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DANIEL:

From Schwartz Media. I’m Daniel James, this is 7am.

As Anthony Albanese heads to the G7, the future of Australia’s most important defence pact is suddenly uncertain. The Trump administration is reviewing AUKUS, pushing for more military spending, and condemning Australia’s new sanctions on Israeli ministers — all signs of a once-stable alliance under pressure.

Today, press gallery journalist and columnist for Inside Story, Karen Middleton, on what’s testing the US - Australia relationship, and whether a meeting on neutral ground can patch things up?

It’s Friday, June 13.

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Audio excerpt – ABC Reporter:

“Well the future of Australia's most expensive and expansive security agreement is under a cloud this morning with the Pentagon undertaking a review of the AUKUS defence agreement between the US, UK and Australia.”

DANIEL:

Karen, Anthony Albanese is heading to Canada for the G7, where he's hoping to meet face-to-face with President Trump. His administration has just confirmed that they are reviewing AUKUS to make sure it's aligned with their American First Agenda. What does that mean for us?

KAREN:

Well, from the government's point of view, it's not terrific news, they'll be concerned that any review might lead to some kind of revision downward to the US commitment to AUKUS. Australia has thrown an awful lot into that agreement that was forged under the Morrison government four years ago, and we've just handed over hundreds of millions of dollars towards the US's submarine development programme to try and make sure that Australia gets the submarines that it's ordered. So they'll be watching that review with a great deal of interest.

Audio excerpt – Rafael Epstein:

“Richard Marles joins you. He is Defence Minister and Deputy Prime Minister. Good morning.”

Audio excerpt – Richard Marles:

“Good Morning Raf, how are you?”

Audio excerpt – Rafael Epstein:

“I'm okay. Can you guarantee that we'll get submarines out of this deal?”

Audio excerpt – Richard Marles:

“Well, I'm very confident this is going to happen.”

KAREN:

Certainly the Minister Richard Marles is playing down the significance of it.

Audio excerpt – Richard Marles:

“Look, I think the review that's been announced is not a surprise. We've been aware of this for some time. We welcome it. It's something which is perfectly natural for an incoming administration to do.”

KAREN:

But I'm sure given the unpredictability of the Trump administration that there'll be some level of anxiety in the Australian government about it.

DANIEL:

What do we know about the review so far? What have the Trump administration officials said about it?

KAREN:

Not a lot, really. The reporting suggesting that it could be completed within about 30 days, it seems to be instigated by the Under-Secretary for Defence, Elbridge Colby, who we know from his previous comments has been a bit of a sceptic about the AUKUS deal. That also will be adding to the Australian anxiety, I think. But as you said, they're looking at the whole arrangement, which was struck under a previous Australian government and a previous US administration, under the Biden administration, just to measure it up against the current president, Donald Trump's America First policies.

DANIEL:

We know the Trump administration has called on Australia to top up our defence spending to 3.5 per cent of GDP, something Albanese has rejected. So is this review part of the US strategy to pull us into line?

KAREN:

Well there's been some speculation, I guess, since the review emerged overnight Thursday night that maybe this is associated with adding extra pressure to the Australian Government. What we saw in terms of the sequence of events was the US Defence Secretary Pete Hegseth went to the annual Shangri-La security dialogue in Singapore, as did Richard Marles, and that is where they had a meeting on the sidelines. And then Secretary Hegseth issued a sort of read-out from that meeting. And interestingly put on the record that he had asked for an increase in Australian defence spending to three and a half per cent. Now currently it's just over two percent, it's due to rise to about two point three within the next few years or so, but it is certainly not scheduled to rise as high as the Americans want. So when Richard Marles was asked about this he said on the records that he was happy to have the conversation, he seemed to be amenable to talking about an increase in defence spending. But when the prime minister was asked about it, he put the kibosh on it.

Audio excerpt – Anthony Albanese:

“Well, I think that Australia should decide what we spend on Australia's defence. Simple as that. That's my view. Now, if others think that that's not the case, then it's up to them to make that case.”

KAREN:

We may well increase spending further, but it will all depend on our capability needs and the strategic environment.

Audio excerpt – Anthony Albanese:

“There is no reason why defence shouldn't be governed by anything other than one factor. What do we need? What is the capability we need to keep us safe?”

