Treasurer Jim Chalmers speaks with US Treasury Secretary Scott Bessent in Washington, February 25, 2025. (X: Jim Chalmers)
Listen to this story
Donald Trump's treasury secretary doesn't share his boss's flare for shoot-from-the-hip, shock-and-awe public speaking.
Scott Bessent instead stuck to carefully prepared notes, as he addressed an audience at the Australian Embassy in Washington yesterday.
But while the secretary isn't a cut-through headline maker, he still made some vital points, which will be heard in Canberra.
Speaking to an embassy-hosted summit of heavy hitters from Australia's cashed-up superannuation sector, along with Treasurer Jim Chalmers and Ambassador Kevin Rudd, Secretary Bessent said plenty of nice things about Australia. He was suitably impressed by the investment power of Australia's enormous pool of retirement savings.
But Bessent also made three things clear. Donald Trump is determined to impose tariffs, there's no guarantee of an exemption for Australia, and linked to the trade threat is a requirement for allies to lift their defence spending.
US wants stronger defence spend from allies
"Genuine burden sharing", he called it.
"US security assurances and market access need to meet with stronger commitments from our allies to spend more on their collective security and to structure their economies in ways that reduce imbalances over time," Bessent said. Bluntly put, this is a warning to spend more on defence or risk losing the US security blanket and access to the US market.
Chalmers pushes for US tariff exemptions
Photo shows Trump signs executive orders from the Oval Office
Perhaps this is just the prepared script delivered to all allies. Perhaps it's a bit of Trumpish bluster. Or perhaps this is a serious message from the Administration that Australia will need to do far more on defence than is currently planned under the AUKUS agreement.
Before attending the summit, Bessent and the director of the US National Economics Council, Kevin Hassett, shared breakfast with Chalmers and Rudd at the ambassador's residence, where he heard the pitch as to why Australia should be given an exemption on tariffs.
The pitch from the two Queenslanders included the now familiar selling points about Australia buying far more from the US than the other way around, the fact we are meant to have a free trade agreement, and Australia's sizeable investment in US submarine manufacturing under the AUKUS deal.
There was also a big emphasis on critical minerals, which as Ukraine is discovering, Trump is rather keen to acquire.
Jim Chalmers with Scott Bessent and Kevin Hassett at the Australian Ambassador's residence in Washington, February 25, 2025. (Supplied: Australian Embassy )
Ultimately Trump's call
Australia has a "veritable periodic table" of critical minerals under its soil, Rudd argued. The government wants the US to become a partner in mining and processing these vast deposits, in part to counter what it sees as China's manipulation of these markets, and in part to further strengthen economic and security ties with the United States.
As impressed as Bessent may have been with these arguments, a mere cabinet secretary was never going to be able to give Australia any assurances about what his mercurial president may do.
"I think it's well understood that at the end of the day this will be President Trump's call," Chalmers later noted.
Trump's trade and security threats, and his adoption of Russian talking points about who started the war in Ukraine, may be leaving allies aghast, but his campaign to pressure them into pumping up their own defence spending is delivering some return.
British Prime Minister Keir Starmer says the UK must drastically increase defence spending to counter Russian aggression. (Reuters: Oli Scarff)
UK cuts foreign aid and boosts defence spend
On the eve of his visit to Washington, British prime minister Sir Keir Starmer has announced a major boost in military funding. The UK will cut foreign aid, he says, and redirect the money into lifting defence spending from 2.3 per cent to 2.5 per cent of GDP. Starmer says it will rise to 3 per cent in the next term of parliament.
Australia's defence spending is currently hovering around 2 per cent of GDP and is forecast to increase to 2.4 per cent, but not until 2033-34.
Have Your Say: What matters to you this federal election?
Photo shows A graphic showing a range of reader comments about potential issues in Australia's 2025 federal election.
The opposition's defence spokesman, Andrew Hastie, doesn't think that's fast enough.
"We've under-invested in defence over the last 25 years", Hastie told RN Breakfast.
Peter Dutton agrees.
"We certainly need to increase our defence expenditure", the opposition leader argued yesterday.
How far the Coalition wants to go and where it will find the money, remains unclear.
"In terms of quantum and those numbers we'll have more to say about that in due course", he says.
The Coalition is also leaving open the possibility it will cut foreign aid to fund a defence boost. Shadow Foreign Minister David Coleman told Afternoon Briefing the Coalition will have "more to say on that" before the election. Given the sensitivity of foreign aid in the Pacific, the Coalition may need to clear this up sooner rather than later.
Loading
More than a public service haircut
The government insists it is increasing defence spending but wants to manage expectations about how far Australia can go.
"I wouldn't anticipate that we get to 3 per cent," the treasurer told Insiders on Sunday.
Both sides of politics are already struggling to explain how they will pay for their various pre-election commitments, at a time when the budget is already sinking into a structural deficit.
Finding serious additional funds for defence won't be easy. It would take more than a public service haircut.
ABC Politics in your inbox
Photo shows Politics journalist Brett Worthington on a black backgournd
Voters, meanwhile, are likely to prefer their money be spent in other areas, and both sides of politics know this. Just look at the lightning-fast agreement from Dutton on Sunday to back the prime minister's $8.5 billion in new health spending for bulk-billed visits to the GP.
Strategic analysts, however, argue the deteriorating security outlook can't be ignored. The flotilla of Chinese warships provocatively tracking down Australia's eastern coastline and engaging in "live fire" exercises is seen as a wake-up call.
The pressure from the Trump administration can't be ignored either. If the US president thinks his tactics in squeezing allies has worked in Europe, he'll adopt a similar strategy in the Indo Pacific. His treasury secretary just told Australia directly.
David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.