Corona virus brakes China, hurts Australian economy

No one knows how long the coronavirus outbreak devastating China – and forcing the World Health Organisation to declare an international emergency – will last. Or how far it will spread.

What we do know is that the Morrison government reacted swiftly and sensibly in opening up its facilities on Christmas Island as a quarantine station for those evacuated from Hubei province and its major city Wuhan. (His faltering reputation was not helped by his acceptance of bad advice that he should charge evacuees $1000 each for the trip, a silly move he has since reversed).

We also know that the impact on China’s slowing economy will be significant. Already the scale of the epidemic and the number of deaths has outpaced the numbers of the SARS outbreak of 2002-2003, which caused panic across the region.

Today’s epidemic, which has splintered into almost every country in the Asia Pacific (except New Zealand and Indonesia to date) will cut more than a percentage point off China’s economic growth in the first quarter, pushing GDP growth down below 5 per cent. 

It could go down more, especially if the authorities are unsuccessful in tightening movements of people in and out of China. Hong Kong, already shattered by the impact of the pro-democracy protests, could also suffer, where its beleaguered chief executive, Carrie Lamb, is under pressure for failing to subdue the movements tens of thousands of people that cross its land border each day, with numbers inflated by those returning to the enclave from Chinese lunar celebrations.

Airlines, including Qantas, British Airways, Lufthansa and Cathay Pacific have stopped most flights in and out of the Peoples’ Republic, and some are offering full rebates for cancellations and no-fee changes. Significantly public service offices in Hong Kong have told staff to work from home, many private sector firms have followed suit, we know of two law firms who have sent Australians to work out of their Sydney offices for the duration. The Hang Seng index tumbled after reopening after the holiday, and market traders are poised for a further correction. During SARS the main Chinese share markets fell by about 10 per cent.

But the coronavirus outbreak is not the only factor to make the celebrations of this lunar new year festivities somewhat muted. These factors should be taken into account by Australian strategists in assessing the impact on our economy, especially the resources sector. They include the ongoing trade war with the United States, still unresolved despite Trump’s assertions that he has settled a conflict he started; a simmering rebellion in Hong Kong, and an economy struggling to cope with regional dissenters, a falling birth rate, bad loans, and a transition to greater domestic consumption that is taking longer than expected. 

What is often overlooked that in this attempted shift, many export-orientated international corporations have closed factories in China and moved them elsewhere. Two notable examples.Samsung, the world’s largest smartphone maker, is ending production at its factory in Tianjin. Pegatron, which supplies components for Apple products, announced it is shifting to a new factory in Indonesia. Last year Japan’s Panasonic, Suzuki and Nikon all moved production out of China to Thailand, Singapore and other parts of ASEAN. Foxconn is reported considering alternatives to the PRC.

The global economy is also faltering. Trump’s America has enjoyed good growth at the expense of burgeoning debt. But the benefit has been felt more by stockholders than workers in the rust belt. Europe, particularly Germany and Britain, is slowing down, and commodity prices are falling. Also, the price of oil has tumbled by more than 20 per cent since the corona virus broke out. Iron ore prices are down by about $US10 a tonne. Copper is riced 13 per cent lower.

Australia, a country that depends for survival on its land mass, selling grain, food and mineral’s, is facing a tipping point. As our competitiveness continues to slip, and the Morrison government does nothing to avert the big risks to our continent’s environment, our exports are likely to take a hit. Oddly the one major export that is likely to hold its own in 2020 in coal, with demand from China continuing to rise, especially from a reliable and close supplier like Australia. 

But it is Australian tourism that is likely to feel the most pain in the short term, mostly as the result of the Morrison government’s ban on new arrivals from China, the country that provides the bulk of visitors this time of year. The Financial Review reports that corporate travel is down 17.8 per cent since January 20, and the drop in leisure travel is likely to be mu h greater when statistics become available, as most visitors from China come in on cut price seats on PRC carriers like Air China, China Southern and China Eastern. 