KAREN:

Whether this review is now a sort of pushback on that and suggestion that the US is serious and there could be a lot at stake if we don't commit to extra spending, people are speculating, but it's an interesting coincidence of timing.

DANIEL:

AUKUS hasn't exactly been popular here in Australia. Does this in some way, shape or form give Albanese any opportunity to reconsider that going ahead at all?

KAREN:

I don't think there's any suggestion from the government that they are reconsidering it.

Audio excerpt – Anthony Albanese:

“We want to make sure as well that every single dollar that Defence spends results in actual assets. And under the former government there are a lot of media releases, just not many assets.”

KAREN:

There isn't really a backup plan for submarines that could get Australia's submarines in a timely way other than the ones that they're planning to buy. Firstly, we all remember that the Morrison government cancelled the contract with France for conventionally powered submarines and the proposal to do with AUKUS is that they would then refurbish existing Collins class submarines further to fill the gap until we got the new ones. I don't think anyone in government is suggesting we're going to pull out of AUKUS, so really the government needs this to work because it's committed to it. It supported what the Morrison government has done and it's carried it on and increasingly the United States is interested in boosting its presence here in Australia and certainly in the readout of that conversation between Pete Hegseth and Richard Marles. The Americans also said that Secretary Hegseth raised the issue of accelerating the US force posture in Australia. So they're clearly putting pressure on to be able to do more in Australia, I don't see a way that Australia can back out of it all now.

DANIEL:

So, Albanese is going to be at the G7 in Canada. At this stage, no meeting between him and Donald Trump has been confirmed. Do you think that tensions between the US and Australia are making that less likely to happen?

KAREN:

It's not very clear, and I guess it's anyone's guess. I mean, we've seen not only the defence spending issue, we've seen Australia, like a whole lot of other countries, upset about the tariffs, the imposition of steel and aluminium tariffs and the doubling of those then up towards 50 per cent is a real blow for Australia. So that is another sticking point between the two leaders. We've seen Mr Albanese, the Prime Minister, speak out very strongly about what he said was the targeting of an Australian journalist.

Audio excerpt – Anthony Albanese:

“That footage was horrific. That was the footage of an Australian journalist doing what journalists do at their very best.”

KAREN:

The Nine Networks, Lauren Tomasi, while she was reporting on the Los Angeles riots.

Audio excerpt – Anthony Albanese:

“And so we have already raised these issues with the US administration. We don't find it acceptable that it occurred.”

KAREN:

And then we've seen the imposition of sanctions against these two sort of far-right Israeli ministers, Itamar Ben-Gvir and Bezalel Smotrich. That's joining with a number of other countries in imposing those sanctions, but that has displeased the United States as well. So it's not the most warm and fuzzy backdrop to a possible meeting between the two leaders. Of course, Anthony Albanese is invited as an observer. We're not a member of the G7. That's the seven biggest economies globally. So if that meeting with President Trump goes ahead, it will be on the sidelines if indeed President Trump attends that gathering.

DANIEL:

After the break - the beef between Australia and the United States

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DANIEL:

Karen, we're at a time when the US alliance has never been more tested. You mentioned that just this week Australia committed to sanctions on two ministers in the Israeli government. Can you tell me what that will mean in practice and how it affects our relationship with the US?

KAREN:

The sanctions are freezing assets and restricting travel and then freezing assistance, financial assistance to those two ministers as well. What we don't know is what assets they might have that might be affected by that here in Australia or what links they might have. So in that regard, it is a symbolic gesture, I guess. It's a number of countries banding together to make this statement. And it's certainly a diplomatic tool or weapon. To make it very clear from Australia's point of view that the government is unhappy with the comments of these two ministers. They've made very extreme comments in relation to the creation of settlements in the West Bank. The government says that they are undermining the quest that parties profess to be moving towards, which is a two-party solution to the current crisis in the Middle East. So the government's saying they're not ruling out making further steps. They haven't spelled out exactly what they think the practical implications of these ones are, but it's definitely a diplomatic statement and it's displeased, certainly enraged Israel, but it also displeases the United States and the US has called it unhelpful to the peace process.

