PM stares down US defence spending demand

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The federal government says it's getting down to the business of governing, but as is so often the case, the US administration has other ideas, raising tariffs, again, on steel and aluminium, and calling on Australia to increase our defence spending to 3.5% of GDP.

Now, that is a lot of money, around $100 billion a year as soon as possible in fact, and they've said Australia must do more to support the US in the Indo-Pacific.

Welcome to Politics Now.

Hi, I'm Patricia Carvelis.

And I'm Jacob Grieber.

And Jacob, okay, the dust has settled and now we have the United States causing all sorts of trouble for us.

Let's start with the first bit of trouble, because I call it trouble because it will be trouble, because our government isn't enthusiastic about the demand and that is in relation to the US Defence Secretary Pete Hegseth.

He met with the Defence Minister Richard Miles on the sidelines of the Shangri-La dialogue

in Singapore.

I had him on afternoon briefing on Friday and I think I asked the key question that kicked it all off if I do say so myself which was

Did they ask the US, did he ask for an increase in defence spending?

And in that interview, he confirmed yes, Hegseth had made that request.

He wouldn't nail down a percentage.

But now the U.S.

has been so kind, Jacob, as to quantify what that might be, and it's got a little messy.

Well, kind or are they trying to corner the Australian government?

Are they trying to embarrass the Australian government?

Are they trying to do them over a little bit in the parlance?

I went back and had a look at his answer to your question.

You asked him whether 3% of GDP was what the Americans were asking for.

Richard Miles said, well, I wouldn't put a number on it.

Well, Pete Hegseth this morning did put a number on it.

The Americans have briefed reporters.

You can go to the Defence Secretary's website and see that for yourself and has made it very, very clear two days after our government was unable to tell us exactly what the demand from the Americans was.

The Americans have said they want 3.5%.

I think that's messy from the Australian government's point of view.

Miles would have been better off actually coming clean with that number and dealing with it from the government's point of view.

Do you accept that number or not?

That would have been his time and place to do it.

Pete Hegseth has now taken the agenda by putting that number out there.

And it's for the Australian government now to explain

why what it's doing is appropriate.

There is a lot of criticism around about our level of spending on defence.

It comes from people who don't want us to spend money on things like AUKUS and it comes from people who do want us to spend money on AUKUS but are saying we're not actually getting real about what that means.

It's big bucks.

There are a lot of people in the defence industrial complex here in Canberra who tell me things like

essentially we are paying for AUKUS out of the existing budget for defence.

We're adding a little bit at the edges, but we're essentially cannibalizing other things that defence does to pay for this big, grand, ambitious, super shiny submarine project.

And we haven't really come to grips with the fact that we're like a house still paying off our mortgage, and we just decided to buy the house next door because it's nicer.

And by the way, the old house still needs a renovation and a new kitchen and a new backyard to do over.

Do you know what I mean?

Like, we're not actually getting real here about what it is we're talking about.

And maybe my final thought on this, Pika, and I don't know what you think, but the Americans are watching us very carefully.

We are a big partner of theirs.

We have a Trump administration that is not scared to call out allies that it feels are not lifting their weight.

And I think this might be a view that Republicans and Democrats share alike: is that Australia may not have clocked the change in the geostrategic situation in terms of what that means for this kind of spending.

We're a country that likes to look after our own people.

We have NDIS, aged care.

There's talk now of childcare, dental, all these things people want and rightly should ask for.

But

our allies in America are saying, well, can you afford all of that and this other stuff that we're talking about?

Yeah,

I think it was inevitable that the US would put pressure on us as it has all allies and look at the dispute it's been having with Europe.

We are certainly not kind of fresh to this, right?

Like everyone has been under the same pressure.

You can understand why they are putting some pressure on their allies to

do more when they feel like they've done the heavy lifting.

And of course, it's like you know, key to the Trump agenda to be making this case that the US has been basically bankrolling the rest of the world in its defence.

So, yeah, it was inevitable.

It's clearly come now

in a pretty strong way in the form of Pete Hegseth, you know, who was not that long ago a weekend Fox presenter and has his own problems.

That's all, Pikachu.