The ABC’s top business reporter, Peter Ryan, has also reported that the epidemic could result in a multi-billion dollar blow to our universities – because Chinese students are not returning to take up their courses, and internet bans are hitting distance learning.

The travel ban does not mean Australia is immune from the coronavirus. So far 12 cases have been confirmed – one of the highest per head of population, and state capitals are still vulnerable to potential infection carried in by Australian citizens, including ethnic Chinese, returning from visiting relatives in mainland China and Hong Kong.

No wonder travel related stocks on the ASX are down. Some strategists may see this as a buying opportunity, but we believe all stocks may have further to fall, as the economic outlook for Australia is not good. Meanwhile Scott Morrison has further worries as the Liberals coalition with the National Party is in danger of rupture, with the resignation of cabinet minister Matt Canavan. He is lining up to support the Nationals’ former leader Barnaby Joyce who is trying to wrest back control of the party on a policy of backing expansion of coal mining and opposing environmentalists supporting urgent action on climate change. 

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PM out of his depth and mired in Canberra’s democratic deficit

EDITOR’S NOTE: We strongly recommend you watch the excellent TV report from Channel 4 News on the sequel to the Australian wildfires disaster – as seen from an international perspective. As the global elite prepare for the Davos summit in Switzerland, the World Economic Forum’s president says all of the five biggest threats to global economic and political stability are linked to the environment. There is a direct link to the newscast at the foot of this post. You may wish to watch it first, and then click the back button to return to our post.

As forests and bush the size of Britain are laid to waste by deadly fires, the Australian PM’s acknowledgment of mistakes is not enough. His lame government needs a new climate change strategy – and soon. Rain has fallen in some of the worst affected areas, but the cost of restoration will far exceed the initial sums allocated to restoration.

Australia’s environmental groups, in a letter to Morrison, have identified 3l species of animals, birds and reptiles now threatened wirh extinction, some of them indigenous to Australia.  It is reported one billion animals have been burnt to death.

It’s no laughing matter

Scott Morrison

That’s not Scott Morrison’s only problem. Two weeks into aa new decade his government is in very poor shape. The ABC’s defemce correspondent, Andrew Greene, reportsthat the $50 billion submarine contract with a French state-owned company is in serious trouble, running over budget and nine months behind schedule. Hard questions need to be asked about whether thecontract should be pulled, and the $400 million spent written off. By the time the submarines are built, they may no longer be fit for purpose. 

The Morrison government is also in a fight with its erstwhile strongest supporters – the Australian media. Last Monday the country’s major newspapers published blank front pages, in a rare act of unity complaining against Canberra’s moves to penalise whistleblowing, deny access to information hat would be made public in other democracies and, in some cases, criminalise journalism.

Not exactly all the news that’s fit to print

Whether a one day campaign when parliament is on an extended holiday is sensible is a moot point, especially when the newspapers owned by the News Corporation have been accused of misreporting the wildfire crisis, including denials of climate change as a factor, and fake news about most fires being started by arsonists. Indeed Rupert Murdoch’s newspapers have been attacked by the proprietor’s own son, James, still a director of the company, for downplaying the impact of the climate cris, where this week The Guardian reports thaf the oceans – three of them encompassing Australia – are at the hightest temperatures since records began, because of greenhouse gas emissions.

When Canberra eventually gets back to business, it will need to deal with these issues, along with the democratic deficit that now engulfs our languid national capital. 

Watch the Channel 4 News Report,

 Listen to Colin Chapman’s personal critique of Morrison and his opaque government.

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2020 – deadlyfires a wake up call for inept, leaderless Coalition

by Colin Chapman

As Australia enters a new decade — likely to be one of the most challenging in its peacetime history — even wearers of rose-tinted spectacles must see that the country is slipping into the delusion that we have seen in the United Kingdom and the United States. This is a belief that all will be well in the months and years ahead, based on the fact that Australia avoided the recession some economists had predicted for late 2019. 

