IQ, it's not just hindsight. He was criticised at the time for doing it. When a country starts invading it's neighbours, it doesn't exactly take a genious to figure out that they are a threat to everyone. Menzies may have tried to ignore this inconvienient issue, but it was obvious to the rest of the country.

Iron ore pricing will test Rudd


IT will be iron ore rather than Tibet that will be the real test of Kevin Rudd's diplomatic skills in China next week. It fits the definition of Australian national interest, all wrapped into one very expensive, multi-layered package.

The Prime Minister is already dealing with the impact of the big two resources companies fighting bitterly in relation to BHP Billiton's bid for Rio Tinto. This has been made far more complicated by the very pointed opposition of the Chinese to any such merger.

BHP and Rio are also arguing with the Chinese to win a massive increase in the contract price of the iron ore they deliver to feed the voracious demand.

Yesterday just happened to be the iron ore equivalent of D-Day - the official starting date for the prices for the next year, which will be backdated to April 1 when everyone finally agrees what those will be.

These games of brinkmanship are unlikely to be over before Rudd's four-day visit, starting on April 10, and they certainly won't improve the political atmosphere. The mandate of heaven isn't cheap.

To general outrage from the Chinese steel mills, BHP and Rio both insist that the 65 to 71 per cent increase won by Brazil's Vale is not enough. They want more, plus a freight differential to account for the lower cost of shipping from Australia. Not that the Australian resources companies are colluding in any way, of course. That would be illegal. But they will both mysteriously end up negotiating the very same price as each other and the mutual and concerted pressure is very useful in tightening the squeeze on the Chinese.

Similarly, the Chinese insist there is no official government effort to block deliveries of Australia iron ore diverted to the higher-priced spot market. After all, that sort of action would be against the rules as well. It just so happens that there are all sorts of delays on import licence applications at the moment. Funny, that. None of this will make Rudd's day job as Australia's Inflation-Buster-In-Chief any easier. Think what a sudden increase of over 70 per cent in payments to a massive national export industry will do for the war on inflation.

But even that is a very small dilemma compared to a more fundamental challenge confronting the Rudd Government in its relations with China.

This is the question of how much is enough when it comes to Chinese investment in the Australian resources industry, particularly iron ore. The Government has carefully avoided answering this question in the lead-up to the Rudd visit. That's partly because it's not sure what the answer is, either.

There are subtle but discernible signs that the new Canberra is deeply suspicious of the argument that large-scale Chinese investment in the Australian resources industry is both inevitable and desirable.

That is even though it is desperate to assure the Chinese that Australia's investment policy is not discriminatory in any way and certainly not directed at the Chinese. The Chinese are less than convinced.


Pig Iron Kev leads the way with the 'enemy'