Panel Discussion, Nikkei Asia Forum Sydney 2026 - Economic Security & Australia-Japan Partnership

View the panel discussion here

Robin Harding, Asia Editor, Financial Times (Moderator): Okay. Well, thank you very much everybody and thank you for all the discussions so far this morning. It's been an absolute love in. I've learned how much Japan and Australia really adore each other and what a great relationship the two countries have. And I hope what we can do in this panel is make more concrete how that strong relationship can be expressed in terms of economic security. So Scott, I'd like to come to you first and maybe ask you to characterise that economic security relationship. How much security can Japan and Australia actually provide each other in a world where all the power seems to rest with the two superpowers the US and China? So in that context, what can Japan and Australia do for each other?

Scott Morrison AC: Well, thank you and thank you, to Nikkei, and to all my fellow panellists, and for the opportunity to join here today. The simple answer to that question is that the relationship is load-bearing massively for Australia and Japan in their own interests. But more significant than that, it's load-bearing for the regional architecture. I've always thought of the bilateral relationship between Australia and Japan forming the spine of the Quad. The mutuality of interests that we share strategically and economically is obvious and has already been rehearsed here this morning, and it's a relationship that exists not because of or instead of a relationship that either of us have with the United States at any given point in time, that changes from time to time, but the relationship between Australia and Japan is foundational and load-bearing all in its own right. So it is in addition to all of those other arrangements, not irrelevant to it, not unimpacted by it, but it is there in its own right. And I think importantly, what's happened with the Japan-Australian relationship and Jan was, you know going into this before, and that is that the economic strand and trade strand of that relationship and channel and the strategic security side of that relationship, have rightly completely fused. The architecture of that has been the product of many decades of work, and I acknowledge Stephen Smith here, who was part of that process, and and taking on new role now in that process and it has moved from the architecture on both streams into a very operational practical side which we saw I think, and demonstrate once again during Prime Minister Takaichi's visit, very very recently, and I think that's very important as well. So we've got beyond the, well how does all this work, and what is the base of our trust now, what is the stuff we're going to keep doing and doing in more depth and in more detail. So I'm quite excited about that because with all the other uncertainty that is going on around the world, the Australia Japan relationship within the Indo-Pacific provides a very solid and stable anchor, and the Ambassador (Suzuki) has done a sterling job and you know that doesn't mean we don't have any issues of difference or any issues that come up from time to time that can trouble the relationship. That happens in every relationship, but I think the bigger picture has always held the dominance in how it's progressed. So, I'm positive about it. I think it has the elements, the reciprocal access agreement, I thought, was an incredibly important part of the relationship. It took us three years, three prime ministers, and we got there and a lot of personal effort to get there. But that was important because the RAA down the security track was very different to going down an economic track on trade, because to agree an RAA requires a level of trust in each other that I think goes deeper than anything else. What you're trusting each other with their own defence forces with, where they are and what they are subject to. So I thought the RAA was incredibly important, that's why we pursued it and even went to Japan in the middle of COVID, and Jan was there on that visit and spent many weeks in quarantine as a result, with Prime Minister Suga, afterwards when I got home. But that was really important because I saw that was going to basically deal with that final, I think ingredient of trust. So now the current government can continue to pursue that relationship I think successfully and operationally.

Robin Harding: Okay, thank you. What I'd like to do now is maybe dig in a little bit deeper to some of the specific areas you might think about in economic security. And I think one that is high on everyone's mind is always rare earths since China's actions around rare earths may be the best example of effective use of economic coercion that you can point to in recent years. Scott, maybe let me come to you. What lessons do you take from that episode and what can be done to secure supply of rare earths, and what role does Japan and Australia play in that?

