Guns or dental care? What a defence splurge would really cost Australia
The recent commitment by NATO members to spend 3.5 per cent of GDP on 'core defence requirements' and an additional 1.5 per cent of GDP on broader defence investments has supposedly ratcheted up the pressure. Of course, such calls neglect major differences between NATO members and Australia. As argued by Professor Peter Dean, co-author of Australia's 2023 Defence Strategic Review, NATO members are facing an active Russia-Ukraine war and, unlike Australia, also benefit from NATO's US-led collective defence arrangements. However, Dean still calls for an increase to 3 per cent, in line with a 2025 Australian Strategic Policy Institute report.
Prime Minister Anthony Albanese has so far admirably resisted this pressure campaign. Considering his government's booming electoral victory, this is understandable. The Coalition's vague and unfunded commitment to the 3 per cent target was emphatically defeated at the ballot box. And as explained by Sam Roggeveen, director of the Lowy Institute's International Security Program, increased defence spending would require 'the government to either borrow more, cut spending, increase taxation, or all three', just as it is trying to implement its social policy mandate.
The policy trade-offs required to reach a 3 or 3.5 per cent target would be particularly severe. Meeting the 3.5 per cent target would require cuts equivalent to further reducing spending on the National Disability Insurance Scheme by more than half. In terms of new spending, it would cost $210 billion extra over a decade, according to analysis by this masthead. That would be more costly than both implementing universal affordable childcare (estimated at $7.3 billion a year) and expanding Medicare to include dental ($12 billion), two long-time progressive priorities. As a result, defence spending would then become the driving prerogative of Treasurer Jim Chalmers's push for tax reform.
No other budget area would receive a blank cheque for such vast amounts of money. The NDIS has been revised significantly to contain spending growth and improve its efficacy. And the Defence portfolio itself has persistently failed to deliver on major projects. The pre-AUKUS conventional submarine program suffered from major cost blowouts and delays, and there are rising concerns about navy ship maintenance issues. To make matters worse, it appears that the Defence bureaucracy has inadequately advised Defence Minister Richard Marles on Australia's defence readiness.
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Given rising US-China tensions, as well as China's continued militarisation of the South China Sea, it is entirely plausible that Australia should consider how to improve its defence capabilities, including via increased spending. But this debate ought to be carried out with the utmost respect for the Australian public and the mandate that it has so recently provided the government.
The first priority should be to identify and reduce existing defence spending inefficiencies. Any new spending measures should then be thoroughly justified via rigorous public and parliamentary debate, including in comparison to alternative social policy priorities. It is entirely possible, and in fact likely, that parliamentarians and voters would much prefer universal affordable childcare to quixotic attempts to make Australia a regional military power. This is especially so as, unlike, for example, acquiring foreign nuclear submarines, many of the Albanese government's social spending priorities would help to boost Australia's GDP over the medium term, indirectly benefiting the defence sector. Moreover, the benefits of generational social policy interventions are far more certain than the speculative insurance mechanism of new weapons.
In this context, the motivation behind calls to increase Australian defence spending dramatically is clear. They continue a long-running disregard by the national security establishment for popular sentiment, which is evidently most in favour of direct and urgent action on the cost of living, gender equality, and housing affordability, not defence. These calls instead overtly prioritise the conservative political mantra of achieving 'peace through strength', however unattainable this would be for a country of 27 million people.
