The election of Donald Trump has increased Australia’s strategic vulnerability in the Asia-Pacific region.
Trump’s policy of ‘America first’ and his doctrine of policy unpredictability has caused significant alarm among America’s traditional allies who rely on America for military protection and to guarantee global stability.
This includes Australia which has relied on America since Churchill left Australia to the fate of Japan in 1942 after the fall of Singapore.
In particular, Trump has publicly criticised America’s open ended protection of Japan and South Korea suggesting either a request for additional financial compensation or a military withdrawal from the region.
Trump has also provoked China both diplomatically through initiating direct communications with Taiwan as well as economically through a confrontational trade agenda and the appointment of aggressive trade representatives.
As a result of increased economic and military regional uncertainty, Paul Keating and Penny Wong have called for a rethink of the American alliance and a shift towards greater economic and diplomatic engagement in Asia.
However, the rise of Chinese power and their quest for regional hegemony coupled with the decline of America’s global presence has been entirely predictable for years.
As a policy advisor to Senator Sinodinos (now Cabinet Secretary) in 2012-13, Sinodinos and I had several conversations regarding the US Government’s disastrous financial position and the unsustainability of its global military footprint.
Much like the Roman and British empires or the Soviet Union, an over extended government will ultimately collapse financially or cede large swaths of territory in a protracted military confrontation.
Obama and the US Congress have left the American economy weak and the federal government in financial ruins.
For example, under Obama, the American economy grew at a paltry 1.46% per annum against a long‑term average of 3.35% (1930 – 2015).
Moreover, according to the US Congressional Budget Office, the US Government, under Obama, has doubled its gross debt to $US 19.9 trillion and is budgeted to deliver 10 years of future deficits. Gross federal debt is projected to reach $US 28.2 trillion in 2026.
Obama’s debt and deficits were financially possible through controversial ultra-low interest rates and three rounds of quantitative easing, resulting in the US Federal Reserve and other government agencies now holding $US 5.49 trillion of US Treasury Bonds.
Yet despite these extraordinary monetary interventions, the US Government was still required to pay $US 433 billion in interest expenses in FY 2015-16.
Given this situation, Trump’s campaign assessment that America cannot afford to be the policeman of the world without adequate financial compensation is both nationalistically necessary and realistic.
Whilst Prime Minister Turnbull remains publicly confident that America will supplement Australia’s national security infrastructure, Trump has multiple contradictory policy positions which are both economically and financially unsustainable that challenge this assumption.
For example, Trump has repeatedly warned that Americans are trapped in a large financial bubble through ‘politically manipulated’ low interest rates and that interest rates need to rise.
Alternatively, Trump’s economic plan assumes an annual real growth rate of 4 per cent per annum and is built on corporate and personal income tax cuts larger than the George W Bush tax cuts, record infrastructure spending and a significant expansion in the size of the US military, while leaving social welfare and health care entitlements untouched.
Raising interest rates is unlikely to generate Trump’s planned 4 per cent real economic growth given the indebtedness of US corporations and households which combined stands at over $US 19 trillion.
Moreover, Trump’s budget plan will likely explode the size of the US Government’s budget deficit, requiring global investors to fund additional debt while simultaneously needing to meet higher interest costs on existing debt.
Trump’s plan is unsustainable, particularly as since the US elections there has been a significant international sell-off in the global bond market, which is driving up long term interest rates.
In the final equation, in order to resolve these contradictions Trump will either need to insist on the US Federal Reserve reversing course and artificially suppressing interest rates again through further rounds of quantitative easing which would risk the US dollar’s reserve currency status, or Trump will be required to scale back his budgetary and America’s military commitments.
Either way, Australia cannot place any long-term faith in America’s military protection.
Australia’s elites have for years falsely assured the Australian people that Australia’s national security is well in hand. The reality is that the nation is not economically, financially, militarily, diplomatically or psychologically prepared for a world without America’s defence shield.
Australia’s current predicament was entirely foreseeable. The gross incompetence of Australia’s elites has led to failed national leadership.
John Adams is a former Coalition Advisor. This op-ed was first published in the Daily telegraph.