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State of the nation

By Bruce Haigh - posted Thursday, 12 February 2009


How prepared is Australia to handle the biggest crisis the nation has had to face since December 1941, when Japan entered the war?

Australia is not yet in crisis as a result of the international financial meltdown. It is still living off accumulated fat. Most analysts agree that bad times are in front, however they have been reluctant to put the forthcoming crisis into context and to give it shape and form. Only by doing so will we meet and match the challenge the crisis offers and develop appropriate responses.

The response so far has been one of panic, akin to the sale of harbour side properties and the flight to the Blue Mountains when the elite of Sydney feared a Japanese invasion. Risk averse politicians and public servants, nurtured on a diet of a paralytic fear of terrorism for the past ten years, went into full panic mode before Christmas throwing $10 billion at consumers. It evaporated like water on a hot road. Half went to pay off debt and of the rest most went overseas to China and other producers of goods. I would estimate that around $1 billion went into circulation in Australia. Which means that only one tenth of the money outlaid by the Rudd government, on the advice of Treasury, had the effect it was intended for; not such a good result, although with the massive private debt, paying some off is not a bad thing.

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The politically sensitive Australian Bureau of Statistics, looks like it has once again been spinning, much as it does with the employment statistics. It recorded a 3.5 per cent growth in pre-Christmas spending as a result of the injection of tax payer’s money. It claimed it was the best result for eight years. The claimed result flies in the face of anecdotal evidence. In any case the effect on jobs and the economy was limited because beyond the short lived benefit to the services sector very little money was spent on Australian goods. There are not many, most having gone offshore under Keating and Costello.

The impact of severely reduced economic activity will dramatically impact on Australia because of our narrow economic base, resting as it does on mining and agriculture, the former dependent on sales to China and the latter on the sale of wheat, wool and meat. The Howard and Rudd governments ripped the competitive advantage from Australian wheat sales by punitively abolishing the Single Desk after the Australian Wheat Board bribed a corrupt Iraqi government to hold the market in the face of Australian preparations to go to war against it.

Australian banks pushed easy credit for the past 15 years, urging the young, the weak and the infirm, among others into building up a national private debt of $1.2 trillion. Those same urgers are still running the banks. How is it then that Australia is, “better placed than most other countries to withstand the effect of the global meltdown”, according to Finance Minister Lindsay Tanner? It is not.

Of course it is a good thing to spend money on schools and all other forms of infrastructure whether or not there is an economic crisis, but where might savings be made? Savings will be achieved by the effectiveness of each dollar spent on productivity leading to jobs and import replacement.

Defence is the first place to look, together with the over inflated terror budget of the AFP and the racist and ideologically driven budget of the Department of Immigration.

Defence spending over the past ten years has been geared to pleasing the American alliance and fitting in with US force structures rather than the defence of Australia. Australia could have got by with smaller submarines but in order to continue to get praise from the US for the work of the Oberon Class submarines spying for the US off Vladivostok and Cam Ran Bay during the Cold War, Kim Beazley, as Minister for Defence, built the ill fated Collins class submarine. It was the technological equivalent of building a one off run of eight Airbuses.

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The economic meltdown will bring political instability with it, including to our region. The ADF is not geared to fight a prolonged engagement in our region. The purchase of the very expensive and untried F35 fighter was a poor strategic decision made by John Howard. It should be reversed and pressure put on Barack Obama to sell us the F22.

The recently purchased Abrams tanks cannot operate in our region, who can we sell them to?

What resources do we need to sustain operations in our region?

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About the Author

Bruce Haigh is a political commentator and retired diplomat who served in Pakistan and Afghanistan in 1972-73 and 1986-88, and in South Africa from 1976-1979

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