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4.2 Since World War II, Australia's strategic outlook and defence planning have been shaped most fundamentally by the global distribution of power, and in particular the strategic primacy of the United States. The United States has played a stabilising role across the world and especially so in the Asia- Pacific region. This has not, of course, meant that Australia has been able to avoid attending to its own basic defence needs, something successive Australian governments have recognised since the 1970s.

4.3 Australia's strategic outlook over the coming decades will continue to be shaped by the changing global distribution of economic, political and military power, and by the future role and weight of the United States. We are not likely to see the emergence of an alternative political and economic system to rival the network of liberal, market-based democracies that emerged after World War II, as the communist system attempted to do last century during the Cold War. Globalisation will ensure that economic interdependence links states and regions together more closely.

4.4 We will, however, see changed strategic power relativities and an increasingly 'multipolar' global order, driven by changing patterns of underlying economic power and political influence. Our long-term planning will have to recognise that the range of even moderately likely strategic futures is wide. 4.5 Further complicating this picture, the convergence of trends such as global demographic change and

population movements, environmental and resource pressures (whether caused by climate change or other dynamics), global public health risks and even transnational crime will increase the risk of conflict over resources, political instability in fragile states and potentially destabilising mass migration flows. Intra-state conflict, such as civil war and conflict involving non-state actors, is likely to be the most common form of conflict over the period considered by this White Paper.

4.6 Regional conflicts, such as in the Middle East and Africa, will likely continue to be a risk in the international system. Clashes between and within states in these regions are likely to arise for diverse reasons, such as the breakdown of fragile states; disputes over territory; access to resources, water

and energy; population movements, environmental crises or food shortages; conflicts between ethnic or religious communities; or efforts to promote ideological or nationalist goals.

4.7 Changing climate patterns, combined with booming population growth, will sharpen competition for scarce food, water and energy resources in many parts of the world, particularly in Africa and the Middle East, and are likely to exacerbate existing population and infrastructure problems in developing countries in those regions, straining their capacity to adapt and cope. Large-scale strategic consequences of climate change are, however, not likely to be felt before 2030.

The Global Economic Crisis

4.8 The world is currently facing the most serious global economic and financial crisis in decades. The crisis is still unfolding, as are its strategic impacts. The strategic effects of the crisis will depend on its duration, depth and the differences in its impacts across nations and regions. The longer the crisis persists, the greater the strategic consequences could be. Many nations are facing recession or at least a dramatic slowdown in growth. Within some nations, this has already led to low levels of instability and protest. Globally, because the degree of potential economic damage will differ from nation to nation, it is possible that we could see significant shifts in relative economic power between nations over time.

4.9 Developed countries will suffer the largest reductions in growth. Those developing nations that have struggled, even in good times, to integrate into the global economy or that are heavily dependent on exports to advanced economies or remittances will be very seriously affected. Fragile and vulnerable nations, particularly in our region, maintain few significant reserves with which to buttress their economies from the crisis. Such nations may struggle to meet the demands of their citizens, and may be easier targets for foreign influence in ways that might be unfavourable to long-term strategic stability.

4.10 The global economic crisis also presents the potential for extremists in Southeast and South Asia, and elsewhere, to seek to capitalise on resentment fuelled by economic woes as governments struggle with diminished revenues and are forced to cut budgets, including in critical areas such as health programs, food and fuel subsidies, or even counter-terrorism activities.

4.11 For nations better able to weather the crisis, budgetary constraints are likely to be felt in some armament programs, within our region and globally, impacting on the longer-term trends in military modernisation that have typified the recent past. The crisis could also, with its associated uncertainty and volatility, reinforce existing insecurities. Some nations could thus respond to a more uncertain strategic environment by increasing their military budgets.Within our region, these different approaches can change the relative strategic weight of nations as some nations fall further behind, while others continue ongoing, or commence new, modernisation programs.

4.12 The global economic crisis is likely to accelerate some established trends such as the shift of economic weight to the Asia-Pacific region. Differences in timing and strength of recovery between regions

and states could alter some economic trajectories, while continued budgetary pressure will have consequent impacts on power relativities. In the Asia-Pacific region, the likely effect of the crisis on military modernisation will be to delay planned capability acquisitions and improvements and curtail exercising and operational budgets. In Northeast Asia, China is likely to be able to continue to afford its foreshadowed core military modernisation. Over the long term, this could affect the strategic reach and global postures of the major powers. There are many potential strategic scenarios that could emerge. Any future that might see a potential contraction of US strategic presence in the Asia-Pacific region, with a requirement for allies and friends to do more in their own regions, would adversely affect Australian interests, regional stability and global security. Even so, the United States has large interests in remaining strategically engaged in the Asia-Pacific region.

4.13 Looking beyond the immediate challenges of this crisis, by 2030, any changes in economic power will affect the distribution of strategic power. Stability in any multipolar global order will most likely result from economic interdependence and pragmatic political cooperation among the major powers. While the potential for those powers to cooperate to manage their relationships and global stability is high, it is by no means certain. Tensions could arise. If nothing else, the potential always remains for nations to miscalculate the interests and reactions of other nations.

US Strategic Primacy

4.14 The United States will remain the most powerful and influential strategic actor over the period to 2030 - politically, economically and militarily. Its strategic primacy will assist in the maintenance of a stable global strategic environment. China, India, Russia, Japan and the European Union will exercise global influence in differing degrees and acquire varying levels of military strength to promote their interests.

4.15 While the United States will maintain the capability to project force globally from its own territory, it will likely continue to judge that its forward deployed forces, including in the Western Pacific and the Middle East, provide reassurance to allies and partners, as well as providing operational flexibility in crises.

4.16 Balancing the capabilities required for unconventional operations such as counter-insurgency and stabilisation, while retaining strong high-technology conventional forces, will be a major challenge for US defence planners, and the United States will continue to seek further deepening of its strategic relationships with capable potential coalition partners, such as Australia. Within the timeframe of this White Paper, the United States will continue to rely on its nuclear deterrence capability to underpin US strategic power, deter attack or coercion by other nuclear powers, and sustain allied confidence in US security commitments by way of extended deterrence.

4.17 Will the United States continue to play over the very long term the strategic role that it has undertaken since the end of World War II? It remains the case that no other power will have the military, economic or strategic capacity to challenge US global primacy over the period covered by this White Paper. But

the United States might find itself preoccupied and stretched in some parts of the world such that its ability to shift attention and project power into other regions, when it needs to, is constrained. This is likely to cause the United States to seek active assistance from regional allies and partners, including Australia, in crises, or more generally in the maintenance of stable regional security arrangements.