US ‘will go nuts’ on China: Hockey

The Australian | October 23, 2022

Former US ambassador and federal treasurer Joe Hockey has warned that America is “going to go nuts” if China cuts critical minerals exports in coming months, as the US Defence Department steps up its plans to bankroll major resource projects in ­Australia.

The US Commerce Department has unveiled sweeping regulations limiting the sale of semiconductors and chip-making equipment to Chinese customers, and there are fears China may retaliate by reducing US supplies of critical minerals, which include copper, lithium, nickel, cobalt and rare earth elements.

All are needed for the manufacture of electric vehicle batteries, renewable energy and military technology.

“In terms of critical minerals, my concern is – and there has started to be a few reports in the US suggesting this – is that after the midterm elections, and with a re-empowered (Chinese President) Xi Jinping, as of next year China will start to turn down the tap on the supply of critical minerals to the US and other places,” Mr Hockey told a private forum in Melbourne last week hosted by Hamilton Wealth Partners.

“Now if they even start to adjust that tap, the US is going to go nuts.”

In his recent landmark address to the Chinese Communist Party Congress, Xi Jinping emphasised the need to increase China’s self-sufficiency in technology and supply chains.

The US is moving to reduce its reliance on China for critical minerals, and in August the Biden government granted Australia preferred status to help drive its electric vehicle battery program.

“I can say to you, in discussions with the Department of Defence in Washington, they are heading down the path of putting money into Australia for specific projects that will guarantee a supply chain for the US.

“They’ve never really done that before. They’ve never used taxpayer money to invest in another country in order to get a guaranteed supply chain in critical areas. That’s an opportunity for Australia,” Mr Hockey told the forum.

“In truth, Australia is about to become a very significant supplier to the US and Western allies, national security companies and the bigger prime industry. We are in an incredible position and we are well under way getting involved with it.”

Bank of America estimates that $US150bn will be needed annually for global miners to produce the minerals needed to achieve a global transition to net zero emissions.

In March the chief executives of Australian resource firms Iluka, Australian Strategic Minerals, Cobalt Blue, Lynas, RZ Resources and VHM visited Washington to discuss fast-tracking investment in the critical minerals supply chain between Australia and the US.

There have more recently been reports that major American car manufacturers have been in discussions with Australian government officials about co-investing in critical mineral processing in Australia.

At the Hamilton forum Mr Hockey, who has been running Washington-based business consultancy Bondi Partners since he stepped down as US ambassador two years ago, also warned of growing industrial unrest in Australia as workers pushed for significant wage increases amid high inflation, rising interest rates and soaring energy costs. “The industrial unrest will come from workers legitimately saying, ‘I can’t pay for all these increased costs without getting a wage rise of 7, 8 or 9 per cent per annum.’

“That’s a perfectly legitimate argument,” he said.

“So when the workers start getting paid that wage growth each year, it’s going to continue to feed into high inflation, which will continue to fuel higher interest rates.

“So I don’t see this high inflation, high interest rate cycle ending in a short period at all.”

Mr Hockey also predicted the current battles between governments and central banks globally were unlikely to end soon.

Given inflation continues to rise in almost every advanced economy, central banks around the world have been raising rates in response – actions at odds with the behaviour of many governments, which continue to borrow heavily.

“You are going to see more of this fight between the equivalent of treasurers, chancellors and prime ministers and their central banks,” he said.

“In the UK, in Europe, in Australia, in Japan and any of the other countries where they have basically a floating currency, you are going to see this clash between the politicians and the central bankers … So this is a big threat to Anthony Albanese and it’s a monstrous threat to Joe Biden. It is a threat everywhere.”

Mr Hockey warned clients of Bondi Partners earlier this month there was a 30 per cent chance Russian president Vladimir Putin would use tactical nuclear weapons in the coming months in a bid to regain the initiative in his failing effort to subdue Ukraine.

In the Hamilton forum, he elaborated on that prediction, noting such a weapon could be “very small and targeted, to take out, say, a one kilometre square.”

“The Russians have up to 2000 of those, which can be fired by a single individual.

“Intercontinental ballistic mis­siles have many layers, appropriately, of checks and counterchecks before one is set off, thank god. But tactical nuclear weapons can be an artillery shell, or it could be a torpedo, and they can be relatively smaller and targeted in impact,” he said.

He added Mr Putin’s willingness to use nuclear weapons would be accentuated by his plight.

“Let’s be very clear. This is the demise of Russia, at least for the next 50 years. Russia has never been in such an invidiously bad position for many, many years.

“So Putin is capable of extreme events.”

Published in The Australian.