DANIEL:

Politically the most pressing thing for Anthony Albanese will be fighting to secure an exemption from US tariffs. If he does get a face to face with Trump, how do you think he'll approach that conversation? Do we know what kind of arguments he might be putting forward?

KAREN:

Well, that's an excellent question. We know the President is a transactional person, so you would have to assume that Australia would be going there offering something and seeking something in return. We've heard in recent days that the government had already been reviewing the arrangements for US beef. The sort of hardline ban on US beef has been lifted some years ago, but the problem Australia still had with US beef was that you couldn't track it, it wasn't traceable. So if beef was going into the United States, for example, from Mexico and Canada, live cattle being slaughtered in the US and then brought on to Australia - Australia was requiring that the beef to be able to be traced all the way through that chain, and that wasn't happening. So the government seems confident that there are things within those arrangements that might be able to be clarified that wouldn't undermine our biosecurity, but that may represent a facilitation of US beef into Australia now.

Audio excerpt – Anthony Albanese:

“We'll only sign up to things that are in Australia's national interest. So on things like the Pharmaceutical Benefits Scheme, the Media Bargaining Code, our biosecurity in agriculture, they're not on the table as far as we're concerned. But are there areas in which Australia and the United States can have win-wins? Yes, I believe that there are.”

KAREN:

There are a couple of other issues that Australia might be hoping to use as some US concern about the treatment of the shareholders in a US-Australian joint venture company. It's a complicated case, but there was a compensation plea in relation to the treatment of this company called New Coal and there's a suggestion that perhaps the federal government might seek to intervene between the US's concerns and the New South Wales government where this was an issue. And whether they can offer that and put that on the table isn't clear. But I think Anthony Albanese, the suggestion from his demeanour is that he doesn't want to kowtow to the US president. He doesn't wanna go in there and acquiesce. But at the same time, you've got to walk that fine line because we've seen how the president responds when people push back, in some cases, on what he wants. Certainly, he's made an example of a couple of leaders in the Oval Office in front of all the cameras. So I think the Prime Minister wouldn't be wanting that to be occurring with him.

DANIEL:

Finally Karen, if we turn back domestically, this week Anthony Albanese gave a press club address which was his first major speech since being re-elected. What did he say and what did he tell us about his priorities for this term?

KAREN:

Well, his big message was, we're going to do what we said we're going to and we're not going to overextend. So he's still trying to manage expectations among his own constituency and support base that having won such a huge majority in the parliament that he should push further and do more than he's already said he would do. So he is trying to manage those expectations. At the same time, he's talking about having another gathering later in the year that is like. The jobs and skills summit that he held after the 2022 election where he brought a whole lot of stakeholders together from business, from the union movement, from community sector, a range of organisations to talk about ideas for the economy and in this case this is going to be focused on productivity which the government has said it is a big focus for this term.

Audio excerpt – Anthony Albanese:

“Our own way on our terms in our interests. Not seeking to imitate low wage economies, not leaving people behind in the scramble for some perceived advantage.”

KAREN:

But he's clearly very focused on taking people with him, not getting out ahead of people because he recognises that if public opinion turns as it can do during the course of his term and he is seen to be overextending his mandate somehow that that could go badly for him at the next election despite his large margin.

Audio excerpt – Anthony Albanese:

“My colleagues and I understand that every day in government is a privilege and with optimism, urgency, purpose and determination, we intend to make every single day count. Thanks very much.”

KAREN:

He looks to other elections in the past, Campbell Newman in Queensland being the most recent example where there was an enormous swing in favour of an incoming government and then an enormous swing against in the course one term and he was out…and he does not want that to happen to him.

DANIEL:

Karen, thank you so much for your time.

Karen: Thanks, Daniel.

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DANIEL:

Just before we go, you might have seen some news around that 7am has been sold by Schwartz Media.

We learned this week that we've been acquired by Solstice Media, the company behind The New Daily and other titles.

7am will continue. But we'll have more information for you in the coming weeks about what that means. In the meantime, thanks for listening.

7am is a daily show from Schwartz Media and The Saturday Paper.

It’s made by Atticus Bastow, Cheyne Anderson, Chris Dengate, Erik Jensen, Ruby Jones, Sarah McVeigh, Travis Evans and Zoltan Fecso and me, Daniel James.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

That's been 7am for this week. Thanks for listening and have a great weekend.

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