In reality, Australia, the US and the UK will probably suffer what Queen Elizabeth II described on Christmas Day as a ‘very bumpy year’. The main cause, common to all three countries, is a severe leadership deficit. In the US, the odious Donald Trump has created hideous worldwide conflicts, and smugly claimed to have resolved them. His well chronicled falsehoods are almost as numerous as those of Boris Johnson, the UK prime minister, whose lies are detailed in a website devoted exclusively to revealing them. Johnson returned to 10 Downing Street in early December, proving you can actually fool the majority of voters all the time. 

Bush fires in Australia on New Year’s Day 2020

In Australia the worst bush fires in living memory have spread across New South Wales, Victoria and South Australia, destroying homes, costing lives, burning precious forests and woodlands, as well as the limited budgets of brave fire fighters. But ScoMo, as Scott Morrison likes to be known, remains indifferent to the global call to step up action to combat climate change. Far from pursuing policies that could help mitigate global warming, the obliteration of species, and the toxicity of air quality in our cities, Morrison actively pursues the development of coal resources in the vast Galilee Basin under the spurious slogan of ‘jobs, jobs, jobs’.  He and treasurer Josh Frydenberg seem to have immunised themselves to the fact that – as other countries have found – far more jobs could be created by swiftly expanding secure and reliable electricity generation from solar and wind power.


Australians tell Morrison he ‘should be ashamed -ABC TV


The Indian-controlled Adani Carmichael mine, with a lifespan of just three decades, will cost the Australian taxpayer just under $4.5 billion in subsidies, according to the Institute of Energy Economics and Financial Analysis, which says it would be unviable without the government handouts and tax breaks. Put another way, as climate change protesters see it, Australians are giving private Indian interests a huge dollop of foreign aid to fuel coal generated power stations in an already heavily polluted India. It will also suck 12 billion litres of water a year out of the Great Artesian Basin. To be fair to Morrison, the mine has strong support from the Australian Labor Party at federal and Queensland state level, as well as from the governing coalition.

The Sydneysiders who have been coughing and wheezing through the smoke that masked the harbour city over the holiday period, the result of blazing bush fires in the mountain ranges that half encircle the Sydney Basin, are not so supportive. As the new year was rung in, thousands of people on the south coast of New South Wales and eastern Victoria were forced to onto the beach and into the ocean as winds of over 20 kph pushed a wall of flames towards their homes.

None of these Armageddon-like incidents deterred the lord mayor of Sydney from pressing on with an extravagant new year’s eve fireworks display over the harbour city, defying a barrage of protests and counter to the wise decisions of the nearby cities of Parramatta,  Liverpool and Wollongong, which cancelled their displays.  The City of Sydney insisted that the show go on, insensitive to the feelings of the families of the 12 who had died in the bush fires, and the thousands who have lost everything except the clothes worn as they fled.

Morrison should have persuaded Lord Mayor Clover Moore to abandon the display and keep the fireworks in dry storage for next year. There is more than a little hypocrisy in Moore’s criticism of the government for inaction on climate change while splurging city resources on the New Year’s Eve festivities. Not least was the oprobium it earned us overseas.

Admittedly, the crowd drawn by the pyrotechnics contributed over $800,000 to a fund set up for bush fire victims, and while climate change and record temperatures were a contributory factor to the scale and intensity of the wild fires, they were by no means the only cause. Some were lit by arsonists, most of whom will escape prosecution. Too many homes, many of wooden construction, have been built adjoining or within bushland. Many state forests have been sold off to private investors or developers. Not all of these land holders or leaseholders have managed the forest and woodland to reduce the risk of fire, by clearing dead timber, creating and maintaining fire breaks, and installing electronic surveillance. With most of south-eastern Australia parched by a two-year drought, wildfire risk is at a peak.

This state of affairs owes much to neglect by both federal and state governments. The cost of wildfires is enormous and cannot just be measured in dollars or shattered lives, or the glib assertion by Morrison that ‘the great Australian spirit’ will rise to the challenge of restoration. Woodlands are precious assets. They capture tons of carbon and replace it with oxygen, which is why some countries plan to plant billions of trees. Over the new decade, our forests and woodlands will regenerate, but the scale of destruction demands action to halt the root causes of climate change.