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The Advertiser
32 minutes ago
- The Advertiser
The APS's march towards $1 million salaries
Already some of the world's best-paid senior public servants, Australia's departmental secretaries are on the brink of earning million-dollar pay packets in the coming years. Successive pay rises have pushed Prime Minister and Cabinet secretary Steven Kennedy and Treasury secretary Jenny Wilkinson past the $1 million mark for the 2025-26 financial year, and their colleagues are not far behind. Dr Kennedy, who is the country's most senior bureaucrat, earns nearly triple the highest rate for United States departmental secretaries, set at $250,600 USD as of January, or about $386,237 AUD. The march towards million-dollar pay began just over a decade ago, when new legislation returned the power to set senior public service salaries to the Remuneration Tribunal. While Dr Kennedy plays a role in deciding pay for some of his colleagues, the greatest influence is exerted by the tribunal. It recommends secretaries be placed in either an upper or lower level of remuneration, and also considers annual pay rises. The figures it decides on include salary, allowances, benefits and superannuation. In 2011, the tribunal had been concerned for some time that secretary salaries were well below what they should be, and had not kept pace with the rising earnings of their subordinates in the Senior Executive Service. It recommended an overhaul of the structure used to determine pay for APS bosses, rebasing the uppermost point - the salary of the Prime Minister and Cabinet secretary - to more than $800,000 by mid-2014. Ten pay rises since 2011 have brought secretary salaries to where they are today. If the tribunal decides on a 2 per cent pay rise in 2026, without changing the current structure, four more secretaries will rise above the $1 million mark. This will include the heads of Defence, Foreign Affairs and Trade, Health and Infrastructure. Two per cent is the lowest pay rise the tribunal has approved since 2011, and public service employees will receive a 3.4 per cent hike in 2026. While this appears likely given the tribunal's past decisions, it could also decide to hold off. The tribunal must look at annual wage decisions and also weighs up APS wage increases, consumer price index and wage price index. In 2020, as the Australian economy faced the COVID-19 pandemic and public sector wages were frozen, the tribunal announced it would not offer a pay rise. "The Tribunal's primary focus is to provide competitive and equitable remuneration that is appropriate to the responsibilities and experience required of the roles, and that is sufficient to attract and retain people of calibre," it said at the time. "However, this does not happen in a vacuum. The context of the broader jobs market and the economy are also considered." The body can also dock a secretary's pay, based on Machinery of Government changes that shrink the scope of their responsibilities, but incumbents are protected from having pay go backwards. Health secretary Blair Comley has meanwhile received an extra promotion, taking his salary from $910,270 to $983,910, after his department gained oversight of the National Disability Insurance Scheme. While Labor maintains that secretaries' pay is an independent decision, there is room for political intervention. The tribunal noted in 2020 that it had received a request from then finance minister Mathias Cormann and assistant public service minister Greg Hunt to freeze pay for APS bosses, and opted to comply. The steady increase has caused concern among some politicians, who earn considerably less than their senior bureacrats. "They earn more than me," Prime Minister Anthony Albanese said when asked about the issue earlier in the year, in reference to his salary of about $622,000. Tasmanian senator Jacqui Lambie last year called on Parliament to radically reduce the earnings of senior public servants, capping remuneration at about $430,000 unless otherwise approved by the relevant ministers. "Departmental secretaries have important responsibilities, and their pay should be appropriate to ensure those positions are competitively filled by capable people," Senator Lambie said at the time. "But the present levels of pay at the top of the bureaucratic and academic trees don't pass the pub test." Meanwhile, independent senator David Pocock wants to see the tribunal consider performance in its decisions. The current system is based on the size of departments and the scope and complexity of the portfolio. "Senior public servants in Australia are paid well above those in most comparable OECD countries, including in Europe, the UK and US," Senator Pocock said. "We want to be able to attract the best and brightest to lead our public service, but at the same time, we need to ensure remuneration is tied to performance and that is lacking in our current system. "I would like to see reform in this space as we continue to value and build the capacity of the APS more broadly into the future." Public Service Minister Katy Gallagher told The Canberra Times in March that while she was sympathetic to the public's concerns, "it's hard to unwind a system that's been put in place over many years". "I get people's concerns with that, I do," Senator Gallagher said at the time. "I understand it when they see it in isolation, or relate it back to their own experience of work, but I also know how hard [secretaries work]. "These