Dr Ross Babbage warns that without urgent economic reform and industrial recalibration, Australia risks becoming a client state of Beijing.

Returning to the Defence Connect Podcast, strategic analyst Dr Ross Babbage delivers an unsparing diagnosis: Australia is drifting towards a future of strategic weakness, economic vulnerability and de facto dependence on Beijing – unless the nation urgently reverses course on industrial policy, governance efficiency and the information asymmetry crippling public debate.

In a wide-ranging conversation with host Steve Kuper, Babbage articulates an emerging geopolitical fracture: the world is crystallising into distinct economic camps. The first, led by the United States and including Western democracies, is erecting selective tariffs and deepened trade ties. Camp two is China and its authoritarian satellites. A third comprises developing nations watching carefully before committing.

Australia's position, Babbage argues, remains fatefully ambiguous. While virtually every Western ally has taken protective measures against Chinese manufacturing dumping and industrial subsidy – a regime he quantifies at eight to 18 times the support other nations provide – Australia has remained conspicuously reticent. China's leverage remains decisive: our iron ore and coal exports are non-negotiable parts of Beijing's strategic calculus.

The deeper problem, he stresses, runs through economic governance itself. Australia has deindustrialised deliberately over three decades, shed critical capabilities in steel and advanced manufacturing, surrendered energy cost advantage and starved investment in domestic capability. Without deliberate recalibration – smaller government, redirection of trade partnerships, strategic investment incentives – Australia defaults towards clientelism.

Equally critical is the communication void. Defence industry leaders, board chairs of major firms and even policymakers routinely tell Babbage they were unaware of the scale of Chinese subversion, intellectual property theft and coordinated disintegration operations aimed at fracturing Western cohesion.

The path forward, he argues, demands frank public briefings, ruthless priority setting and abandonment of exhausted economic orthodoxies. Without it, Australia becomes the strategic backwater Beijing expects.

Enjoy the podcast, The Contested Ground team