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U.S. Senator Mike Enzi traveled with a small group of his Senate colleagues to Australia and New Zealand in early 2012.   They left Washington, D.C. Jan. 3 and returned Jan. 17.  When Enzi travels on official trips, he keeps a journal.  Some things Enzi discovered- Wyoming business people who want to increase sales “down under” might try a trip to Perth or Brisbane before Sidney or Melbourne.  Our country could learn a thing or two from Australia’s version of Social Security.  China is increasing its military presence in certain areas and purchasing energy and food assets all over the world.  Like here in the U.S., people in other countries are also suffering from government policies “dripping with intervention.” Recourse loans help solve or prevent a country’s housing market problems.

Below are more excerpts/observations from his informal trip journal:

Trip Report Australia Jan 3-17, 2012

Hawaii- Senators and selected staff went to a Pacific Command briefing.  On the way we learned that, before Pearl Harbor, the vulnerability of fuel for ships and planes was recognized. Miners were brought in from all over to tunnel into the mountain here, to put the tanks on their side underground. You can see in the tunnel how far they got before Dec 7 because that part is all nicely finished - then it is rough, but worked. A second wave of Japanese planes was planned to take out the fuel, but never happened because Japan wasn't sure where the rest of the aircraft carriers were. Fuel destruction would have set us back at least six months and made the difference.

We went to Pacific Command. Admiral Willard did an excellent military briefing on the Pacific focusing on China and the neighbors. We covered nuclear risk with North Korea and learned about the new ruler there. India is a key country. China is expanding military jurisdiction into the surrounding seas. We heard of relationships with each of the countries as well as military basing difficulties, Taiwan's elections and Burma changes along with the reasons for the new Marine posting in North Australia. It was a great introduction to what we would be seeing over the next several days. 

On the bus on the way back the returns were coming in from the Iowa Caucuses. I got Senator Alexander, who ran for President the year I ran for US Senate, to talk about his experiences.

We flew to Wellington, New Zealand. We were greeted by Ambassador Huebner in "Cook Strait Winds". They do have what Wyoming folk would call "real wind!"

The bus took us to the Embassy for a briefing by the ambassador. His grandfather was a miner. His dad was a butcher. He is an attorney and has been responsible for setting up several offices, the latest in California. He took a huge pay cut to be ambassador.

1) The conservative NZ Party is libertarian and in many respects compared to the US, is extremely liberal. The vote is for the party, not the individuals. The party selects winners after they find the number of representatives by the proportional vote. When a Chinese official visited Parliament, a Green Party Member held up a Tibetan flag in protest. A Chinese bodyguard took the flag and stomped on it and beat up the person holding it - and China was given an apology (not the victim).  2) NZ is very free trade when it comes to trees, milk and meat. 3) They hope China will become their only customer (China bailed them out when the Europe crisis hit). NZ has a free floating dollar. 4) There is some military training, but it is mostly for humanitarian events. Because of Vietnam, Afghanistan, and Iraq, many are anti-American. 5) They have a dangerously high debt, but deny it. They are very self promoting and unified to the outside world. 6) There is a brain drain because wages, even in Australia, are higher. 7) Because of their world location they are very isolated. An enemy essentially would have to go through Australia to get to them. They are also a very small population.

We had a staff briefing. Mike Lane of Montana, who was last assigned to China, is the Commerce attache. He noted a stable relationship with the US. The ruling party got 49% of the vote, so had to have a coalition. They formed with the green party to get two votes for organizing and getting confidence votes. The Green Party got two portfolios. The Wellington Treaty was recently signed by Secretary Clinton. It is a form on which to hang other agreements. Signing had a big New Zealand effect. NZ doesn't allow any import of pork or poultry. Because they don't believe in feed lots, their cows go dry seven months of the year. Because of their range of climate, some part of the country is always producing, but they have visited North Dakota and Indiana for ideas. NZ is green, meaning they won't consider having any mining.

Defense briefing, troop numbers. Because of our nuclear capability, NZ allows no US military ships in its harbors.

There is beginning to be some organized crime. We have offered a Treasury and an FBI person but they have not accepted the help.

There are constant cyber attacks by China on government and banks.

We went to the home of the High Commissioner, O'Sullivan, (Ambassador from Australia, but since it is all part of the British Commonwealth under the same Queen, they had to invent a new term). We got an overview of New Zealand and Australia. Australia and the US are cousins with England as an ancestor. Our bonds were tied first during WWI.     

We then went to the NZ Parliament building where we met with Attorney General Chris Finlayson who is also the Minister for the Treaty of Waitangi (Maori reparations negotiations.) He was very knowledgeable of US politics and considered himself similar to Republicans.

All their Ambassadors are career and are always appointed to a country for four years. 