are serious jobs, and we need the best and brightest, and we need to retain them in the public service." Already some of the world's best-paid senior public servants, Australia's departmental secretaries are on the brink of earning million-dollar pay packets in the coming years. Successive pay rises have pushed Prime Minister and Cabinet secretary Steven Kennedy and Treasury secretary Jenny Wilkinson past the $1 million mark for the 2025-26 financial year, and their colleagues are not far behind. Dr Kennedy, who is the country's most senior bureaucrat, earns nearly triple the highest rate for United States departmental secretaries, set at $250,600 USD as of January, or about $386,237 AUD. The march towards million-dollar pay began just over a decade ago, when new legislation returned the power to set senior public service salaries to the Remuneration Tribunal. While Dr Kennedy plays a role in deciding pay for some of his colleagues, the greatest influence is exerted by the tribunal. It recommends secretaries be placed in either an upper or lower level of remuneration, and also considers annual pay rises. The figures it decides on include salary, allowances, benefits and superannuation. In 2011, the tribunal had been concerned for some time that secretary salaries were well below what they should be, and had not kept pace with the rising earnings of their subordinates in the Senior Executive Service. It recommended an overhaul of the structure used to determine pay for APS bosses, rebasing the uppermost point - the salary of the Prime Minister and Cabinet secretary - to more than $800,000 by mid-2014. Ten pay rises since 2011 have brought secretary salaries to where they are today. If the tribunal decides on a 2 per cent pay rise in 2026, without changing the current structure, four more secretaries will rise above the $1 million mark. This will include the heads of Defence, Foreign Affairs and Trade, Health and Infrastructure. Two per cent is the lowest pay rise the tribunal has approved since 2011, and public service employees will receive a 3.4 per cent hike in 2026. While this appears likely given the tribunal's past decisions, it could also decide to hold off. The tribunal must look at annual wage decisions and also weighs up APS wage increases, consumer price index and wage price index. In 2020, as the Australian economy faced the COVID-19 pandemic and public sector wages were frozen, the tribunal announced it would not offer a pay rise. "The Tribunal's primary focus is to provide competitive and equitable remuneration that is appropriate to the responsibilities and experience required of the roles, and that is sufficient to attract and retain people of calibre," it said at the time. "However, this does not happen in a vacuum. The context of the broader jobs market and the economy are also considered." The body can also dock a secretary's pay, based on Machinery of Government changes that shrink the scope of their responsibilities, but incumbents are protected from having pay go backwards. Health secretary Blair Comley has meanwhile received an extra promotion, taking his salary from $910,270 to $983,910, after his department gained oversight of the National Disability Insurance Scheme. While Labor maintains that secretaries' pay is an independent decision, there is room for political intervention. The tribunal noted in 2020 that it had received a request from then finance minister Mathias Cormann and assistant public service minister Greg Hunt to freeze pay for APS bosses, and opted to comply. The steady increase has caused concern among some politicians, who earn considerably less than their senior bureacrats. "They earn more than me," Prime Minister Anthony Albanese said when asked about the issue earlier in the year, in reference to his salary of about $622,000. Tasmanian senator Jacqui Lambie last year called on Parliament to radically reduce the earnings of senior public servants, capping remuneration at about $430,000 unless otherwise approved by the relevant ministers. "Departmental secretaries have important responsibilities, and their pay should be appropriate to ensure those positions are competitively filled by capable people," Senator Lambie said at the time. "But the present levels of pay at the top of the bureaucratic and academic trees don't pass the pub test." Meanwhile, independent senator David Pocock wants to see the tribunal consider performance in its decisions. The current system is based on the size of departments and the scope and complexity of the portfolio. "Senior public servants in Australia are paid well above those in most comparable OECD countries, including in Europe, the UK and US," Senator Pocock said. "We want to be able to attract the best and brightest to lead our public service, but at the same time, we need to ensure remuneration is tied to performance and that is lacking in our current system. "I would like to see reform in this space as we continue to value and build the capacity of the APS more broadly into the future." Public Service Minister Katy Gallagher told The Canberra Times in March that while she was sympathetic to the public's concerns, "it's hard to unwind a system that's been put in place over many years". "I get people's concerns with that, I do," Senator Gallagher said at the time. "I understand it when they see it in isolation, or relate it back to their own experience of work, but I also know how hard [secretaries work]. "These are serious jobs, and we need the