Scott Morrison AC: Well, my first observation is it's not new. I mean, this just hasn't happened. Supply chain choke point leverage in what China is currently doing. They've been doing it for a long time, and no country understands that better than Japan. It is not fresh and that's why I think one of the enduring parts of the relationship between Australia and Japan is that we must maintain what has historically been, I think, a clear-eyed and wide-eyed understanding about Chinese influence in our region. I'm well known as a China hawk, but put, you know, put one's perception of my views on to one side for a second. My point is simply this. They have a plan, like they have a strategy that their tactics change, but their objectives don't. Prime Minister Takaichi understands that. Japanese prime ministers have understood that, and it's a central part of their policy. That doesn't mean they have completely disconnected themselves from China. It also doesn't mean that they have refrained from, you know, drawing lines and speaking about them and being quite assertive on occasion, as this Prime Minister has, I think, to her great credit and deserves recognition for that, particularly from partners. She should be encouraged for that and backed up on that. But having said that, you also then have to deal practically with the issues. And this is something that Abe would often reflect on to myself and to Tony Abbott and Malcolm Turnbull, about how you went about walking both sides of that street the entire time, where you could hold your line. You could be clear about what your interests were and didn't resolve from them, but at the same time practically deal with the challenges that presented. And the rare earths one and critical minerals more generally, I think, is a good example of that, but there are many others. China will use and turn off the tap when they wish, according to their purposes at any given time. And I think Australian businesses have to be very clear about that in terms of how they assess and price risk and where they put their investments. And in the rare earth space, it was the original bullying that China imposed on Japan many years ago that led with JBIC and others to support the establishment of Lynas, which then set up in Malaysia, which governments of both persuasions spent many years in our own engagement with the Malaysian government making sure that they could continue to operate there. Pretty much I think almost every meeting I had with successive Malaysian prime ministers, that was a fairly big part of the discussion, and successfully, and now we have Lynas setting up in Texas, which is a very big deal for heavy rare earths and is, you know finally in the US, understanding the need to build those resilient supply chains in critical minerals and rare earths. Australia and Japan have already written the book on how you deal with this. The United States has actually been pretty late to the party on this. It's not like it wasn't known. We were talking about this in our engagements with the United States, certainly while I was prime minister and before, but for them to now, and I think they have, fully embrace this idea that there needs to be offtake guarantees and price flaws and things of that nature to justify the investment, particularly on the Australian side in the extraction. Australian miners have plenty of other options and often much higher yield options in terms of where they're going to be put that capital and for that matter Japanese investors in Australia extraction have better opportunities and less risky opportunities for this investment sector but it has strategic importance and that is what justifies the state sector involvement to provide greater surety over those investments and that is now happening but it isn't happening fast enough that's not a criticism. It's just a statement of reality. I think whether it's the agreement that has been forged on critical minerals with the United States, that's terrific. Would love to see more flow from that, and I'm sure it will. And I know it's a sensitive part of what Ambassador Moriarty has at the heart of his agenda in the United States. But let's not think that the rare earths critical minerals challenge is only going to be addressed in that sphere. Personally, on the form, Japan has proved to be a more consistent and understanding partner of the strategic significance of this over a much longer period of time and has been prepared to back that up, whether it's through JOGMEC or whether it's through JBIC or with agencies of that nature to ensure that the real choke points are addressed. And what are they? It's not getting the stuff out of the ground necessarily, not technically. It is on the processing side, and that is the space that needs to be addressed. Now, it can be addressed here arguably, I think it's harder on the critical minerals side than on the rare earths. We put over a billion dollars into the plant at Eneeaba with Illuka that's been topped up by the new government. Good for them, that can be done but building that processing ecosystem amongst trusted allies is the bit that is still substantively missing in the supply chain and I see Japan, and for that matter Korea as significant partners along with the United States, but as significant longer-term partners in this space that have the relationships the understanding of the Australian minerals sector I think to ensure those supply chains can be made more significant, more reliable, carry greater volumes and effectively wean us off a vulnerability which we should have no surprise that China would seek to weaponise at any given point in time because that, if it suits their interests to do so and I think that I think provides both clarity and urgency to the initiative and reinforces the important of the Japan Australian partnership.

Robin Harding: Great. Thank you. I want to put one more question, but I also want to make sure there's plenty of time for questions from you. So, please start thinking about your questions for the panel now while I put one more to Scott about energy and the role Australia can play in Japan's energy security. I know there's lots of debates within Australia about tax, about royalties, about how that affects the economics of the investment projects owned by many of the Japanese companies in the room. What does Australia need to domestically to deliver what it can on energy security to Japan?

Scott Morrison AC: You can't understate, sorry overstate the significant importance of the energy supply relationship of Australia to Japan in that partnership. It is, you cannot extricate it from the economic security nature of that partnership or the security-specific strategic security part. You can't separate them along different tracks, and uncertainty around gas policy in particular is a challenge. It's a problem and it needs to be sorted. Japanese industry will be incredibly polite about this, and I respect that and I understand it, but it's important that I think Australia understands that trust goes both ways and that trust ensures that we can continue to be a reliable partner when it comes particularly to gas and the issues that are causing consternation are the safeguard mechanism. There is also the royalties issue which has been around for some time now, back to the time when I was in office with Queensland. Those two are very significant issues and these and then you'd have to add to that the gas reservation scheme. And what does that mean? It doesn't mean you can't have all these things, but it does mean that they need to land and there needs to be some stability and certainty and landing at that position has to take into account to what extent those things are going to impact on the viability of long-term investments that have been made by our partners in this country. And that goes to the trust in the relationship going forward. And we can't pretend it doesn't and just gloss over it. And so I am hopeful because the partnership is so deep and the commitment to it is so real that that can be resolved, but it can't just be going well, that's a different issue, or that's a domestic issue, or that's a tax issue. No, it is central to the relationship and the partnership. And I would hope and I would like to be confident that it can land, it can land well. And when we did the hydrogen partnership with Japan, that was in the context of our energy supply relationship. If there was going to be a new form of energy that was going to dominate the world and at that time we were looking at that as being a potential, you know, five, six percent of what it might be. We wanted to be partners in it. If there was an energy partnership to be had, we wanted Australia and Japan to be pursuing that together. And my concern at the moment is that is under stress, and it is impacting the viability of investments made here, very long-term ones. I remember being up at the opening of Impex in Darwin with Prime Minister Abe. It was a wonderful occasion celebrating years of getting to that point of massive investment. And what struck me in the many discussions I had with IMPEX was this was a huge deal and a lot of people put their careers and reputations and credibility on the line to go and do that, and we must be mindful of that and how we manage these issues.