We took the bus to the Ambassador's residence for a reception. We got to meet many young leaders. The bus took us to the airport where we left for Melbourne, Australia.     

A front page Sunday Newspaper article gave the results of a five year study of pre-schools and contended they were little more than babysitting services, not teaching much. The only bright spot for Australia they noted is that they were better and more productive than the ones in the United States.      

We took the bus to the airport and flew an hour to the capitol, Canberra.

We went to the Embassy where we had a team briefing. Officially there is “no closer alliance than Australia and the US. The announcement by President Obama that we will deploy more marines to the Darwin area got the attention of the neighbors. We also sold them helicopters last year.

In banking, Australia expects to have its budget back in the black by 2013! They took a hard line on derivatives. They super-annuated their pensions in the 1980s, meaning they required employers to contribute 9% of the payroll to individual accounts managed by funds. That provides the third largest pool of investment. Management by funds provides diversity with limited employee choice - this would be like our TSP accounts. They still have a social security safety net of $371 a week that is means tested. It is a defined contribution plan eliminating defined benefit plans. The amount in the fund at retirement determines the monthly payment. If a person dies, the fund goes to heirs. This method puts a lock box on retirement, because it’s not like our social security where bonds are put in a “trust fund” and the cash is spent. Foreign participants can take their funds with them if they move or are transferred. This provides an economic pool the same size as the value of everything that Australia produces in any year (GDP).

Defense - Their dock capacity is limited even in Perth. The air bases need infrastructure. All bases need reinforcement and weapon storage. They are currently doing a new Force Posture Review.

Energy is in the Northwest. Aussies want a partnership, not a grant or majority foreign ownership. Exxon has a policy that they won’t put more than 30% of their assets in a single country. They improved relations with India by agreeing to start selling them uranium. Queensland has both coking and regular coal.

They don’t like our sugar policy of quotas limiting sales in the US. They do fill quotas other countries leave open.

I asked separately where trade trips by a state like Wyoming might be most effective. They suggested Perth and then Brisbane would be the best targets. Everyone goes to Sidney and to Melbourne.

We have a very close relationship on intelligence demonstrated by Pine Gap at Alice Springs. We are both concerned about Iran’s nuclear capability and cyber threats particularly from China.

The West half of the country only has 2 million people.

We went to their defense admin building where we met Defense Secretary Duncan Lewis and the Chief of the Defense Force, David Hurley.

We went back to our Embassy where we met with Service Personnel.  Ambassador Bleich hosted us to a dinner at the residence.

We went to a Trade and Treasury Roundtable. Australia has not had a recession in 20 years. Their “"superannuation retirement" fund helps. I probed for details on how it works and problems they have had. They are looking at increasing the mandatory contribution from 9% to 12%. People are allowed to put in their own money and have it managed the same way. For low income people there is some matching by the country. The funds are privately managed and do have risk.

Their housing market is stable because all home loans are full recourse - meaning that default still leaves the home owner with debt. Banks have only one federal regulator. There are not state regulators. When they have a failing bank they eliminate the directors and eliminate the stockholders.

There is a regional Free Trade Agreement with 9 participating countries. Four more want in.

In energy, they are sensitive to the price of LNG (Liquid Natural Gas), coal, and oil. Australia just imposed a $24 per ton carbon tax. China just did a $1.50 carbon tax. We wondered how that difference would play out. We were told the coal companies got concessions so they didn’t oppose the carbon tax. We couldn’t find anyone who knew what those concessions were - including coal company representatives I later talked to.  They thought the European financial situation should be a message to the US.

We visited, laid a wreath, and had a tour of the War Museum. The museum is located on a visual line with the Parliament Building so war decisions are prominent when voting.

We flew back to Melbourne.

At 8:30 a.m. the Consul General gave us a briefing of what to expect during the day. Unemployment is 5.3% $1.3 Trillion GDP, 7.7% debt. 135,000 housing starts. Inflation 3%. GDP growth expected of 3%. Trade is with India and China mostly and increasing. Mostly minerals. The challenge is getting skilled labor. They measure their dollar against ours, but when ours goes up, theirs comes down and vice-versa. 23 million people. Aging population. 

We went to the federal office building and met with the Treasury Minister, Bill Shorten. He was excellent. He talked about this superannuation fund as well. It takes two decades for the “superannuation” to work. Fifty percent of the funds have to be invested in Australia. Requiring investment in funds diversifies the risk. Companies are moving out of Defined Benefit Plans. The 9% would have gone into wages. This savings cuts down on inflation.

Their personal tax rate is 45% above $180,000. There is no tax below $20,000. Capital gains is figured based on 1/2 of each person's top rate. They do not tax the sale of the family home. There is a VAT tax of 10%, but not on food. The VAT was in exchange for cancelling several other taxes. Twenty-two percent of GDP is taxes. Half the VAT goes back to the states. People are given three months off every ten years.