Well, you know, I've been a weekend Foxtel presenter, so I'm not down on weekend Foxtel or Fox presenters.

You too can run a defence department.

Definitely.

But yeah, so

he's heaping the pressure on.

I think what's interesting is to hear the government's response.

And I think the Prime Minister's been

pretty tough, actually, in his response.

His view generally, which is worth poring over, is that he's not really a big fan of putting a percentage without actually articulating what you're spending the money on.

And of course, you'll recall that it wasn't that long ago in our election campaign that the opposition that was so roundly defeated and lost more ground did say they wanted to get to 3% of GDP, but, you know.

Yeah, and for the record, we're currently a bit over 2%.

Yeah.

And we're going to get to about 2.4-ish.

2.3, 2.4%

over the next eight years.

And what the Americans are saying is, well, that's not enough, nowhere near enough.

So the PM, look, he has an election mandate, in a sense.

That's, I think, what you're getting at, isn't it, PK?

Pretty much.

Around defense spending.

He's also committed, though, fully committed to AUKUS, which is a $350 billion proposition over the next few decades.

It's his job, and it's the job of the Treasurer to make those numbers work.

He's raised a few eyebrows as well.

I don't know if you're picking this up from some of the defence think tank kind of

audience here in Canberra.

The ASPY and around

the ASPI types who've been putting out reports and ASPI wasn't the only one.

There was a second report last week pointing out some of these budgetary issues, quite critical, and the Prime Minister was really quick to just shoot it down as essentially partisan nonsense.

And I think that's going to be challenging going forward for the PM, I suspect, because these questions about the cost of this stuff are going to keep coming up.

It's such a big spend.

And the question around it is, do we actually believe Pete Hegseth when he says, what's the language around Taiwan?

Imminent, I think he's talking about.

Yeah.

Now that's a big escalation in what we're talking about.

Some of our colleagues in the gallery have interpreted that as us being on a war footing.

Yeah.

Well the rhetoric was over the top in my view.

Now that's not to say that China doesn't have demands on Taiwan, but that kind of escalatory language is not without risk, right?

It's the threshold question though, isn't it?

If you're worried about China, you will want your government to be doing everything it can.

If you think it's all overblown, if you think it's all

just hot air cooked up by a bunch of defence hawks who want to fight, then you'll think the other way.

You know, and I often say this, I don't see it as a binary, right?

Like, obviously...

You know, it's indisputable that China is moving in this direction, but the kind of language does imply that it's sort of imminent and the threat is upon us.

I don't know if there's a lot of evidence to suggest that right now.

And of course, it is all about heaping pressure on us at the same time.

But, you know, like it takes two to tango, right?

And of course, the US feels like they've been holding the fort, if you like.

But they've been rather distracted on some other issues too.

And now there's meant to be this pivot to our region.

Well, there hasn't been,

you know, some of it is just language alone, right?

There's not a lot lot of evidence that they really understand.

And look at the way they've cut aid, for instance.

There are implications to what they've done in relation to aid, which is diabolical for our region, is it not?

Like as China tries to increase

its influence and the U.S.

has retreated on those issues.

I think that's an important point.

And it almost brings us to our next topic immediately, which is the way America is treating allies on an an important area like tariffs.

Steel tariffs, the President announced, would double.

That's hitting us.

That's hitting other countries in Asia, not to mention the rest of the world.

And so it's this sort of, yes, they want us to spend more on defense, but they're also hurting

our industries with these sorts of actions.

And they're also hurting themselves, by the way, which is something the government's been pointing out ad nauseum over the weekend.

But it makes for, you know, I mean, I I don't know Pikachu what do you do with this what does the Prime Minister do with this when he meets Donald Trump we assume in the next fortnight pretty much they'll be on the sidelines of a G7 meeting in Canada middle of this month and this stuff is all there does the Prime Minister go in there with a big pledge to meet them on this defence spending or does he risk being humiliated like a Zelensky or the South African president last week.

I think the sidelines meeting is a bit different to a sort of overall office meeting in terms of the risk for Australia.

Having said that, this meeting will be key.

It'll be their first face-to-face.

