Some of Australia’s best thinkers fear that we are.

The costs are real.

You will, for example, pay more to build your new house, as a result of it.

And an isolationist mentality would seriously damage Australia’s reputation, internationally.

There are clear overtones of Fortress Australia both in Julia Gillard’s talk of a “sustainable” Australian population in future and the Coalition’s promise to cap immigration at 170,000 a year.

The two major parties both present their policies as reasonable responses to Australia’s present circumstances.

However the nation’s university dons, builders and farmers are all worried by what they are saying.

You should be too.

Like mining, tertiary education is one of Australia’s most successful industries.

But it says it is now faced with “a perfect storm” – and that the population debate is part of  its troubles.

Professor Peter Coaldrake, who chairs Universities Australia, says this country has been “nourished” by a flow of international students,  from the times of the old Colombo Plan.

“This has enabled Australia to establish enduring links and goodwill, connect with the world and enhance our reputation, especially in the Asia Pacific region,” he says.

That says nothing of the money that the tertiary education industry brings to Australia – and the high paying jobs it creates, either.

There have been problems, of course, including recent violence against Indian students in Australia. So Australia is being watched, very closely, at present.

Professor Coaldrake warns that immigration policy must not  be allowed to create a “fortress Australia” mentality, in this country.

Dr Harley Dale, of the Housing Industry Association, and Brett Heffernan of the National Farmers’ Federation have also been vocal on this subject.

Dr Dale says a new survey, which his association produced with Austral Bricks, showed that Australia is short of skilled workers in 8 of its 13 skilled building trades.

This is particularly serious, as the industry is already falling well short of existing demand for new houses.

Those shortages, of course, also mean that builders – and home buyers – will have to pay more to get the skilled workers they still need.

The usually conservative National Farmers’ Federation is worried, too.

It sees a labour shortage, of some 100,000 people, developing in rural areas, over the next five years.

Mr Heffernan says a mandatory cap “gives rise to little flexibility in meeting emerging business needs.”

These warnings, from industry leaders, might well prompt Australians to ask themselves , too, whether the current hysteria over the 4,000 or so boat people, wbo arrive each year, is justified.

Like other immigrants, in the past, refugees have made significant contributions to Australian life.  They could do so, in future, too.

Those are two possible long term effects of the global economic crisis.

The Reserve Bank Governor, Glenn Stevens, who spoke of these prospects, said:”…big events echo for many years.”

He is not alone in his worries about the future.

The Nobel prize winning economist, Paul Krugman, has even warned that the crisis could tip the world into a new Depression, like that it experienced in the 1930s.

Mr Stevens stressed that he was speaking of global, not specifically Australian, prospects.

Although technical, his speech was based on ideas that can be expressed fairly simply.

He noted. for example, that  the crisis had forced several governments to back their countries’ banks with capital injections.

And he said capital is usually more expensive than the savings that these banks usually lend to their business clients, in normal times.

As the extra costs have to be covered, expenses for the broader community would rise, as businesses which borrow now would have to charge their customers more.

Mr Stevens warned, too, that business activity throughout the world could be “crimped” as the tighter regulations imposed on the world’s financial systems take effect.

That could reduce business activity throughout the world.

Mr Stevens said these risks, in turn, illustrate the need for “a balanced approach” to these issues.

“… some governments took on bank ownership in order to ensure the replenishment of capital that had been too thin to start with,” Mr Stevens said.

The capital of those banks had also been “depleted by the losses on securities and loans,” he said.

Mr Stevens said some of the money governments had invested in that way had already been restored.

“In fact about 70 per cent of the funds invested by the United States in banks have been repaid,” he said.

“And the US Government expects to make an overall profit from these capital injections,” Mr Stevens added.

“Nonetheless for a period of time governments are carrying a little more debt than otherwise as a result of the provision of support to the banking system,” he said.

Mr Stevens admitted that the recent downturn “was a bad one in many countries.”

“And that is because it was associated with a financial crisis,” he said.

So “the major countries generally are going to have significantly higher public debt relative to GDP after the crisis than before, and the debt ratios will continue to rise for several more years,” he said.

By any reasonable standard, events like the global economic crisis are dangerous.

The last event, of this magnitude, the crash of 1929 – and the Depression which followed it, for example, led directly to
World War II.

News of this likely development is emerging gradually, as  France and Germany also push for an easing of the rules , which were set by the Basel Committee on Banking Supervision.

