Ukraine means a stronger Australian economy needed to afford defence upgrade

Economic dislocation is a risk of the changing defence and security environment that has to be countered by innovative economic development and diversification.

Much in the Ukraine-Russian conflict is a harbinger of challenges likely to be faced in the next two decades – uncertain and unsafe times.

And while there is understandable interest and inclination to splurging on new hardware, technologies and infrastructure that might make us safer, equal if not more attention has to be given to strengthening our economy to afford the defence systems and capabilities needed to deter aggressors.

This is the real implication for Australia in the current state of global affairs.

Leading in to next month’s federal election neither of the major parties is proposing to go beyond 2% of GDP and yet without economic growth it is difficult to see how that threshold can be maintained and national security maintained.

Defence is expensive. Being forced to sacrifice other national domestic priorities is the risk, if we don’t focus more on smarter, more innovative ways of creating economic value.

It’s a complex and challenging set of issues in need of much more rigorous consideration, debate and action by our political leaders.

Regional development cannot be left out of the conversation.

It must also be a cornerstone of our national defence strategy, particularly in northern Australia – that under-populated, under-invested half of the continent rarely seen by most Australians other than when flying over it.

These are some of the themes highlighted in my 7 April Op Ed article for Queensland Country Life and The North Queensland Register. The short item appears below.

“Few Australians will argue at the $156 million pledged in the Federal Government’s budget for military and humanitarian assistance to beleaguered and suffering Ukraine.

We can afford to help – being comparatively better off than most countries in dealing with the short-term disruption and economic fall-out from Russia’s outrageous aggression.

Regional Australians already know the war means soaring fuel and fertilizer prices and increased everyday living costs.

Offsetting the pain are the boosted prices for wheat, barley and sunflower seed and record spot prices for iron ore and coal.

Increased investor interest in agri-business funds suggests also that a war between two major food exporters creates opportunities for their competitors.

Looking longer term, there are undercurrents in Putin’s Ukraine gamble potentially detrimental to Australia’s interest.

For decades, our $430 billion primary sectors have delivered prosperity because of the strong international commitment to a rules-based global trading system.

China’s increasing economic belligerence is challenging that order, as is rising populism and nationalism in Europe and the United States.

Together these forces are degrading confidence in forms of economic governance that have delivered so well for Australia.

With the global trade-to-GDP ratio already on a decade long slide, Putin’s rogue subversion of western sanctions and enlistment of Chinese support compounds a growing insecurity internationally.

Instead of offshore investment exploiting sources of comparative advantage, OECD countries, including Australia, are talking now of the need for ‘on-shoring’ to protect supply chains and increase self-sufficiency.

It comes at substantial economic cost as do related strategies for increased defence self-reliance.

The discounted security dividend enjoyed by America’s allies since 1945 is no longer prudent nor possible.

The $575 billion Federal Government commitment to upgrading and expanding our military and security capabilities over the next decade is the minimum outlay required for Australia to be an effective partner in the western alliance.

It means the days of spending less than 2% of GDP on defence and security ended with this budget.

Ukraine’s struggle reminds us that to be free and masters of our own destiny, besides having committed powerful allies, we must be able to deter potential threats.

To pay for a much bigger defence bill, increasing the productivity and competitiveness of our secondary and tertiary sectors will be essential – as is further development of our regions, especially in the north.

Without such a comprehensive integrated national security and economic development strategy we put both at risk.”

Author: Professor John Cole OAM

Honorary Professor and founder of the Institute for Resilient Regions at the University of Southern Queensland and Honorary Professor, UQ Business School, The University of Queensland.

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