Former Australian treasurer Peter Costello used a global history lesson to explain the changes in the new world order which will represent significant geopolitical changes over the years ahead.
Known as the ‘best prime minister Australia never had’, Costello rejoined the Narta conference once again for another appearance and provided an insight into the geopolitical chess being played and the decreasing influence from America creating a new world order.
Costello claimed that Australia has been benefiting from the “American shield” and like Europe will need to make higher investment in defence.
He claims there is now a shift in the world that came into being after the Second World War with the development of organisations such as United Nations, NATO, IMF, World Bank as well as the World Trade Organisation to encourage free trade and the rules based international order.
“The world is changing, some things that were tail winds are now head winds. The rules based international order is breaking down and trade barriers are going up. We have lived through a wonderful time with Australia’s terms of trade – the price you pay for your imports compared to the price you get for your exports. We have lived through the greatest terms of trade in Australian history which was a huge tailwind for our country – and now we may experience a trade shock – that would be a big wake up for Australia – our credit could go down and our terms of trade could go down and then our productivity is exposed.”
Referencing the changes in power dictated by various nations globally, Costello referenced a famous phrase from 416 BC during negotiations between the Athenians and the Melians – “the strong do what they can and the weak suffer what they must”.
“That is how the world worked then and mostly that is the way it has worked since. So if you are Putin and in your mind Ukraine is part of Russia, or if you are Xi Jinping and say that Taiwan is part of greater China – you announce a policy of reunification. If you are Erdoğan in Turkey and you remember the great Ottoman Empire you see Syria as a natural adjacent area, if you are Modi you see Kashmir as Indian and any challenge from Pakistan will be met with airstrikes. The world is going back to the way it was.
“I can understand why the Americans would say Ukraine is not part of NATO and we are not going to waste blood and treasure thank you.”
“The world has become more uncertain and we need to do more about our own defence. If we were to lift defence expenditure to 3 per cent of GDP it would be an additional $25 billion per year that we would have to spend in Australia. The budget is in deficit by $40 billion and we are forecasting deficits for the next decade and we are going to have spend more on defence.
“In this new world where the rules-based order is coming to an end, there are going to be costs. We will go through the trillion dollar debt mark in September and we have huge expenditure coming down the track. “
“Our problem in Australia is not tax it is spending – at the rate that we are spending no tax system can sustain it. When I left office tax to GDP was 24 per cent – it is now 27 per cent or another $100 billion. Big spending, big taxes, big debt, dig deficit.”
Costello referenced the increased tax to be introduced by the new Albanese government on 1 July 2025 for unrealised gains including a doubling of the tax from 15 per cent to 30 per cent on earnings from superannuation balances above $3 million.
“We have exhausted the taxes on income, we have exhausted the taxes on consumption, so we have to come after savings. What is driving this is that we have a spending problem – not a tax problem. I feel so disappointed in the election that we have just had in 2025, because both sides of politics wanted to keep the spending going and with the outcome in the election, the government will think it has a mandate to take it further – no one seemed to object as the public voted for it.”