best and brightest, and we need to retain them in the public service." Already some of the world's best-paid senior public servants, Australia's departmental secretaries are on the brink of earning million-dollar pay packets in the coming years. Successive pay rises have pushed Prime Minister and Cabinet secretary Steven Kennedy and Treasury secretary Jenny Wilkinson past the $1 million mark for the 2025-26 financial year, and their colleagues are not far behind. Dr Kennedy, who is the country's most senior bureaucrat, earns nearly triple the highest rate for United States departmental secretaries, set at $250,600 USD as of January, or about $386,237 AUD. The march towards million-dollar pay began just over a decade ago, when new legislation returned the power to set senior public service salaries to the Remuneration Tribunal. While Dr Kennedy plays a role in deciding pay for some of his colleagues, the greatest influence is exerted by the tribunal. It recommends secretaries be placed in either an upper or lower level of remuneration, and also considers annual pay rises. The figures it decides on include salary, allowances, benefits and superannuation. In 2011, the tribunal had been concerned for some time that secretary salaries were well below what they should be, and had not kept pace with the rising earnings of their subordinates in the Senior Executive Service. It recommended an overhaul of the structure used to determine pay for APS bosses, rebasing the uppermost point - the salary of the Prime Minister and Cabinet secretary - to more than $800,000 by mid-2014. Ten pay rises since 2011 have brought secretary salaries to where they are today. If the tribunal decides on a 2 per cent pay rise in 2026, without changing the current structure, four more secretaries will rise above the $1 million mark. This will include the heads of Defence, Foreign Affairs and Trade, Health and Infrastructure. Two per cent is the lowest pay rise the tribunal has approved since 2011, and public service employees will receive a 3.4 per cent hike in 2026. While this appears likely given the tribunal's past decisions, it could also decide to hold off. The tribunal must look at annual wage decisions and also weighs up APS wage increases, consumer price index and wage price index. In 2020, as the Australian economy faced the COVID-19 pandemic and public sector wages were frozen, the tribunal announced it would not offer a pay rise. "The Tribunal's primary focus is to provide competitive and equitable remuneration that is appropriate to the responsibilities and experience required of the roles, and that is sufficient to attract and retain people of calibre," it said at the time. "However, this does not happen in a vacuum. The context of the broader jobs market and the economy are also considered." The body can also dock a secretary's pay, based on Machinery of Government changes that shrink the scope of their responsibilities, but incumbents are protected from having pay go backwards. Health secretary Blair Comley has meanwhile received an extra promotion, taking his salary from $910,270 to $983,910, after his department gained oversight of the National Disability Insurance Scheme. While Labor maintains that secretaries' pay is an independent decision, there is room for political intervention. The tribunal noted in 2020 that it had received a request from then finance minister Mathias Cormann and assistant public service minister Greg Hunt to freeze pay for APS bosses, and opted to comply. The steady increase has caused concern among some politicians, who earn considerably less than their senior bureacrats. "They earn more than me," Prime Minister Anthony Albanese said when asked about the issue earlier in the year, in reference to his salary of about $622,000. Tasmanian senator Jacqui Lambie last year called on Parliament to radically reduce the earnings of senior public servants, capping remuneration at about $430,000 unless otherwise approved by the relevant ministers. "Departmental secretaries have important responsibilities, and their pay should be appropriate to ensure those positions are competitively filled by capable people," Senator Lambie said at the time. "But the present levels of pay at the top of the bureaucratic and academic trees don't pass the pub test." Meanwhile, independent senator David Pocock wants to see the tribunal consider performance in its decisions. The current system is based on the size of departments and the scope and complexity of the portfolio. "Senior public servants in Australia are paid well above those in most comparable OECD countries, including in Europe, the UK and US," Senator Pocock said. "We want to be able to attract the best and brightest to lead our public service, but at the same time, we need to ensure remuneration is tied to performance and that is lacking in our current system. "I would like to see reform in this space as we continue to value and build the capacity of the APS more broadly into the future." Public Service Minister Katy Gallagher told The Canberra Times in March that while she was sympathetic to the public's concerns, "it's hard to unwind a system that's been put in place over many years". "I get people's concerns with that, I do," Senator Gallagher said at the time. "I understand it when they see it in isolation, or relate it back to their own experience of work, but I also know how hard [secretaries work]. "These are serious jobs, and we need the best and brightest, and we need to