Dr Steven Kennedy, Secretary to the Treasury, recently addressed the United States Studies Centre with a powerful message: the lines between economic policy and national security are now more blurred than ever.

In his speech - posted online - Dr Kennedy remarked on the increasing convergence of economic and strategic policy, quoting Henry Farrell and Abraham Newman: “In the past decade, economics and national security have collided, turning government inside out and upside down”. 

He said this claim encapsulates the tumultuous global environment being faced today.

Dr Kennedy highlighted the stark contrast between the optimistic predictions of the 2012 "Australia in the Asian Century White Paper" and the current reality. 

“Trade is increasingly seen as a vulnerability as much as an opportunity,” he said.

“If we fail to adequately adapt and respond to the new reality we face, we risk exposing our economy and our country to excessive risk.”

Reflecting on Australia's economic history, Dr Kennedy acknowledged decades of prosperity through international economic integration and reforms like tariff reductions and financial deregulation. 

However, he pointed out the shifting global dynamics: China’s economic growth now overshadows that of the United States and G7 nations.

He quoted the Treasurer, stating, “We are facing the most challenging strategic environment since World War II”, and emphasised that “economic resilience is an essential component of assuring our national security”.

Dr Kennedy outlined a strategic “small yard, high fence” approach, focusing on protecting critical infrastructure while keeping global market access. 

He warned against regulatory overreach, which could stifle economic activity. 

“The key challenge is to prevent overreach,” he stressed.

Recent government reforms aim to strengthen investment scrutiny in sensitive sectors and enhance transparency. Dr Kennedy highlighted the importance of avoiding the misuse of regulatory regimes for quasi-industry protection or community appeasement.

Australia's significant role in global supply chains, especially for critical minerals essential for decarbonisation and defence, was a key focus. 

“Australia is one of only a few countries around the world with the natural resources, industry expertise, and trusted trading relationships to fill this role,” he said.

With global efforts to secure critical mineral supplies accelerating, he said government intervention might be necessary to ensure market stability and diversification. 

On climate change, Dr Kennedy underscored the urgent need for decarbonisation. 

Australia’s commitment to net zero by 2050 provides a clear national interest goal. Achieving this, he explained, will require significant economic transformation, technological breakthroughs, and well-designed policies.