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A new era in the world starts today. America loses its previous wild and unpredictable president, replacing him with a much more stable one. This is good news for Australia – mostly, but not completely.
A STRONG AMERICA
Donald Trump ran America like one of his businesses – fast and loose and he let it collapse in the end. You have to give some credit to him for the economy in 2019, which was very robust. But when crises hit he flapped his hands and turned out to be weak and helpless. The US needed someone much more capable. Joe Biden is hoping to be that person, and if he is, Australia will be better off too.
A weak US economy is bad for Australia in a lot of ways. They say when the US sneezes, the world catches a cold. We sell a lot to China and China sells a lot to the US. Without American economic strength dragging the world along, everyone suffers.
As the next chart shows, the US economy was in terrific shape back in 2019. Unemployment was at record lows. A pandemic was always going to be a setback to a strong economy, but Trump’s lacklustre approach to defending against it made things even worse.
RELATED: Trump leaves note for Joe Biden
Biden is starting his term with big actions to prop up the economy. A big one: He is sending a $1400 stimulus payment to every American. For those who are not well off, that will be a godsend, and there are a lot of people in America who are very, very poor. For the well-off it will be a windfall they can spend or invest.
Expect markets to go up even more as some people invest their $1400. Australian markets will probably follow Wall Street up as this happens.
Biden is also doing some really simple things to stop the pandemic from getting worse. For example, making wearing masks mandatory in federal offices. Little things like that make you stop and realise how little effort Trump exerted to stop the spread of coronavirus.
RELATED: China unleashes payback on America
The quicker America gets its health crisis in check, the quicker it can return to the growth the whole world needs, especially Australia.
CLIMATE CHANGE
Australia needs the whole world to take action on climate change. We are already a country with a lot of hot temperatures, droughts and fires. Somewhere like Scotland might be nicer if the globe warms up by two degrees, but Australia won’t be. We’ll probably just end up with Adelaide being 48C all summer, desert creeping into the western suburbs of Melbourne and crocodiles in the Brisbane River.
RELATED: Biden immediately moves to erase Trump’s legacy
So it’s good news when the biggest and most powerful country in the world says it is doing something about climate change.
Donald Trump took America out of the Paris Agreement on climate change – Biden is putting America back in.
This is positive news for other countries. It was hard for the US to pressure the world – including China – to take action when it was slacking itself.
Mr Biden’s actions will also ramp up the pressure on us to do more. Australia’s policies are not really enough to meet our targets to cut emissions.
We are going to see more pressure to do more. Expect to hear a lot more about green jobs as the economic recovery happens. For example, more subsidies for solar panels and electric vehicles are likely choices to be mainstream policies for both major political parties.
CHINA
Trump got tough on China. As well as a lot of serious talk and a big trade war, the US formally labelled China as committing genocide against the Uighur people, an ethnic minority who live in western China.
The regime of Joe Biden is not expected to take pressure off China, because it is not just the US which has changed, but China. President Xi abandoned the usual rules that limit the terms of presidents, making himself essentially president for life. So now, China has a dictator in charge for the foreseeable future with a shocking human rights record. It’s not easy to be friends with a country like that.
As it soaks up pressure from the US, China is unleashing its fury on Australia. We’ve been the victim of a range of trade pressures, reducing our exports of things from beef to wine to lobster.
It will be very interesting to see if Chinese tourism and education ever return to Australia under a Biden administration. They may not.
In fact, China may continue to use Australia as a demonstration of what smaller countries can expect if they are allied to America. That could be quite uncomfortable until we learn to adapt.
Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology
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