone to go, what the hell's going on? The bank
has to cut. We've got more Donald Trump tariff craziness.
You've got to cut. You've got to protect the economy.
But no, Bullock gets up and says, well, hold on,
just hold on.
S5 (21:11):
Five weeks by our next meeting in five weeks, we
will have the June quarter. CPI another labor market reading
further information about international developments and an updated set of forecasts.
So the board decided to wait a few weeks to
confirm that we're still on track to meet our inflation
and employment objectives.
S4 (21:30):
And she's giving us wink wink, nudge nudge probably will
cut at our meeting. Uh.
S1 (21:35):
Well, they kind of have to cut now because she
pretty much promised it to us right on on Tuesday.
S4 (21:40):
Yeah. And this is a look. The bank. And it's
what they call forward guidance. Everyone in Sydney and Melbourne
will know. Remember when Phil Lowe said, oh, look, we
don't think we don't think rates need to go up
until 2024.
S1 (21:52):
I'll never forget it, Shane. I'll never forget it. Hashtag
never forget.
S4 (21:55):
And Michelle Bullock has almost every press conference she's done
since taking the job. I'm not giving you forward guidance,
but saying, oh, June 30th, those figures, they'll be really important.
It's all about the timing. It's all the directions. In
one way you go, oh come on, that's forward guidance.
Just with a roadmap.
S1 (22:12):
I mean, it's like trying to pass the kind of,
I don't know, the tea leaves or something. The economic
tea leaves, which you do very, very well for us. Shane.
S2 (22:20):
To be fair to Bullock on on on forward guidance
like in her defence, she's not forecasting years into the
future here.
S4 (22:26):
I'd agree with you. Except she has said I don't
give forward guidance. Five weeks in the reserve Bank world
is it can be an eternity. Look, given what we've
seen this even this year, like only the last meeting was,
they discussed whether they should have half a percentage point
cut because of what was going on with Donald Trump. Like,
things are moving very quickly in this space.
S1 (22:48):
They are. And speaking of forward guidance, we must end there, chaps.
We've we've moved from LED Zeppelin to that Ricciardo guy
that you mentioned. We will meet again.
S6 (22:58):
We'll meet.
S1 (22:59):
Again.
S6 (23:00):
We will, Miss Maley. We will.
S1 (23:02):
Um. And I hope very soon. Thank you both for
joining us today.
S2 (23:06):
Thanks, guys.
S4 (23:07):
Thanks, Matt.
S1 (23:11):
Today's episode was produced by Kai Wong. Our executive producer
is Tammy Mills, and Tom McKendrick is our head of audio.
To listen to our episodes as soon as they drop,
follow Inside Politics on Apple, Spotify or anywhere else you
listen to your podcast. And to stay up to date
with all the politics, news and exclusives, visit The Age
and The Sydney Morning Herald websites. To support our journalism,
(23:34):
subscribe to us by visiting The Age or. Subscribe. I'm
Jacqueline Maley. Thank you for listening.
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