He also mentioned a skills gap since young people today will have six different jobs. But the shortage is appearing in the trades. They are reinvesting in the trades. He wondered if the Mediterranean is ready for austerity because that is their only solution now. Australia's bank deposit right now is paying 6 1/2%. Their national symbol is the emu and the kangaroo because neither can go backward. Their housing market hasn't had problems because they require recourse. In health care, their cost of gap insurance is increasing dramatically. They raised the age of retirement from 65 to 67.

They have a carbon based energy plan because they have lots of coal. If you've got it, use it!! He tried to explain the benefits coal got so they wouldn't complain about the new carbon tax. He couldn't explain what had been given to coal. He did say the current rate (23%) will be in effect for 3 years and then they will go to a market based mechanism.

Their family payments (welfare costs) are dropping. They are adjusting. They used to make ropes - then low cost sandals - but markets change.

We went to the Exxon Building and met Exxon and Boeing officials. Exxon has been in Australia for more than a hundred years. They started with lubricants. They have billions of dollars invested. They are now doing billions of dollars a year in projects which includes refinery upgrades. They work with BHP in the Tasman Sea.

Boeing employs thousands people. Half are defense related. They are losing people to minerals. They pay almost half of profits in taxes when counting health, “superannuation” and their holiday structure.

They helped with the questions about how imported employees handled the “superannuation” versus normal company retirement. If the company has a plan I guess they can keep it if they have been in it for ten years - otherwise they have to go to the new national plan. Aussies leaving the country can take their pension with them after five years..

LNG use will move natural gas prices closer to oil prices. Gas prices will rise.

I was surprised at how little interest there was in bringing cash back to the US

The Institute of Public Affairs hosted a dinner with lots of businesses, media, and Liberal Party Senators (the conservatives). 

We flew to Sydney. We were met by Council General Neils Marquardt

We took a bus to Kirribilli House, the Sydney residence of the Prime Minister who hosted a reception for both our Codel and Chairman Rogers' Codel.   We walked to a water taxi that took us across the bay where buses took both groups to the Counsel General's House for a dinner.

We rode the bus to the Consul General Offices.

We met with Shadow Finance Minister Andrew Robb. He also does deregulation and debt reduction.  Both sides like the troops to Darwin and the Free Trade Agreement. He worked for Chevron on 21 projects around the world fighting for dollars for their project - let alone strategies against other companies. He said, “The carbon tax is dripping with intervention.”

The way the US is spending, there won't be enough money to invest in anything.

Food safety will be a big international issue restraining trade. Australia has water running into the sea and needs irrigation infrastructure and techniques. Australia is "galloping across a lot of issues." He learned from a four week fellowship in California about California, "the most socialistic, communistic way you could go.” They have clean brown coal, but it is 60% water. I mentioned the flash techniques developed in Wyoming to get moisture out of the coal to increase BTU and reduce shipping weight). He thinks we should find a way for agriculture to put CO2 back to the soil for increased production.

On immigration - John Howard stopped the boat people and that gave confidence that higher skilled people could come and contribute. Now they have hundreds of thousands of high skilled people coming each year. Nine countries are buying up ag land around the world. We should be concerned.

We drove to the Lowy Institute for a meeting with Andrew Shearer and others. This is an 8 year old think tank funded by Frank Lowy who builds lots of shopping malls also in America. I got to meet him and his sons after 9/11. They had the misfortune of buying the World Trade Center just before the terrorism. I worked on building insurance then with Sen. Sarbanes, Dodd and Gramm. Sen. Sarbanes suggested a definition of terrorist so, unless you participated in the planning or execution of terror, you are not a terrorist just because you own the building. We all mentioned that small piece of the bill when we did a press conference. We went from there to the floor to introduce the bill. Democratic leadership at the time then told Sen. Dodd and Sarbanes, "if you put that bill with tort reform in, you lose your chairmanships".  We had to go back to the drawing board.

Australia has allowed uranium exports to India. That has dramatically improved relations.

China is cornering energy anywhere. China is out-bidding India. The best way to ruin the international economy is to buy the assets of other countries. When they make purchases, they have "inside" access to the bid and cost information. They are also buying up broadband. [Information AND energy!]  We went to the office of ASIC and Chairman Greg Medcraft who told us how they do market security. He has a budget of $150 million, but generates $350 million - net returned to the Treasury. Their Strategic Priorities (and he can recite them) are to ensure: 1) Confident and informed investors - education about investor responsibility, helping them to understand risk, reward, and diversification. They hold the gatekeepers accountable and they monitor consumer behavior - how investors and consumers make decisions. 2) Fair and efficient financial markets through supervision, competition and corporate governance. 3) Efficient registration and licensing with a focus on small business.