Worries over the capacity of some European banks to meet those requirements have been unsettling world financial markets.

Many investors fear the new rules might also place too much weight on the European governments,  which back those banks, at a time of serious worries about sovereign debt in several European countries.

French and German negotiators have been pressing for a softly softly approach, at a meeting of regulators in Basel this week.

Increasingly. their arguments are being seen as realistic.

Investors, particularly, are eager to avoid a second fall in world markets, like that which followed the collapse of Lehman Brothers.

Bloomberg says European regulators may now be willing to compromise on how the capital that banks are required to keep is defined.

European banks may also be given a transition period of up to 10 years, to meet the new rules.

Whatever happens, there will be costs associated with these talks, which will continue in Basel this week.

One is that that  the banks involved might be forced to  cut their lending.

That could well have  serious knock-on effects, slowing recovery from the global economic crisis in several European countries and – of course – in the world as a whole.

However the negotiators, now in Basel, now have an urgent example, in front of them.

They have seen worries over debt problems in Greece unsettled  world financial markets.

So they now realise just how fragile the world’s recovery from the global economic crisis really is.

That has been a sobering observation.

That should not obscure a disturbing fact, that has appeared in the nation’s latest – apparently strong -trade figures.

The latest economic news is certainly good – but there’s a sobering item hidden in it.

Australia chalked up a b surplus of almost $1.7 billion, in its goods and services books in May, a much better result than anyone had predicted.

That was encouraging, especially as the the Reserve Bank also kept interest rates on hold, for a second successive month.

The Australian Bureau of Statistics reported that Australia’s exports rose by 6 per cent, on seasonally adjusted figures in May, while imports rose by just 4 per cent.

Any country would be proud of that result, especially in difficult times, like those the world is going through right now.

So some cautious optimism seems reasonable.

Especially as new car sales have also been high, recently.

However that strong rise in  Australia’s exports during May was boosted by one, very disturbing fact.

Gold exports rose by a massive 66 per cent during the month.

Investors traditionally see gold as a safe haven, in difficult times.

That has been reflected, very clearly, over the course of the the global economic crisis.

A month before the  crisis struck,  back in September 2007, gold was selling for a  moderate price of $US672 an ounce.

That price has now hit $US1,209 an ounce.

The nervousness this reflects, on world markets, was the main reason why the Reserve Bank kept Australia’s interest rates on hold, once again, this month.

Australian families are still spending cautiously, too.

The Reserve Bank Governor, Glenn Stevens, nailed that in his explanation of  his board’s decision to keep its target rate at 4.5 per cent.

“Consumption spending is recording a modest increase at present,” Mr Stevens said.

However he said, too, that Australian families are still “displaying a degree of caution.”

Mr Stevens noted, too, that house prices are rising more slowly now, than they did in the first half  of the year.

The Nobel prize winning economist, Paul Krugman, has warned that the world could be on the brink of another Depression.

That’s the big risk.

So what should we make of it all?

Well, the latest numbers do look good.

But the crisis isn’t over yet.

The decision, announced jointly by Prime Minister Julia Gillard and her deputy Wayne Swan is a clear victory for miners, who bitterly opposed the proposed tax.

Ms Gillard will meet reporters in Canberra shortly, to explain the decision.

Meanwhile she and Mr Swan have issued a joint statement, which reads:-

“Today the Gillard Government is proud to announce a breakthrough agreement on improved resource tax arrangements that addresses the concerns of the resource industry.

The new tax arrangements will underpin major economic reforms that will strengthen our economy so we can move forward together with confidence.

These arrangements will fund an historic boost to superannuation, new and better infrastructure, and business tax cuts including an up-front tax break and less red tape for small businesses to help them grow and thrive.

This agreement provides certainty to the resources industry, to mining communities right around the country, and to the broader Australian economy.

It sends a very clear message to the world that the Australian resources sector is strong and its future is secure.

The breakthrough agreement keeps faith with our central goal from day one: to deliver a better return for the Australian people for the resources they own and which can only be dug up once. It is the result of intense consultation and negotiation with the resources industry.

The improved resource taxation reforms focus on the most profitable resources, raise the uplift factor for tax losses, remove refundability and offer generous depreciation arrangements to promote new investment.  They are more generous to industry in some respects, while industry has given ground in other areas. The improved profits-based taxation reforms will apply from 1 July 2012.

