YEAR IN REVIEW: Canavan on virus, debt, and foreign policy
Fortune fluctuated for the country and for Queensland LNP senator Matt Canavan in 2020.
Fear spread with COVID-19 as individuals fell ill and businesses were ravaged.
In February, Mr Canavan resigned from his Cabinet role as Minister for Resources and Northern Australia to back a failed National Party leadership challenge by Barnaby Joyce.
Since then, the senator has kept busy chiefly as an advocate for the Queensland coal industry, particularly as it relates to Australia’s relationship with China.
Economics and foreign policy comprised much of what Mr Canavan shared with The Morning Bulletin in his 2020 Year in Review.
“Everyone wants to consign 2020 to history. History has been made in 2020. We can enter 2021 with the hope that vaccines will finally kill the coronavirus, but we will be living with the consequences of the virus for some time.
Australia has been fortunate to avoid the worst of the virus itself, but we haven’t avoided the big changes to our economy and society that few would have envisaged a year ago.
Australia was due to get back to a budget surplus this year; instead we have recorded the biggest budget deficits in our history. Australian Government debt is approaching $1 trillion and is at its highest level, as a percentage of our economy, since the aftermath of World War II.
It is hard to conceive of $1 trillion in debt but think of it this way: if you laid $1 dollar notes on top of each other, $1 trillion would reach a third of the way to the moon.
And that is just the Federal Government debt. All state governments have increased debt massively too. State debt will reach more than $500 billion. Combined with the Federal Government debt, that gets us almost half the way to the moon.
These borrowings have been necessary to support businesses and workers during a global pandemic but that doesn’t ease the burden that this debt will leave to future generations of Australians.
Some will say what does this matter? Government debt is not my debt, it is the government’s debt. But higher debt will have real consequences for all Australians.
Already the state governments have lost AAA credit ratings and there is a chance that the Federal Government would lose its AAA rating in the future. That would increase the interest costs of servicing federal government debt – currently about $13 billion a year.
More importantly though, it would have a knock on effect to our banks. Our four major banks have some of the highest credit ratings in the world. All of them have higher ratings than any bank in the United States, and they are among the top 20 highest rated in the world.
Our banks maintain these high ratings on the back of the high ratings of the Commonwealth Government. If the Commonwealth Government’s debt is downgraded that would likely see downgrades in our banks ratings too. That means their costs of borrowing would increase and interest rates would likely rise for all Australian businesses and households.
So the next time someone tells you that government debt doesn’t matter, remind them that the more Australia borrows, the higher interest rates for everyone would likely be.
Remember too that we borrow much of this debt from overseas. Only a third of government debt is held by Australians. The data does not identify how much of the debt is held by China, but China has become a large funder of western debt in recent years.
This year also marked a turning point in Australia’s relationship with China. Ever since China joined the World Trade Organisation in 2001, Australia has done more and more business with China.
Twenty years ago Australia exported just $10 billion of goods to China. Now it is around $150 billion a year and China is the largest destination for our exports by far.
China views this situation as a vulnerability and is trying to bully Australia over various gripes it has with our domestic and foreign policy settings.
A flashpoint occurred earlier this year when China objected to Australia calling for an independent inquiry into the coronavirus. This was a completely reasonable request; indeed, a proper inquiry is critical to ensuring we avoid some of the mistakes made in managing this crisis.
China’s over-reaction, however, has exposed how far the Chinese Communist Party has changed under Xi Jinping.
China’s frustrations with Australian policy have been building for years. China’s Australian embassy recently provided the Australian media with a list of 14 “grievances” they have with us.
Some of these include domestic policy decisions, such as not allowing a Chinese state owned telecommunication company to build our 5G network, or Australia’s right to determine what foreign investments are in our national interest, and even whether the Australian Government should muzzle the free speech of Australian politicians or the media.
We must not buckle to any of these threats which would weaken fundamental Australian values. In fairness, China also disagrees with our position on foreign policy matters like the South China Sea, Hong Kong or China’s treatment of the Uighur minority.
Australia always puts these positions respectfully and never disputes China’s right to determine its own policies as a sovereign nation.
Increasingly that is not a respect that China extends to Australia or the many other countries it is bullying.
The pandemic has also shown that the world has become too reliant on China’s dominant position in manufacturing. China now produces more than half of the world’s steel, aluminium, rare earths and copper. Australia plays a key role in supplying the natural resources that have helped fuel China’s manufacturing boom.
China has entrenched its dominance of these crucial sectors through massive government subsidies that are almost certainly not consistent with its international trade obligations.
It makes sense for the world to cooperate so that manufacturing is spread more evenly across the world and not concentrated in just one country.
It also makes sense for Australia to find its manufacturing mojo again. The last decade has seen Australia’s manufacturing output fall for the first time on record.
We have a lot to do to recover our strength in making things and it must start with focusing on the energy sources that we have in abundance, like coal and gas.
We must end the practice of sending other countries our high quality resources so they can undercut our manufacturing businesses while refusing to use the same resources ourselves.
The need to diversify away from China highlights how important it was to get Adani going, which is by far the biggest Indian investment in Australia. This year marked the real start of this long delayed project.
There are 2000 people now working on the mine and three flights a day leave Rockhampton with locals who have a job thanks to the project. Thank God the naysayers did not get their way on this project because we would be in a weaker position to shift away from China if they had.
Central Queensland can be the centre of our economic recovery and response to a tough year. We have the water, land and mineral resources to grow our economy and emerging links with countries like India show the future path Australia must navigate.”