ASIA
26 November 2025
Australia and Economic Cold War – Drifting into the New Paradigm
Australia has become a complacent country, without a comprehensive insurance policy in the face of unprecedented global transformation, according to Dr Heather Smith.
What follows are extracts from a keynote speech to the 2025 Annual Conference of the Australian Institute of International Affairs by Dr Heather Smith PSM FAIIA, National President of the Institute.
– Australia faces a rapidly deteriorating strategic environment, but decades of complacency, underinvestment, and overreliance on great-power guarantees have left the nation dangerously unprepared.
– The world Australia faces is increasingly undemocratic, grievance-driven, aggressively interventionist and multipolar.
– Our desire for a strategic equilibrium in the Indo-Pacific would seem to no longer be achievable. Indeed, we are now in a state of strategic disequilibrium that will be the norm for some time.
– Our bilateral policy framework of ‘stabilisation’ also seems precarious as Beijing undoubtedly will seek to test what it has called our ‘two-faced’ policy as we juggle our economic and strategic interests.
– Little attention is given to understanding the longer-term implications for Australia of the internal dynamics of the US.
– we need to be hedging by planning for greater strategic autonomy, as distinct from strategic independence…meaning more self-reliance, more defence spending and sovereign defence capability, and more hedging of our interests through new coalitions and partnerships, whilst continuing to support regional partnerships.
– for too long we have underinvested in the foundational elements of our nation that are required to better position us for a new world – whether it be sovereign science and technology capability, a diplomatic footprint that reflects our global interests, defence spending that reflects our strategic circumstances, an industry policy that enables future growth rather than protecting the past, a migration policy that truly focuses on bringing in the best and brightest, or a concerted rather than piecemeal strategy that positions us for sustained major power competition in the Indo-Pacific.
– We are yet to move the dial on productivity growth – our performance is now the second lowest in the OECD.
– our propensity to underinvest in our understanding of the Indo-Pacific…enrolments in Asian languages are at their lowest levels in decades…China studies in Australia have gone backwards.
– we have become a complacent country, without a comprehensive insurance policy in the face of unprecedented global transformation.
– Australia faces a rapidly deteriorating strategic environment, but decades of complacency, underinvestment, and overreliance on great-power guarantees have left the nation dangerously unprepared.
– The world Australia faces is increasingly undemocratic, grievance-driven, aggressively interventionist and multipolar.
– Our desire for a strategic equilibrium in the Indo-Pacific would seem to no longer be achievable. Indeed, we are now in a state of strategic disequilibrium that will be the norm for some time.
– Our bilateral policy framework of ‘stabilisation’ also seems precarious as Beijing undoubtedly will seek to test what it has called our ‘two-faced’ policy as we juggle our economic and strategic interests.
– Little attention is given to understanding the longer-term implications for Australia of the internal dynamics of the US.
– we need to be hedging by planning for greater strategic autonomy, as distinct from strategic independence…meaning more self-reliance, more defence spending and sovereign defence capability, and more hedging of our interests through new coalitions and partnerships, whilst continuing to support regional partnerships.
– for too long we have underinvested in the foundational elements of our nation that are required to better position us for a new world – whether it be sovereign science and technology capability, a diplomatic footprint that reflects our global interests, defence spending that reflects our strategic circumstances, an industry policy that enables future growth rather than protecting the past, a migration policy that truly focuses on bringing in the best and brightest, or a concerted rather than piecemeal strategy that positions us for sustained major power competition in the Indo-Pacific.
– We are yet to move the dial on productivity growth – our performance is now the second lowest in the OECD.
– our propensity to underinvest in our understanding of the Indo-Pacific…enrolments in Asian languages are at their lowest levels in decades…China studies in Australia have gone backwards.
– we have become a complacent country, without a comprehensive insurance policy in the face of unprecedented global transformation.