retain them in the public service." Already some of the world's best-paid senior public servants, Australia's departmental secretaries are on the brink of earning million-dollar pay packets in the coming years. Successive pay rises have pushed Prime Minister and Cabinet secretary Steven Kennedy and Treasury secretary Jenny Wilkinson past the $1 million mark for the 2025-26 financial year, and their colleagues are not far behind. Dr Kennedy, who is the country's most senior bureaucrat, earns nearly triple the highest rate for United States departmental secretaries, set at $250,600 USD as of January, or about $386,237 AUD. The march towards million-dollar pay began just over a decade ago, when new legislation returned the power to set senior public service salaries to the Remuneration Tribunal. While Dr Kennedy plays a role in deciding pay for some of his colleagues, the greatest influence is exerted by the tribunal. It recommends secretaries be placed in either an upper or lower level of remuneration, and also considers annual pay rises. The figures it decides on include salary, allowances, benefits and superannuation. In 2011, the tribunal had been concerned for some time that secretary salaries were well below what they should be, and had not kept pace with the rising earnings of their subordinates in the Senior Executive Service. It recommended an overhaul of the structure used to determine pay for APS bosses, rebasing the uppermost point - the salary of the Prime Minister and Cabinet secretary - to more than $800,000 by mid-2014. Ten pay rises since 2011 have brought secretary salaries to where they are today. If the tribunal decides on a 2 per cent pay rise in 2026, without changing the current structure, four more secretaries will rise above the $1 million mark. This will include the heads of Defence, Foreign Affairs and Trade, Health and Infrastructure. Two per cent is the lowest pay rise the tribunal has approved since 2011, and public service employees will receive a 3.4 per cent hike in 2026. While this appears likely given the tribunal's past decisions, it could also decide to hold off. The tribunal must look at annual wage decisions and also weighs up APS wage increases, consumer price index and wage price index. In 2020, as the Australian economy faced the COVID-19 pandemic and public sector wages were frozen, the tribunal announced it would not offer a pay rise. "The Tribunal's primary focus is to provide competitive and equitable remuneration that is appropriate to the responsibilities and experience required of the roles, and that is sufficient to attract and retain people of calibre," it said at the time. "However, this does not happen in a vacuum. The context of the broader jobs market and the economy are also considered." The body can also dock a secretary's pay, based on Machinery of Government changes that shrink the scope of their responsibilities, but incumbents are protected from having pay go backwards. Health secretary Blair Comley has meanwhile received an extra promotion, taking his salary from $910,270 to $983,910, after his department gained oversight of the National Disability Insurance Scheme. While Labor maintains that secretaries' pay is an independent decision, there is room for political intervention. The tribunal noted in 2020 that it had received a request from then finance minister Mathias Cormann and assistant public service minister Greg Hunt to freeze pay for APS bosses, and opted to comply. The steady increase has caused concern among some politicians, who earn considerably less than their senior bureacrats. "They earn more than me," Prime Minister Anthony Albanese said when asked about the issue earlier in the year, in reference to his salary of about $622,000. Tasmanian senator Jacqui Lambie last year called on Parliament to radically reduce the earnings of senior public servants, capping remuneration at about $430,000 unless otherwise approved by the relevant ministers. "Departmental secretaries have important responsibilities, and their pay should be appropriate to ensure those positions are competitively filled by capable people," Senator Lambie said at the time. "But the present levels of pay at the top of the bureaucratic and academic trees don't pass the pub test." Meanwhile, independent senator David Pocock wants to see the tribunal consider performance in its decisions. The current system is based on the size of departments and the scope and complexity of the portfolio. "Senior public servants in Australia are paid well above those in most comparable OECD countries, including in Europe, the UK and US," Senator Pocock said. "We want to be able to attract the best and brightest to lead our public service, but at the same time, we need to ensure remuneration is tied to performance and that is lacking in our current system. "I would like to see reform in this space as we continue to value and build the capacity of the APS more broadly into the future." Public Service Minister Katy Gallagher told The Canberra Times in March that while she was sympathetic to the public's concerns, "it's hard to unwind a system that's been put in place over many years". "I get people's concerns with that, I do," Senator Gallagher said at the time. "I understand it when they see it in isolation, or relate it back to their own experience of work, but I also know how hard [secretaries work]. "These are serious jobs, and we need the best and brightest, and we need to retain them in the public service."
