Dear Mr Rudd (Minister for Propaganda)

It is also misleading to brag that Australia will have a lower level of debt after the current economic crisis compared to other Western nations. If you are honest, you would acknowledge that Australia would also be in dire straits without Chinese demand as commodity prices would collapse.

In reality, Australia can do little to influence the international economy. As usual, the policies that drive the international economy will be decided by the US and the EU, although international forums will allow smaller players to raise their voice. What Australia wants from its trading relationship from China may prove irrelevant if a trade war emerges.

Though your essay illustrates the pain ahead, you hardly have any real ideas about how “to enhance long-term productivity growth” and lessen Australia’s reliance on the boom and bust of mining and shares. Yes you cite the US National Economic Council stating we need to be “more export-oriented” and “less consumption-oriented”, but how do you propose to make this transition?

To be honest Mr Rudd I do not see much originality from your ideas. While you provided free ceiling insulation to 2.7 million homes to improve energy use (February 2009), this idea was in line with other think-tanks that noted the need to provide support non-housing parts of the economy, such as providing incentives for insulation of homes to help the construction industry rather than big social housing projects (Finfacts, June 12, 2008).

You also have much to say about a flawed reliance upon debt, yet your government has assisted first home buyers to get loans, a strategy that will prove to be a disaster should the economy worsen much further as some have predicted (Steve Keen and Gerard Minack). Further, is not the ASX now working with the Australian Office of Financial Management to list government bonds on the local exchange?

Yes, you mention the need to improve productivity and improve infrastructure such as schools, roads, rail, ports, clean-energy projects, universities, TAFEs, hospitals, medical research and a national broadband network. But all of the above are a given for any modern economy in a competitive world. Such policies do not indicate how Australia can diminish its reliance upon minerals or withstand greater competition from developing nations.

And what do you mean when you call for greater international co-operation to address the investment imbalances that developed between the surplus countries in the East and deficit countries in the West?

Why would China not aim to be both the largest consumer market and exporter? After all, the US used to be both in 1950 before its promotion of freer trade (more so than previous hegemons) helped undermined its economic dominance which resulted in a greater reliance upon debt.

Where are the signs that China wants to play by the same rules? As noted recently by Stanley Crossick, Director and Founding Chairman of the European Policy Centre, we indeed have much to worry about when a communist government (policy posted June 4) urges government investment projects to purchase domestic products, although Washington’s 2009 “Buy American’ provisions also favoured US contractors.

China remains a mercantile nation which has done little to prevent piracy of Western products, has tariff and non-tariff barriers and subsidies to promote exports, and has long kept its currency cheaper to help its exports.

And with China arresting Rio Tinto officials after Australia’s steel producers managed a 33 per cent price cut rather than China’s preferred 40 plus per cent, it appears China is not going to democratise or do anything else unless pressured to do so by the Western powers via carrot and stick approach.

In a world of freer trade, nations which do have a large number of skilled workers and growing middle class, an abundance of cheap labour, and a communist political system, will prove unbeatable if current trends continue. This will long remain the case even if a communist China chooses to listen to you and expand its social welfare system.