They've had a couple of phone conversations, clearly quite cordial because

the president, you know, from, I don't know if you really can recall that much or if he's just someone whispers in his ear before there's a microphone in front of him, but he seems to say nice things about our Prime Minister.

And our Prime Minister is a rather inoffensive kind of dude, right?

Like he's quite, you know, he does know how to tick a box and do the right thing in terms of his conversations.

He doesn't sort of, I don't think, you know, at least at that international level, you know, might bristle maybe sometimes with our own media here, but a bit different when he's dealing with world leaders.

So the PM's going to have to really game that sidelines meeting.

The other one, of course, is should there are some people, Arthur Sinodenis, the former ambassador for representing Australia to the US, who says he needs to come to the Oval Office face-to-face and do it.

Now, I put to him, well, that's a pretty risky thing.

Like, no one seems to really think that goes their way, but he still thinks it's an important thing to try to secure.

Although, I detect that the government's not going out of its way to try and secure that meeting.

Am I missing something?

Like, I don't see sort of.

They're hastening slowly, I would imagine, on this one.

Of course, it's.

And it's, you know, there's lots of reasons.

One of them is, I don't think they think there is a genuine, realistic

chance of them getting an exemption.

And so...

And are they judging that voters don't regard them to be at fault if they don't get an exemption?

Because really no one's getting an exemption at this stage.

Exactly.

And they're on and then they're off and then they're back on, but it's everybody.

Exactly.

And then that court decision last week has changed the dynamics as well.

Now, that's in relation, of course, to the Liberation Day tariffs put on pause, but it's clearly going to work its way through the U.S.

legal system now.

And that has changed the dynamic, in my view, quite significantly, Jacob, and governments around the world, not just us, we're just a middle kind of power working among many other powers, just holding back thinking, looks like they've got their own problems there, and there might be delays and pauses and all sorts of things.

So why would we go out of our way trying to get a deal that

may not even materialize,

may not, you know, I think it's changed things.

And is the latest sort of outburst, and this is always the thing with Trump.

There'll be a big outburst, a big headline, and then it sort of fades away or disappears, or reality strikes from some other direction.

And I'm sure the government's sitting there saying, well, yeah,

you announced these tariffs and then you backed off on them.

The courts have questioned them.

He's clearly, deeply annoyed.

the president at this lingo that's come out of Wall Street where they're calling it the taco trade.

He does not like that.

Always chickens out.

And so if you want to make money on Wall Street, you do the taco trade.

You bet on whatever big thing that's about to happen not happening and then you make money out of it.

And that that will really have stung him.

And there's reports that he snapped at a reporter who used that phrase in the White House

at a briefing last week.

And the steel thing feels like he's almost now trying to compensate for that.

But what do you do?

If you're trying to make policy around this, do you indulge this stuff or do you just step back and play it a little more strategically?

Well, I think the countries that have stepped back and played it a little more strategically are looking better at the moment.

And we're in that category, I think.

The steel industry in Australia is really supportive of the Albanese government support approach, rather.

We heard from the head of the Australian Steelmakers Group, whose name I've terribly forgotten, but he was on Radio National this morning, making the case that, look, this is the right approach.

The Trade Minister, Don Farrell, is arguing the merits of the tariff case, why we should be exempt and why they're bad for trade.

But we're not about to start doing something silly like a retaliatory tariff, which would just, that's pointless

hurts your own consumers.

That's right.

We're not going to do that, but we're also clearly not going to get on our knees and beg and plead with the president.

And that is

a change dynamic, isn't it?

It's a huge shift, right?

And I think a wise one.

Equally, I don't think the Prime Minister is overly politicising the relationship either.

I think actually on balance, he's got the balance right.

So,

obviously, there is a lot of domestic politics to be extracted from talking on Trump.

He certainly differentiates, says Australia will make its own, you know, even from defence.

The previous conversation we had, we will make decisions about what we think is in our best interest.

So, very much that kind of national interest first, Australia first

vibe, which is wise politically, but he doesn't go over the top.

And so, this relationship, and we are in the infancy of the Trump administration still, it feels like it's been 100 years to me.

I think we are, as a kind of world fatigued by this dude, but we are just starting.

So they've got to pace themselves, this government, don't they?