SBS Australia
33 minutes ago
- SBS Australia
PM says China trip has been successful
TRANSCRIPT The Prime Minister wraps up his trip in China Australia's highest civilian honour handed to the family of late Gumatj clan leader Galarrwuy Yunupingu Tadej Pogacar regains the overall lead of the Tour de France Anthony Albanese says his six-day tour of China has been successful, resulting in outcomes that will boost the bilateral relationship. The prime minister is ending his trip in the regional city of Chengdu, the capital of Sichuan province, before he flies out of the country to return to Australia. Mr Albanese says it has been a productive trip, including the meeting with China's President Xi Jinping. "One of the theme of our discussions was improving people-to-people and cultural links between people in Australia and China. And I can think of no better way then through the sporting engagement at what is the iconic sporting event in Australia - our Australian Open. Indeed the last Australian prime minister to visit Sichuan was Bob Hawke in 1986. And that time he launched an annual Australia-China tennis challenge. A gesture of goodwill between our nations." Russia says it won't accept the 50-day deadline announced by US President Donald Trump to reach a ceasefire to end fighting in Ukraine - or face sanctions. Russian Foreign Ministry spokesperson Maria Zakharova condemned the move, calling it blackmail. The US also promised more missiles and other weaponry for Ukraine. Russia's all-out war against Ukraine in February, 2022, has led to Europe's bloodiest conflict since World War Two, with the United States estimating that 1.2 million people have been injured or killed. Doctors at the Al-Ahli Hospital in Gaza City say two women have died - and several others are injured, following a strike that hit a Catholic parish in the Gaza Strip. The strike damaged the Holy Family Church, the only Catholic Church inside the Palestinian enclave. The Israeli Defence Forces says it is looking into the matter. The Vatican has not yet responded to a request for comment. The late Yolngu Elder and land rights pioneer, Dr Galarrwuy Yunupingu, has been officially awarded the nation's highest civilian honour, two years after his death. The Companion of the Order of Australia was accepted by his eldest daughter, Binmila, from Governor-General Sam Mostyn, who travelled to northeast Arnhem Land to present the award - in accordance with the wishes of the Yunupingu family. Ms Mostyn says Dr Yunupingu would have viewed the award in his own way. "But I am also aware that in the 50th year of the Australian honours and awards system, this may be an award that Dr Yunupingu may not have really seen as necessary. Or seen as adding to the way he lived his life. In a way it is an important thing that we are doing in acknowledging his life through a system that must sit alongside something else that Dr Yunupingu said in his essay. He spoke of an allegiance to each other, to land and to ceremonies that define Yolngu." The award was announced earlier this year, recognising Dr Yunupingu's eminent service to First Nation Peoples, in particular traditional land ownership, to leadership in economic development initiatives, to fostering reconciliation and respect, and his role as a custodian of culture and ceremony. Binmila Yunupingu says her father's legacy is something that will burn on forever. In cycling, Tadej Pogacar has regained the overall lead of the Tour de France, after winning stage 12. On the first major mountain of the race, the three-time Tour winner went clear early on the 13.5-kilometre ascent - going on to win the stage by two minutes 10 seconds from Jonas Vingegaard. Pogacar dedicated the stage win to 19-year-old Italian cyclist Samuele Privitera who died after a crash in the opening stage of the Giro della Valle d'Aosta in Italy on Wednesday. "I think this stage can go for (be a tribute for) somehwhere - and to all his family because it was really sad. The first thing I read in the morning and yeah, it was just... I was thinking in the last kilometre about him and yeah, how tough this sport can be - and how much pain it can cause." In a statement, Privitera's cycling team, Australian outfit Jayco AlUla, paid tribute to the 19-year-old, describing him as the life and personality of the team; and his loss is felt deeply.
