The Rudd strategy Part I: political expertise or political expediency

Without increasing evidence of a hard landing, a cynic could in fact interpret the Rudd Government strategy as a cruel and heartless invitation for the vulnerable, and those who could ill afford it, to pump up the economy by splurging their "windfall cash bonus" on a Christmas spending binge, rather than saving or extending it for future spending on necessities in the tough times ahead.

So! What are the hard times ahead referred to by Rudd?

Is the problem really under control?

Is the spending splurge really the answer?

Rudd is confident that China's economy will remain on track and that demand for Australia's iron ore, coal and gas is crucial in contributing to China's continuing growth.

He is confident that China's ongoing economic growth is somehow immune to the global economic crisis. Revenues and royalties, therefore, will continue to flow from China's ongoing demand for Australia's coal, and iron ore. The resources industry continues to gear up for another two decades of continued growth in China fuelling ongoing demand for Australia's iron ore, coal and grain.

It has to be so. His friends Hu Jintao and Wen Jiabao have told him so in many phone calls. Besides, his own team of advisors must also have considerable first-hand knowledge of China's strengths.

Australia is not totally reliant on China. The Northern Territory is slavering over huge revenues and spin offs from the Japanese gas project that it won from Western Australia and therefore is not China reliant. The royalties will be a major contributor to Federal and State coffers, but that is in the future.

Queensland's coal exports continue to produce a flow of royalties and revenues into Federal and State coffers driven by Japan and South Korea. China's contribution is relatively small and any decline will have a relatively minor impact on royalties and state revenues.

In Western Australia, royalties from iron ore and gas continue to feed a state surplus. New mines are coming on line and potential miners are negotiating with Chinese steel companies for orders and investment. A new major gas project is also in the planning stages.

Coal

China ranks number six in Australia's coal export markets buying nearly six million tonnes a year. Japan buys 18 times that with 108.2 million tonnes. South Korea buys 28.1 million tonnes, Taiwan buys 24.1 million tonnes. India and Holland even buy more Australian coal than China.

In comparison, Indonesia exported 193 million tonnes of coal in 2006 with a target of 370 million tonnes targeted for 2009. US$1 billion is being spent developing two new Indonesian mines with initial production of four million tonnes per year.