Robin Harding: I'm just going to press you a little bit more on it. I mean, do you think if you were on the board of Tokyo Gas, would you feel comfortable making new gas investments in Australia right now? 

Scott Morrison AC: If they want to contract me, I'm joking. I think the uncertainty at the moment needs to be resolved for people to make decisions. That's what I'm saying. That's what I'm saying. I'm not prescribing what that is. I'm not in government anymore, and the government has a different view about the agendas that drive their decision say on the safeguard mechanism, which I think is understated in terms of the three issues I've mentioned. I think that one is a very significant one because it impacts on the LNG production out of this country and its supply. The royalties issue was a Queensland issue, and it was back then too, but state governments have impacts on global on international relationships. I certainly found that in trying to manage, you know what we were doing around our security interests regarding China, we had to introduce pretty tough laws which basically sidelined states when they sought to impact on those relationships in a way that we didn't agree with. So, and then of course there's the reservation scheme. Now, there's a reservation scheme in WA and Stephen knows that's been running a long time and it's been very successful, and there's been plenty investment in gas in Western Australia. It doesn't mean one can't work or shouldn't work. That's really a different question, and I know my party in opposition has got a view in favor of it. I've got a somewhat reserved position on it, that my position doesn't matter anymore. But what matters is land it and make sure it takes into account the very context of discussion that you just put to me. And if you land it wrong and they make the decision not to invest, it ain't their fault.

Speaker: Thank you so much for the great presentation. My name is Tats Kato from Sojitz. So question to Scott Morrison. So Australia had a quite a few we mentioned about energy security, but also we need to balance you know energy stability and the carbonisation. So historically we have you know invested a lot for you know coal and energy and after the middle middle east you know energy security for like a crude oil and diesel is very important but as we have 2035 and 2050 decarbonisation targets like renewable energy, solar wind best as well as transmission line the new energy zones important, and also we have opportunity for like renewable natural gas, biomethane as well as sustain aviation field and in diesel. So my question to you or broader panel is which in your view, which one of the energy play most vital role for energy security in Australia, and why could you explain? Thank you.

Scott Morrison AC: Yes. Gas. Is the short answer. The others are incredibly important, but they have different tails on them. Gas is around, and it's not going anywhere and it shouldn't go anywhere. It should, and I always saw it in the debate back then when we used to talk about transition fuels and all that sort of thing. It's way more than a transition fuel if it depends on what you put the timeline on transition. If the transition's 100 years, well, yeah, it's a transition fuel, but no, I'd say gas, but that doesn't mean the other ones can just be discarded or left to an uncertain policy environment, which effectively chop off existing investments at the knees, but gas.

Speaker: Thanks very much for the discussion. I'm Genna Lehman from the Australian National University and a non-resident fellow at the United States Study Centre. I'm researching industrial policy, and you've spoken a lot about government investment in strategic industries to build capability and secure strategic goods such as critical minerals. I'd be interested in your views on what lessons Australia can learn from Japan who has a long history with industrial policy, including around industrial capability but also institutional capability, and any guardrails we should have in place. Thank you.

Robin Harding: Scott, a very quick final word.

Scott Morrison AC: I think it's important when looking at Japan's industrial policy to understand the context of their economy and what it's made up of, when you compare it to, say Australia or other countries. I mean, the role of the major trading houses in Japan, you can't separate from that. That doesn't exist in Australia. It's a very differently shaped economy in terms of where the extra capital and capacity comes from. So I think you have to make those distinctions from the outset. But having said that, I think what's important is that you look at some of the dynamism of some of those Japanese institutions I mentioned before like JBIC and then JOGMEC and groups like that, which have proved enormously fleet-footed in going in and making things happen and drawing the assets of Japan together to make them happen, and we've seen that in the space sector. We've seen it in a number of different sectors. The other point I'm finalising this because there's another thing we haven't mentioned today, and that is countries like Australia and Japan don't have to do everything within their supply chain within their own countries. We are very capable because of long-standing networks, not just with each other but with other countries in our region, to be able to secure supply chains and trusted supply chains which protect us and provide resilience without having to onshore everything. And so partnerships with countries like India then, I think become fundamentally important and that's why the Quad is so important, and the fusing of those security and economic elements of that relationship is the same increasingly with India. Just this past week, Japan and India have sat down for that very reason. It's a very strong I think signal and it shows that our relationship in this region are not because of the United States or China .or instead of a relationship with China and the United States, but exist in their own right for our own benefit.