The improved resource tax reforms involve:

• a new Minerals Resource Rent Tax (MRRT) regime applying to iron ore and coal in Australia; and
• extending the current Petroleum Resource Rent Tax (PRRT) regime to all Australian onshore and offshore oil and gas projects, including the North West Shelf.  This will provide certainty for oil and gas projects and ensure all oil and gas projects are treated equitably.

The Government will focus the resource tax reforms on our biggest and most profitable commodities: iron ore, coal, oil and gas. These represent three-quarters of the value of our exports and resource operating profits and account for an even greater share of resource rents in the mining industry. They also represent the vast bulk of growth in the sector over the coming decades.

Since the beginning of the mining boom, prices for iron ore have increased by over 400 per cent and prices for black coal have increased over 200 per cent.

Other commodities will not be included, which reduces the number of affected companies from 2,500 to around 320. These commodities were not expected to pay significant amounts of resource rent tax, and excluding them will allow many companies to remain in their existing taxation regimes.

The agreement also provides certainty for projects in the emerging industry of converting coal seam gas to LNG, by including all Australian onshore and offshore oil and gas projects, including the North West Shelf, in the PRRT.

Including all oil and gas projects in the one regime will ensure equitable tax treatment between competing projects.

To ensure the smooth implementation of the new arrangements the Government is establishing a Policy Transition Group (PTG) led by Resources Minister Martin Ferguson AM and Mr Don Argus AC to consult with industry and advise the Government on the implementation of the new MRRT and PRRT arrangements.”

The two ministers also said:-

“The improved resource tax reforms are estimated to reduce revenue by $1.5 billion over the forward estimates. As the Government has always said, all elements of the tax reform package are dependent on the package being balanced by the revenues from resource taxation.

The reduced revenue makes necessary the following revisions to the associated reforms:

• The company tax rate will continue to be cut to 29 per cent from 2013-14 but will not be further reduced under current fiscal conditions. Small companies will benefit from an early cut to the company tax rate to 29 per cent from 2012-13.
• The resource exploration rebate will not be pursued.  Resource exploration costs will continue to be deductible in the normal way and the PTG will consider the best way to promote future exploration and ensure a pipeline of resource projects for future generations.

We believe these improved reforms offer the best chance of delivering for hard-working families and small businesses around Australia while protecting and growing our great mining industry.

All along, our objective has been to deliver Australians a better return for the resources they own, which can only be extracted once, and this plan will deliver on that commitment.

We came together as a nation to stare down the worst of the global recession and now we come together to reform our economy, improve our tax system, and move forward with confidence.”

He has little choice.

A fresh election is due before the end of the year.

And the big miners’ campaign against the proposed  tax is undermining his government’s support, particularly in the  resource rich States of Western Australia and Queensland.

New research, by the Roy Morgan organisation, confirms that.

It shows high levels of concern about the proposed new tax in both States.

The issue continues to dominate debate in Federal parliament, too.

The Opposition Leader, Tony Abbott, believed he had new ammunition, when he launched an attack on the government, over the planned tax, yesterday.

He asked if a speech by the Treasury Secretary, Ken Henry, earlier this week signalled that the government is planning to extend its super profits tax to areas outside mining.

The Prime Minister responded with a flat denial.

“The bottom line is that the government’s position in relation to the resources super profit tax is that it applies to non-renewable resources in Australia,” Mr Rudd said.

“That is the entire basis of the regime.

“It is a taxation arrangement designed to deal with the non-renewable resources of this country.

” Once they are extracted and removed, they are not returned to Australia; they have gone forever.

“That is why they have been separately taxed for a long time through the royalties system.

“We propose tax reform based on a profits based tax, not a production based tax.

“That is the core of our reform and is therefore unique to the resources sector.”

This was an unusually clear response.

So what concessions could the government make, to save its own skin?

A Canadian academic says the government got its super tax model right.

But Professor Jack Mintz says the rate is wrong.

He told the ABC that  a rate of 30 per cent would be better than the 40 per cent, that the government is proposing.

There have already been signs that this might be acceptable to the miners.

Our imports from China also rose in the same period, even though Australia’s total imports, from all sources, actually fell in that time.

These developments coincided with the worst economic downturn the world had seen, in 75 years.