He emphasized that people have to protect themselves! They have a 351 page website where you can do your own financial plan and save it and come back and recheck and change it. They just embedded financial literacy in the school curriculum so English and writing cover it. I asked them to send their program to me.

Housing should only be three times annual wages. Housing needs recourse loans.

Derivatives can be big enough to distort and drive the market!

He has responsibility over the “superannuation” investment funds.

We went to the New South Wales Parliament building. The President of their "Senate" gave us a tour of the chambers and some history. We had a reception and then lunch with the European-Australian Business Council hosted by the Senate President. Lunch conversation was mostly about the USA Republican primary. 

We drove back to the American offices and met with the Shadow Treasurer, Joe Hockey. He is the main budgeteer. He just returned from meetings in DC and is very quotable and knowledgeable and blunt:

Bernanke is out of options.

The world can't afford to have a weak US.

Now a contract in England has to be backed in Sterling and has to be subject to English Court.

No one is coming clean on bank debt. Not Europe or America.

The US doesn’t have very good regulators.

Australia has aggregated financial services (insurance, banking, etc.), but uses separate and simple rules for transparency for each sector.

These are the "salad days". And you still can't reduce your debt? You are in real trouble.

There is no shortage of money because everyone is printing it. It has to do with the value of money. People are sensing something is not quite right.

We are, at best, going to have 30 years of money cocoons and volatility. China and India are mass producing much and cheap and that is holding off inflation.

Australia does a report - 30 year projections - a snapshot of where we are headed - suggests the need for a small pain now for a long term gain. The report comes out every six years.

America is the natural leader of the world.

You "Need a Plan!"

How much the US owes China is a strategic problem.

China knows their security is energy and food.

India is different. A cable company was trying to sell new hook ups. They only had 20,000 customers they could count for ad prices. They went to look at their customers and found that each customer had wires running to all the neighbors who were getting it for free. You have to adjust to reality. They gave everyone free TV and were able to claim enough customers to sell ads at a profit.

He has never seen a new tax that created jobs. The US problem is there is NO plan. People will take short term pain for long term gain.

We took the bus to the airport and flew three hours. We went to a classified. This is a joint USA/ Australia facility.  We got to learn of some of our intelligence gathering capability. We toured the facility to get a flavor for what they are doing. They fed us a working lunch as we went through all the missions. This relates back to several previous meetings and briefings that cannot be detailed.

We took the bus back to the airport and flew to Uluru at Ayres Rock.

We drove back to the plane and flew to Sydney.

Went to the Reserve Bank of Australia and met with Chairman Glenn Stevens. He is very calm and very careful answering, but very impressive. The Reserve is in charge of stability but has very few tools. They are no longer regulators. Australia's gross debt is 15% of GDP. The Aussie states have debt of 20-25% of GDP. What he worries about is the private (personal) debt. But savings have gone up and delinquencies are low - 1/2 of one percent. There was very little subprime lending and almost always full recourse (which means even if they default they are liable for the loan). Australia and others complain about Basel III rules. Daily, the very first thing, he checks out a number of things.

The US Fed fund rate got to zero, so the only leverage Bernanke has is to buy up paper. Australia has more ammunition. Too much emphasis on low unemployment will affect stability.

When “superannuation” first went into effect, savings went down.

There is a future vulnerability as long as the Europeans keep on muddling through. It’s easy for a false step to happen. China could have a property value collapse.

America from a distance looks better to him than a year ago.

It’s all about confidence. You can stretch the market for a long time, but watch out when it wakes up!! The amount necessary to restore faith will be tremendous. There is a trigger point. Markets will be less forgiving, very unpleasant.

In Australia, most of the money is with the feds - and most of the spending is by the states. Australia might offer help to their states, but it would be at an appropriate price.

The future of the Euro depends on what Germany is prepared to pay. Ireland is doing deflation. It’s very painful, but it’s working. The Euro isn't about finance, it’s strategic. Another very insightful meeting.

We went to an AMCHAM (American Chamber in Australia) working lunch. They were mostly interested in what we are going to do on defense funding and if we have a plan for the debt. I explained several debt plans and assured them we will come up with one because we have to.

We had a Sydney Harbor Cruise hosted by the American-Australian Association with board member Michael Warczak. 

Bussed to the airport. Flew to Pago Pago in American Samoa for fuel. Gained back a day.

Flew to Honolulu. 

We packed up for the last time and put our luggage out at 6:15

We got on the plane and flew to DC. I wrote and edited the annual birthday letter that goes to other senators. I caught up my travelog and finished my trip report. We got back at 11 p.m.