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Prime Minister Anthony Albanese with Treasurer Jim Chalmers in the foreground outside Parliament House after the 25 March budget announcements (Hilary Wardhaugh/Getty Images)
Economic Diplomacy: Doing the sums for a tight federal election and a Trump trade revolution all at once was bound to be challenging.
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Budget 2025: Trump-proofing Labor’s poll chancesBudget 2025: Trump-proofing Labor’s poll chances
Donald Trump may have well and truly trashed most of the conventional interpretations of American exceptionalism in little more than two months in office.
However, it says a lot about the enduring power of the catch-phrase that Treasurer Jim Chalmers couldn’t help talking up his own Antipodean version this week as he sought to Trump proof the Labor government’s election fortunes with “Australian economic exceptionalism”.
It was not that the US president is even mentioned by name in the almost 4000-word budget speech or the near 400-page budget Strategy and Outlook document – such is the apparent sensitivity about possibly offending him ahead of tariff “liberation” day next week. Indeed, Chalmers only allowed himself one tart response to Trumpian disruption when he said the government would expand the Pharmaceutical Benefits Scheme rather than “weakening it because American multinationals want us to”.
It is just that the US president seems to have sent such a shock wave through rusted on partners such as the Australian government that it hasn’t quite grasped the new political lexicon.
Anyone for Make Australia Great Again?
That political marketing opportunity aside, the Treasurer has increasingly claimed the mantle of fashioning an economic security strategy for Australia ahead of an election possibly being called in coming days.
For example, last week, as Prime Minister Anthony Albanese was in Queensland announcing pre-election health policies, Chalmers seized the opportunity in Canberra to talk about the findings of the government’s intelligence services review declaring that national security and economic policy were “almost inseparable from each other”.
The two main parties will be going head-to-head rhetorically, but tip-toeing around actually naming the new cause of global uncertainty.
Indeed, the review identifies global economic fragmentation as one of the three key recent changes in the intelligence landscape and recommends a more formal connection between the Treasury and intelligence agencies.
The budget was the government’s first opportunity to respond to this new challenge ahead of an election where we seem set for a faux national security debate in which the two main parties will be going head-to-head rhetorically, but tip-toeing around actually naming the new cause of global uncertainty.
Nevertheless, the national security spending hierarchy in the budget speech provides a guide to how the election debate in this domain might play out.
The government will spend $20 million over a year to promote buying Australian products in a populist response to likely new US tariffs. More significantly it has expanded funding over the longer term for production of “green” steel and aluminium building on pre-existing critical minerals support programs in FMIA. The Opposition supports parts of FMIA, but opposes most of it.
Just days after Opposition leader Peter Dutton reclaimed the Pacific Step-up as a Coalition policy in his Lowy Institute speech, the budget provides some details of the Albanese governments effort to shore up failing Pacific banking services. The ANZ Bank has secured a ten-year indemnity against certain losses from keeping its regional banking network open.
Labor was seen to have won the 2022 election debate about Chinese influence in the Pacific, but Dutton seems inclined to reclaim the turf.
Chalmers claims an extra $50 billion in overall defence spending by the mid‑2030s but the GDP share only edges up 0.2 per cent in this budget, an infinitesimal contribution to the three per cent being demanded by some Trump Administration figures. What is striking about the defence budget is the rapid expansion of the still debated AUKUS nuclear submarine program to consume $2.8 billion this year, now spread across at least ten government agencies.
The Opposition is reported to be considering a big increased commitment to defence spending – possibly in the budget reply on Thursday night – to distinguish itself from the government and appeal to the Trump defence hawks.
The swings and roundabouts of Australia’s increasing financial exposure to Papua New Guinea are revealed with only about half the more than $3 billion in loans Australia has injected into the country’s own budget over the past five years still outstanding.
Chalmers announced $45 million over four years to partially implement the intelligence review recommendations mostly going to the Office of National Intelligence.
The aid budget is increasing 2.7 per cent to $5.097 billion and, although that is a small inflation adjusted decline, it certainly stands out against the recent massive aid cuts in both the United States and Britain.
Nevertheless, the budget papers claim Australia is already responding to those cuts by “reprioritising our development investments to bolster support to our region”. But the actual numbers only show a less than one percentage point share increase in aid to the Asian region.
Dutton recently talked up the previous Coalition government’s aid focus on the Pacific, but that would not rule out a new government taking some inspiration from the Trump aid cuts to rein in multilateral allocations.
Opposition Leader Peter Dutton will deliver the budget in reply on Thursday (Hilary Wardhaugh/Getty Images)
India stands out as the only recipient of new regional initiatives in the budget with $20 million over four years for a trade and investment accelerator fund and an extension the Maitri exchange program.
But the swings and roundabouts of Australia’s increasing financial exposure to Papua New Guinea are revealed with only about half the more than $3 billion in loans Australia has injected into the country’s own budget over the past five years still outstanding. On the other hand, the newer $600 million plan to underwrite a PNG National Rugby League team is now listed as an unspecified contingent liability in the budget.
While the impact of the Trump White House flows sotto voce through the budget from the Buy Australia scheme to the seemingly overstated regional shift in the aid program, the Albanese government seems to be gambling that by taking a low profile, Australia will be treated moderately in next week’s global tariff announcements.
Treasury’s economic outlook warns up front that: “Escalating trade tensions have significantly magnified uncertainty in the global economy and volatility in global markets, and could disrupt trade, investment, economic activity and push up prices.” But it also adds hopefully that the Trump administration’s deregulatory policies “depending on how they are approached, have the potential to stimulate spending and investment”.
Despite all the traditional parliamentary theatre still involved, annual budgets are increasingly overshadowed in an era of 24-hour news cycles and geo-political fragmentation. This one seems likely to have a shelf life somewhere between a possible weekend election announcement and Trump’s tariff Liberation Day next Wednesday.
About the author
Greg Earl
Greg Earl was the deputy editor, opinion editor, national affairs editor and Asia Pacific editor of The Australian Financial Review.
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