The message is clear. Morrison needs to lift himself out of his suburban torpor and give the environment the high priority it needs. It means a stop to subsidies for environmentally damaging projects like the Adani mine, and using the savings elsewhere. Capturing or reducing carbon emissions has been given a far too low a priority but should be top of the agenda for 2020 and beyond. The states must penalise all but the cleanest private cars, phasing them out altogether by 2030. The same policy must be applied to commercial vehicles, albeit more slowly. Other cities are already doing this. Why not ours?

Morrison’s Coalition government has been found wanting in other areas too. The prime minister claims that there has never been a better time to be Australian. While he does not indulge in the kind of lies that have tarnished the leadership of Trump and Johnson, his optimism in the future of ‘our amazing country’ is misplaced. Speaking to Australians on New Year’s Day, he claimed there was ‘’no better place to raise kids anywhere on the planet”.

One might respond: “Tell that to those in Mallacoota, Victoria, who had to race ahead of flying embers to the safety of the ocean; or those in NSW towns who saw their homes, shops and schools burnt to a cinder; or the one third of the wineries in the Adelaide Hills that have been wiped out; or the truckies stuck in blistering heat on the only tarmac road across the Nullarbor Plain linking South and Western Australia”.  Morrison’s message might not go well with parents whose children are about to enter Australia’s ailing education system, where standards are slipping quickly down world league tables. With world growth slowing and Australia’s competitive edge slipping, the ‘she’ll be right’ mentality is surely not the answer for economic policy. Worse may be on the horizon: the Trump-induced US trade war with China is far from over, despite optimistic noises from Washington just before Christmas.

The message for Morrison for 2020 and beyond is “Wake up!”. So many areas of policy need immediate attention; a medium-term vision for Australia’s future is needed; and there must be reform in the way both the Federal government and Parliament work to address the democracy deficit. In coming weeks, further articles on Australian Strategieswill analyse new approaches.

But all is not lost in the Anglosphere. There is hope that Trump, while surviving impeachment, will lose the November presidential election, especially if the Democrats have the courage to select former New York mayor, Mike Bloomberg, as their candidate. The Brits have undertaken a double act of self-harm by deciding to leave the European Union and electing the charlatan Boris Johnson as their prime minister. As the full impact of these decisions hits wallets opposition will grow, though it has to be said the British Labour Party is a long way from reforming itself and will have difficulty in picking the right leader and forming a strong opposition. 

As for Australia, the whole country needs to rethink its future for the rest of the first half of this century. The 2020’s will be a decade when risks grow, rather than diminish. Re-read Julie Gillard’s tract Australia in the Asian Centuryand see how dated it is and how the aspirations have faded. It’s unlikely Morrison will be the man to lead us into the promised land, but at least he should abandon the clichés in favour of decisive action.

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Morrison too cosy with damaged and odious Donald Trump

by Colin Chapman

Those of us who were frustrated that Scott Morrison appears to take no interest in foreign affairs, even leaving attendance at international leaders meetings to others, have been taken by surprise. In September the prime minister flew around the world to attend a series of high-level meetings, while also delivering a clutch of speeches.

Some were strategic, some not. Some were better than others. And then last week we had the first meaningful Coalition government exposition of foreign policy since the Rudd and Gillard years?

There were great expectations when the Prime Minister elected deliver the annual Lowy lecture in Sydney on October 3. His speech was what the English literati like to call ”a curate’s egg”-  good in parts. It was reasonably comprehensive but lacked important detail, offering little useful information for international affairs academics and policy wonks, though providing insights into the way ministers, if not DFAT diplomats, think. The respected president of the Australian Institute of International Affairs, Allan Gyngell, said Morrison, struck an “anxious and inward-looking tone”.

