Can Australia still look to America? Saul Eslake says Trump Ukraine broadside bears no pangs of Curtin kinship

Not since Western Australian Prime Minister John Curtin declared “Australia looks to America” has there been such a seismic shift in the Lucky Country’s place in the world. That’s according to respected economist Saul Eslake, who calls it an “imperfect parallel” to President Donald Trump’s alarming and false accusation last Thursday that Ukraine started the war with Russia. Equally, that 1941 declaration about the task ahead by Mr Curtin represented a true watershed moment: that Australia would no longer rely on Britain, its mother country. “The key difference is we don’t have anyone else to turn to,” the former chief economist for ANZ and Bank of America Meryll Lynch told The West Australian. It’s a sentiment that furthers concerns expressed by former Prime Minister Tony Abbott last week about the West being in a “dangerous place”, and by former Prime Minister Malcolm Turnbull, who warned grimly in an ABC interview that Australia can’t assume it can rely on Uncle Sam the way it has done in the past. Within weeks of becoming President, Donald Trump dished out sweeping tariffs against US trading partners Mexico, Canada and China. In the Australian business world, there’s hope and belief the property mogul-turned politician understands their plight and are encouraged by his purported reputation for “cutting a deal”. On the other hand, there are concerns Government efforts to reign in the superpower’s spending — aided by billionaire Elon Musk — are threatening the lucrative incentives dangled by former resident Joe Biden via the Inflation Reduction Act. On Thursday, Fortescue revealed this lack of clarity regarding funding from that programme, and the US Department of Energy’s Clean Hydrogen Production Tax Credit, meant it would need to rethink spending and timelines for a lead green hydrogen project in Arizona. Anglo-Australian mining giant Rio Tinto and Australian steelmaker BlueScope Steel are still trying to figure out whether they will be spared 25 per cent tariffs imposed on goods they want to sell Stateside. Rio chief Jakob Stausholm was reported as being in the US this week with an alleged plan to try and suss out what exactly President Trump’s trade plan is going forward. The Trump shift raises big questions for Australia’s open and export-driven economy, of which WA’s mining industry is at the nucleus, contributing substantially to national resources and petroleum earnings of about $415 billion in 2023-2024. Asked whether a more geopolitically-isolated Australia would naturally mean more domestic manufacturing, Mr Eslake is of the view Australia should concentrate its workforce and resources on what it’s good at. “This is something I call manufacturing fetishism. The belief that there’s something inherently more noble about manufacturing than mining or agricultural services, and that manufacturing jobs are somehow more important,” he said. “As Western Australians know better than anybody else. We’re good at mining. Mining is 10 per cent of Australia’s GDP. Its less than 2 per cent of almost every other advanced economies. We’re also quite good at ag (agriculture), it’s almost 3 per cent of our GDP, which doesn’t sound like very much, but for almost every other advanced economy except New Zealand . . . it’s one or less.” He also argues a successful manufacturing industry requires significant scale and a big domestic economy to offset fixed costs of production, or at least being close to one for exports. “To be good at manufacturing, without either tax breaks and subsidies or forcing your own consumers to pay unnecessarily high prices goods . . . you need scale,” he said. “We don’t have a big domestic market, and we are not close to one.” If digging, exporting and a reliance on the power of free trade is the smart way to go, maintaining a steady relationship with Australia’s number one trading partner will be vital. A situation where Chinese President Xi Jinping is emboldened by President Trump and Vladimir Putin’s (at this stage) mutual position on Ukraine could put Australia in a difficult position, the Tasmania-based economist said. He theorises a potential trade blockade on Taiwan could trigger retaliatory economic and financial sanctions from the West, the same way it did when Russia invaded Ukraine. “Suppose the West were to respond . . . which country would suffer the most? Which country runs a big surplus with China? Which country exports a bigger proportion of its GDP to China than any other advanced economy? “We would be expected to stop selling iron ore and coal and gas to China. It’s easy for the US to say, because they don’t sell anything to China. “I think that’s potentially a huge risk. More for WA than any other part of the country. If that happened, you guys will be sitting next to Tasmania supping at the GST trough.” Former US Ambassador to Australia Caroline Kennedy last year lauded Western Australia’s place in the US-Australia alliance, declaring WA was “at the centre” in regard to critical minerals, national security and AUKUS. The strategic three-way defence pact between the US, UK, and Australia will see some 700 submariners expected to call WA home when submarines start regularly rotating through HMAS Stirling from 2027. “Perth is going to become a submarine base and a naval base for the US,” Mr Eslake said. “That’s fine if you thought the American people were our friends, and the US would defend us if push really came to shove. But my point is, I don’t think you can believe that anymore.”