ABC News
an hour ago
- ABC News
Indonesia reaches tariff deal with Donald Trump, but is it a win-win?
Indonesia has become the second Asian nation to reach an agreement with the US, following President Donald Trump's launch of his tariff war on the world in April. The US would pay no tariffs to Indonesia under the deal, while goods from the South-east Asian nation would face a 19 per cent levy. Mr Trump had threatened Jakarta with a 32 per cent tariff rate, effective August 1, in a letter sent to Indonesian President Prabowo Subianto last week. Indonesia runs a trade surplus with Washington, meaning the value of the goods it sells to the US (footwear, clothing, palm oil and rubber) brings in more money than what Indonesia pays to America for things such as oil and gas, electronic products, aircraft components, cereals and pharmaceuticals. In 2024, the difference was close to $US18 billion in Indonesia's favour. What's in the new deal? In exchange for the tariff reduction, Mr Trump said Indonesia agreed to purchase 50 Boeing aircraft, primarily from the 777 series. Furthermore, the Indonesian government plans to import US energy commodities valued at $US15 billion and US agricultural products worth $US4.5 billion. "For the first time ever, our Ranchers, Farmers, and Fishermen will have Complete and Total Access to the Indonesian Market of over 280 million people... U.S. Exports to Indonesia will be Tariff and Non-Tariff Barrier Free," Mr Trump declared. Donald Trump said he discussed the deal directly with Indonesia's President Prabowo Subianto. ( AP: Eraldo Peres ) Is it a good deal for Indonesia? Mr Prabowo hailed a "new era of mutual benefit" while Indonesian Trade Minister Budi Santoso said the new tariff has the potential to attract significant investment to Indonesia. He said this week: "We have two things that we can gain: investment inflow, and secondly, an increase in our exports." However, Bhima Yudhistira, Executive Director of the Centre of Economic and Law Studies (Celios), told Tempo news website that the agreement disadvantages Indonesia. "[It] actually carries a high risk for Indonesia's trade balance," he said, adding that while exports would benefit, there was a danger American imports could increase dramatically. He said the agreement didn't compare well to Vietnam's deal signed on July 3. 'The difference between Indonesia's and Vietnam's tariffs is only 1 per cent, but Vietnam's manufacturing competitiveness is superior. In this case, we lose,' he told The South China Morning Post. A win-win was unlikely Poppy S Winanti, Professor of International Relations at Universitas Gadjah Mada in Yogyakarta, said the current deal on the surface seemed favourable, especially given the initial 32 per cent threat. 'At 19 per cent, Indonesia's tariffs are among the lowest in ASEAN and are competitive with main rivals in the US market, such as Vietnam," she said. 'However, for Indonesian producers, any additional tariffs above previous levels are already burdensome. 'Still, we should recognise that since negotiations began, a win-win outcome was unlikely. 'The Indonesian government's aim was probably to minimise damages, complemented by efforts to mitigate impacts in the short, medium, and long term. In the short term, support should go to domestic producers directly affected, while medium- and long-term strategies include strengthening regional cooperation through Regional Comprehensive Economic Partnership Agreement and expanding Indonesia's market to other countries.'' Barbies made in Indonesia displayed on a US supermarket shelf. ( AP: Andres Kudacki ) Professor Wisanti said it was essential to examine what opening the Indonesian market to more American products might mean. 'Including ... how to ensure these products are genuinely needed by the Indonesian industry and economy, or whether they are merely replacing or competing with locally produced goods and commodities,' she said. 'Even if markets are opened for US products, they can benefit the domestic economy if there is a genuine demand from local industries. However, if many of these products are similar to or could be produced locally, the impact could be negative.'' What next? Monash Business School professor Robert Brooks said the US would now be keen to arrange as many of the deals as possible. 'If arrangements have been reached with Vietnam and Indonesia that will provide incentives to complete a broader range of deals across South-east Asia,' he said. Indeed, Kevin Hassett, Mr Trump's top economic adviser, told Fox News that "a whole bunch" of additional trade deals would be announced very soon, but gave no details. He said Trump's strict August 1 deadline had spurred a flurry of new activity, including talks with countries that had not previously been in touch.