That was clear from Morrison’s comments on his appointment that as a politician his instincts and passions had always been domestic. He said he’d never sought out attendance at international summits. Well, we knew that; but the title of his talk went further. “In Our Interest” suggests that in foreign policy matters he has adopted the Trumpian theme ‘Put America first’ 

Putting aside for the moment Morrison’s relationship with the American president, it is worth reviewing the strategic elements of Morrison’s Lowy lecture, insofar as they exist amid the empty rhetoric.

Let’s start with good strategy, much of which came towards the end of the talk. Morrison talked of righting his predecessors’ neglect of the South Pacific, which allowed China to move in and take a highly influential and self-interested role in strategic island countries in the South Pacific Forum. But he did not go far enough. Our smaller neighbour, New Zealand does better. 

As we have long advocated, Morrison’s Canberra is now playing a more active role in ASEAN, particularly with Indonesia, our closest neighbour and the region’s largest country.  Legislation to ratify the landmark Indonesia-Australia Comprehensive Economic Partnership signed in March is about to go through parliament. The treaty removes all Australian tariffs on Indonesian goods, while gradually removing 94 per cent of Indonesia’s tariffs on our goods and services.  

Relations with Indonesia have greatly improved since the Abbott years when then foreign minister Julie Bishop tried in vain to persuade the newly re-elected president Joko Widodo to call off the execution of two Australian drug dealers. Now Australia and Indonesia are committed to increase trade and investment between them in areas ranging from cattle to education, cars to wheat. The deal will enable Australian farmers to ship more agricultural goods to South-East Asia’s biggest economy, as well as allowing Indonesian textiles and footwear to out-compete China in the Australian market.As Morrison said:” I very much look forward to attending the inauguration of re-elected President Widodo later this month”. 

The PM also reminded us that Canberra already has a strategic partnership with Vietnam, and wants to expand cooperation even further, but did not go into details. For a country with whom we were at war not so long ago, Australia-Vietnam relations are extraordinarily cordial, and our ties with Hanoi remain strong.

The other good strategic move is Morrison’s confirmation of his acceptance of an open invitation by India’s prime Minister to visit Delhi next January, where he will deliver the inaugural address at the Raisina Dialogue, India’s annual flagship conference on geopolitics and geo-economics. Morrison will be accompanied by a business delegation led by Ashok Jacob, chair of the Australia-India Council board. The hope is that this visit wiill lead to a new economic relationship the world’s largest democracy or, as Morrison put it, “another step in cementing India in the top tier of Australia’s partnerships”.

Morrison was at his most enigmatic when talking about Australia’s relationships with international organisations. This was also his only new announcement. “I have asked the Department of Foreign Affairs and Trade to come back to me with a comprehensive audit of global institutions and rule-making processes where we have the greatest stake”, he told his Sydney audience. “We will be looking to tap Australian expertise as part of our efforts”.

Morrison is clearly piqued that Australia has not played as active a role as it should in setting rules.  “When it comes to setting global standards, we’ve not been as involved as we could be”, he said. “We can’t afford to leave it to others to set the standards that will shape our global economy”.

Well, whose fault is that? Not since Gareth Evans was Foreign Minister in the Whitlam and Hawke governments has Australia had an effective voice at the United Nations, and we did not make the most of our recent one year term on the Security Council. James Wolfensohn was head of the World Bank for a decade until 2005 and was a significant force in international finance but since then Australia has lost the plot. Kevin Rudd strutted the international stage mostly in self-promotion. In business and the economy Australians have been among the weakest attendees at important annual meetings such as the agenda-setting World Economic Forum in Davos and the Bloomberg Business Forum in New York. When Bob Gottliebsen and I, year after year, showed up as media leaders in Davos we were always appalled at how poor Australian representation was, with both ministers and corporate leaders missing their chance to network with their global peers. 