They've got to pace themselves in how they manage this.

They do.

All right, Jacob, I want to pivot if we can to what is very significant for our country, which is our emissions, our policies around climate change and what we're seeing happen.

Now, the Prime Minister has been out and about today in South Australia.

talking to farmers about the drought, which of course is pretty devastating.

We have a country of extremes.

There's extreme droughts in some places.

We've had flooding in others.

I mean it's just so wild.

But he has been asked over the last few days about climate policy.

You've written a lot about it as well.

And this is all much more

in the news because of the extension to 2070 of the WA gas project, the Northwest Shelf.

Now that obviously complicates things, although Chris Bowen was out this weekend saying, well, you know, they still have to reach net zero by 2050.

It shouldn't make it any more complicated, but it does make everything more complicated.

And, you know, the language has shifted from gas being just a backup to gas being

maybe

here for the longer term.

Now, how you do all of that and how you get your emissions down.

I mean, we've got another report that came out.

Clearly, we are having some troubles getting our emissions down.

It's not all smooth sailing is it Jacob?

No it's not and it's sort of one of those things that goes unnoticed because it gets reported every three months but the official stock take if you like of our emissions came out on Friday and they showed that over the last year really

emissions are not going down.

They're completely stalled.

They've been stalled at the sort of level they're at now for three years.

There's a number of reasons for that.

Some of them,

you know, some sectors like agriculture emissions have gone down, but it's actually because they didn't have, you know, the crops were down.

So it's not like it's for a good reason that the emissions went down.

It's because we didn't have enough crops that, or as many crops as we were expecting.

Transport emissions are still going up.

The industrial emissions are sort of going down, and that's part of this.

I suspect, effect from the safeguard mechanism.

And I mention that because that is what Chris Bowen says will take care of the emissions that come from this project, the Northwest Shelf project.

Quick quick little interrupt for me.

Just tell them, listening, yes, the safeguard mechanism, it's one of those terms which if you're a wonk, you know, but perhaps others don't.

Essentially, it's a carrot and stick piece of policy.

If you are a large polluter, a large climate polluter, in the terminology, you have to cut your emissions at a certain pace every year to 2030.

Now, Woodside starts in 2030.

so essentially we have to take Chris Bowen's

word when he says it will be included from 2030 onwards.

But it's a budget.

There's a number of carbon tons we can emit between now and 2030.

And then when we get our 2035 targets, we'll know how many we have to get rid of in those five years.

And if you're adding a big project like a Woodside on top of that, it has to come from somewhere.

Woodside can buy carbon offsets.

It can spend money on, for instance, using renewable power to power its operation, which is the big emitting piece of this particular project, or it can just not do any of that.

And in that scenario,

those emissions go onto the national budget.

They're then socialized, if you like, for everyone else to have to deal with.

That's this technical, nasty part of when you have a carbon constraint, which we now do, there's a cost associated with it.

And the question that is unresolved, I believe, is who's paying for that cost and where are they paying for it and when.

And we have to sort of take the government at its word on this.

And frankly, if the Liberals were not still arguing back and forth about the basic proposition of whether net zero by 2050 should be the target, they would be making life quite uncomfortable for the government on this.

I don't know.

Are they missing a trick or are the Liberals actually, you know, politically smarter to just get out of net zero altogether?

Not if they want to win any seats in the metropolitan areas across Australia.

I mean, I can't.

Even in the regions now, people are worried about that.

Yeah, that's right.

Politically, that mood is shifting.

But

maybe it swings one way and the next election, people will be sick of it.

That point you make is an interesting one because that's what some of the more conservative Liberals believe.

They think

it's not done and dusted.

This issue isn't settled.

And, you know, they'll point to,

and we all remember it, those of us old enough, but the landslide of Tony Abbott, where he fought vigorously on the issue of really climate by saying, repeal the carbon tax.

Now, I think, and I've said this before, but I have to say it again, that what we forget about that period is that it wasn't just a referendum on climate at all.

It was

really a referendum on a terribly dysfunctional government that had really done the most appalling things to their own prime ministers and their own talent.

And so don't forget it.

Just don't forget that dynamic.

Governments lose, oppositions really win.

And so to think that it was a climate victory for Tony Abbott, I've always believed, is exaggerated.

That's not to say that he wasn't very clear on the carbon tax and weaponising it as a tax was clearly effective.

I'm not saying that didn't play a role because that would be silly to argue.

But the idea of

relitigating the energy system and climate, I mean, the public is fatigued by these debates.

We are fatigued by these debates.

Climate change is indisputable.

And I might just add, so that painful thing I was describing about the safeguard mechanism and

the way that operates.

And there's now discussions around a thing called a CBAM, a hideous term, but it means cross-border carbon adjustment mechanism.

It's a way, if our businesses,

it's kind of a tariff.

I'm a bit hesitant to use that term, but it is sort of like a tariff.

Basically, our businesses have carbon constraints.

They have to do the right thing.

They've got to get carbon out of their processes.

That costs money.

And so that those companies are not unfairly competing against a company from another part of the world where they don't have those constraints, they will face a tax, if you like, a kind of a charge when they bring that steel steel into Australia or aluminium.

It's a bit like an anti-dumping measure.

But one of the reasons we're in this world with all this highly technocratic, highly complex policy where we kind of have to just trust that the people in charge of this stuff are doing it right is because we don't have an economy-wide carbon tax.

Like every economist will tell you that would have been the most efficient way to manage that.

The thing repealed.

We repealed that after the 2013 election.

So it's this big circular thing.

But yeah, the Liberal Party is, is, we're told, going to have a vigorous debate about whether to stick to their current policy of net zero by 2050.

And well, good luck with that.

Yeah.

I still can't see that that would be a successful thing to argue in the mainstream political discourse.

But hey, maybe I'm missing something.

But

I just feel like this is overwhelmingly settled,

particularly among younger people, where the numbers now are in elections.

And so if the Liberal Party wants to appeal to more than just boomers, it might need to engage with these issues differently and just neutralise this thing.

And, you know, shout out to our colleague, actually, Annabel Crabb.

I'm sure lots of people have read this column, but if you haven't, do it.

Go to the ABC News website and read her column.

She made the case that she thinks it's a bit similar what we're seeing in the coalition to what happened in Labor over border protection and asylum seeker policy.

And I couldn't agree agree more.

I think it's very similar where Labor fought so hard internally on these issues.

And again, it was because of its base in many ways.

Its base, more left-leaning, didn't like these hardline policies of, you know, turning back boats and offshore detention.

And I'm sure some people listening don't like those policies, right?

But clearly, overwhelmingly, the Australian public were more comfortable with and just wanted this issue kind of neutralised and ended.

And every time Labor kind of went back on these things, it caused them grief, it caused them internal grief.

Now we are living in a different world.

Do you hear about like the boats or asylum seekers very often, Jacob?

Absolutely not, because Labor has neutralized it inside its own party.

The coalition has not neutralized the issue of climate change and met the public where they're at.

Labor did meet the public where they were at.

Yeah,

I think that makes a lot of sense, what you're describing.

And I think it's even more so on this issue, because climate change, to be seen to be actually trying to address it, no one's saying it's going to be perfect.

No one's saying these targets are easy to reach.

In fact, they're quite the opposite.

They're really, really hard to reach.

Maybe we just fall short.

From the point of view of a lot of younger voters, which is what we're talking about here.

it matters that we're even striving towards these targets rather than saying, you know what, it's all too hard.

So why are we even doing that that seems to be what some people in the Liberal Party think is a message they can sell to younger voters and have a future as a political movement yeah I'd be surprised if they can if they can be successful with that and remember and I think this is key they the Prime Minister didn't make the same mistake he made in 2022 by promising that energy bills would go down, giving a figure to it.

In fact, he didn't.

And in each debate when he didn't promise that energy would go down under his government, it was critiqued that he wasn't handling it well.

But in many ways, he was being he I think he learned his lesson from that, didn't he?

I mean that.

Yeah, but he also didn't make promises he can't keep, right?

Because the truth is, and you and I have said this a zillion times, but energy's going up.

That's it, regardless.

The transition is expensive.

How you help people along the way is key in our debate and should be front and center.