Morrison does seem to be putting more effort into multilateral fora than Turnbull or Abbott, but he was a noticeable absentee from the UN Climate Action forum while in New York last month. Moreover he has a dismal record in action against greenhouse gas emissions and our damaged biosphere, which is very worrying. He seems to think he is acting in the national interest, but he is not.Though Tony Abbott’s treasurer Joe Hockey Australia was one of the prime movers in gaining International support for the OECD’s efforts to put an end to the way digital groups like Facebook, Amazon and Google shift their profits around the world to reduce or even avoid national taxation. Last week the Paris-based OECD proposed a revolution in corporation taxation, which, if introduced, will overturn long-standing rules that have allowed many (mostly American) corporations to minimise their tax. 

“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence,” the OECD said in a consultation document published on Wednesday. “What that means for Australia, for example, is that the ATO would be able to levy taxes on profits made by Google on advertisements sold by Google and Facebook to Australian advertisers. It is possible Trump will rail against the OECD plans. It will be a real test of Morrison as to whether he backs Hockey’s ideas encompassed in the OECD proposals, or backs his ‘close friend’ in the White House.The most worrying aspect of Morrison’s foreign policy strategy is indeed his grim determination to cement his friendship with Donald Trump. 

It’s good strategy to have foreign minister Marise Payne restore Australia’s participation in the so-called Quad talks in New York last week, along with counterparts from the United States, India and Japan. Under prime minister Kevin Rudd Australia pulled out of this practical forum for co-operation on regional terrorism, maritime and cyber issues.

In his lecture Morrison declared,”under my leadership, Australia’s international engagement will be squarely driven by Australia’s national interest”. Fine words, but they do not square with the PM’s affinity with Trump which, when on show in Washington a few weeks back, was a national embarrassment. It’s not just a conflict of the two men’s moral values, Trump having broken all but two of the Ten Commandments. The US president also has no respect for the rules-based world order, enduring vales and adherence to human rights that Morrison proclaimed as so important in international relations.

Trump will probably escape impeachment, but his role in Russia’s interference in his 2016 election, and his now proven attempt to persuade Ukraine’s president, under duress, to help prove wrongdoing by Joe Biden, provides sufficient evidence for Morrison to take a cool and professional (as distinct from effusive) approach to the American leader, who now seems unlikely to get a second term. 

As if this is not enough, as a strong advocate of free trade, Morrison should surely be railing against Trump’s blatant protectionism, as manifested in the trade war he started against China, and his continuing threats to the world’s biggest trade bloc, the European Union.

Even worse, is Trump’s record of four decades of bigotry, his treatment of refugees, and the deterioration of American foreign policy during his administration.

Former Secretary of State General Colin Powell correctly described Trump’s foreign policy as “a shambles” last week, urging Republican congressman to “get a grip” on him. This followed the president’s sudden announcement that he was going to withdraw US troops from the militarized zone along Turkey’s southern border with Syria, where thousands of captured Islamic state fighters, including Australians, are being held. As predicted, this has now enabled Turkish troops to move in on the area that is controlled by Kurds, who bore the brunt of the fighting against ISIS and played a major part with the help of US coalition forces in destroying the IS caliphate.

“History will never forget if the US allows our Kurdish allies to be massacred” was a typical Republican criticism of the president. Not only that, but if Turkey attacks the Kurds it will free the IS fighters, rekindling the fortunes of Islamic state.

Morrison should be summoning the US ambassador to Canberra, expressing Australia’s displeasure at the odious Trump’s reckless move, which betrays an ally and increases the potential danger to Australia. He won’t do this, of course, even though the US president is under a concerted attack. 

Under attack from erstwhile Republican supporters, by Wednesday the president had put his name to a White House statement labelling the Turkish military action a “bad idea”, even though it was his action that triggered it.

Senator Lindsay Graham, until this week a staunch Trump supporter, tweeted bleakly: “Pray for our Kurdish allies who have been shamelessly abandoned by the Trump administration. This move ensures the emergence of ISIS”.  Morrison and Co should be saying their prayers too.

Colin Chapman is a Fellow of the Australian Institute of International Affairs