But like pretending that you're going to make it sort of cheap as chips again and that you can bring back coal and that's going to be cheap as chips and it's all going to be good is not true.

It's hard.

It's difficult.

Otherwise it would have been dealt with a long time ago and it costs money, whichever path you take.

There's only so many elections though.

Labor learned this.

There's only so many elections you can keep having on the same issue.

And Labor learned that on asylum seekers and boats.

It was actually very burnt by the re-litigation of those things and the internal issues.

So does the coalition really in three years want to go do this again?

I'd be surprised if they, you know, I know that.

Look, there are Liberals who are saying Susan Lee should embrace the current policy that they have and they should put the heat on Labor to deliver as a way to reconnect with younger voters.

The Liberal Party should be the ones advocating for Labor to actually do more.

to get to climate change targets.

I've heard that from Liberals now.

I've heard that too.

There are others who take take 100% the opposite view.

Good luck with getting that through that party room, as the Four Corners I did show.

Like they are split right in the centre, literally, on that.

So yeah, unless they split as a party or

someone lays down their guns, so to speak, because that's what happened in Labour.

The left did that.

The left capitulated.

You know, the left were like, okay.

All right, we don't like it, but we accept that that's the way it is.

And in this case, is the right prepared to do that?

And they did so because

they realized they wouldn't be in government if they didn't address that issue.

Exactly.

They were pragmatic and they accepted the reality, the political reality.

It came at great cost for their internal, I mean, the left of the Labour Party still hates it.

They still hate it, but yet do they get much traction on it?

Well, they, yeah, but it's, you know what I'm saying?

Like these things are expensive in a political sense, in an ideological sense, inside these parties.

And I still think we're, as an electorate, we're breaking up much more than the result on April-May suggests.

The primaries are still very low.

There are seats.

that you can't have imagined in the past that are vulnerable now.

And yes,

it's the Liberal Party that's been the biggest victim in the last two elections in terms of those sort of teal movements, but the National Party faces its own threats from independent campaigns, and so does Labor.

I suspect if they'd announced that Woodside approval before the election, they would have lost Fremantle, they would have lost NWA, they would have lost Bean in the ACT, and they might have lost other seats.

So both major parties have to look over their shoulders on a lot of these issues.

Yeah, you're right.

And that's exactly why they didn't announce it before the election.

And they were...

So cynical.

Well, it was.

There is no other way to see it, right?

Look,

we're going to wrap up, but the Prime Minister, as we said, spoke before and uh did you know defend australia's independent thinking on defence when asked the pete hegseth questions but he was also announcing which i think is important um

drought support which you know is is really key at the moment again reminding people he does this every time he speaks jacob that you know people are over the climate wars he wants to use every opportunity to link these issues, you know, when we're seeing extreme drought, that climate climate wars are an issue, hint, hint, nudge, nudge, the other side still have that problem.

But he's there again turning up to constituencies which are not his.

You know, the farmers are not broadly voting for Labor, but he always he makes a big point of this, being the Prime Minister for everyone, going to electorates that wouldn't vote for him and making sure he shows up.

And he's done that again.

And I've got to say, so far, that's quite a successful strategy for him

operating that way.

And

he's kind of that's why people say he has a lot in common with, what, John Howard, which I'm sure lands very interestingly on the Prime Minister.

Would love to ask him that question, actually.

I shouldn't say it because I want to ask.

And if he hears this podcast, he'll know I'm going to ask.

He will.

Anyway, I rode my bike through this part of Australia exactly a year ago on a thing called the Mawson Trail.

Fantastic bike ride from Adelaide to Blynman, north of the Flinders Ranges.

So I rode through this area and it's devastating what's going on there with the drought.

And I hope to get rain soon.

What sort of lycra do you wear?

I don't.

You don't do lycra?

No, I don't do lycra.

I'm so glad to hear that because I really like you.

And I was like, what sort of lycra?

Baggy pants, baggy shirts.

Ah, so indie.

I love it.

All right, Jacob.

I've enjoyed my Monday as usual.

Take care.

Take care.

And of course, I'll be back tomorrow.

You can send questions to the party room at abc.net.au and Fran and I will answer them.

See you, Jacob.

See ya.