The Prime Minister, Kevin Rudd, recalled them yesterday, as he opened a trade and economic co-operation forum for the two nations in Canberra.

The Chinese delegation to the forum is being led by that country’s Vice President Xi Jinping.

Shortly before Mr Rudd spoke, he had released a statement outlining 10 new agreements the two countries have reached.

“The agreements cover projects worth more than $10 billion in total,” the Prime Minister said.

Seven relate to resources and energy.

“This demonstrates the dynamic relations between the two countries in this sector and the strong complementarity of the two economies,” Mr Rudd said.

Another outlines a memorandum of understanding between the Party School of the Communist Party of China and the Australian National University.

Telstra will also acquire preferred supplier status to the  ZTE Worldwide, assisting it in the construction of a new communications network in Hong Kong.

Mr Rudd said that, collectively, the new agreements would deepen existing relationships between Australia and China.

The Prime Minister was launching a book by Lenore Taylor and David Uren, which tracks the events which led to the global economic crisis, that started in late 2008.

Mr Rudd said he and his Treasurer Wayne Swan had been among world leaders who had been forced to contemplate the  collapse of both the  global  financial system and the global economy at that time.

“As a global economy, we screeched to the edge of a cliff and we leaned over,” Mr Rudd said.

He said Australians should remember the scale of the crisis.

Global stock markets fell by 40 per cent in the first 12 months of the crisis – almost twice the fall seen in the first 12 months of the Great Depression of the 1930s.

In that time, global output fell as sharply as it had during the Great Depression.

And global trade had fallen by almost twice as much as it did, back then.

Mr Rudd said his government had “acted decisively” to meet these threats.

He admitted that there had been mistakes, but quarrrelled with the authors’ suggestion that Australia would see little, by way of new capital, as a result of the government’s stimulus measures.

“…I don’t accept the passing remark in the book that there is depressingly little to show for our stimulus, in terms of its contribution to productive capacity,” Mr Rudd said.

“I don’t think the facts support that contention, ” he added.

Mr Rudd said there had been new rail lines, roads, super fast broadband, schools and universities.

The book, called Shitstorm, is published by Melbourne University Press.

That’s because Australia imports a very wide range of clothing and other consumer goods from China.

Chinese authorities have said they will allow the yuan to trade more flexibly.

That announcement  has been seen as a signal that the yuan’s two year old peg to the US dollar will end soon.

The decision follows US pressure.

It has been announced before a G20 summit.

US President Barack Obama criticised China, earlier this year, arguing that it had relied on an undervalued currency to boost its exports.

One analyst described China’s decision as a small victory for the US Treasury Secretary Tim Geithner.

Geithner, himself, has also welcomed the announcement, saying “vigorous implementation would make a positive contribution to strong and balanced global growth.”

That, in turn, would help Australia, despite the extra pressure a stronger yuan would place on prices in this country.

At present, Australia’s strong economic performance is based, largely, on its sales of iron ore and coal, in particular, to China, Japan and India.

Recovery, in other countries, too,, would make Australia’s own recovery from the global economic crisis more secure.

Meanwhile, though, there has been  good news from China, itself.

The World Bank is predicting 9.5 per cent growth for China in 2010 and 8.5 per cent growth next year.

Although these forecasts concede some softening in China’s recent spectacular economic growth, they still imply more strong economic growth, in the country that has become Australia’s best customer.

China’s vice-president Xi Jinping is now in Australia.

He will hold talks with Australian political and industry leaders, over the coming five days

Dr Xi has already spoken of his desire to strengthen trade and diplomatic relations between the two countries.

Speaking through a translator, he said:”In the next few days I look forward to meeting your leaders, senior officials and people from many other sectors for further exchange of views on how best to further advance the China – Australia relationship and other issues of common interest.”

Meanwhile, the Reserve Bank Governor Glenn Stevens, admitted that he is concerned about rising family debt levels in Australia.  He told business leaders in Sydney that it would not be  good to see household debt levels continue to rise, as they have over the past 20 years.

Almost 18 per cent of the people who responded to a survey conducted jointly by the Westpac Bank and the Melbourne Institute reported that their family finances are worse now than they were 12 month ago.

This was the biggest fall in any of the five components of the index of consumer sentiment that the bank and the institute produce regularly.

The index, overall, fell by 5.7 per cent this month.

The bank said this took consumer sentiment to a point at which optimists and pessimists are now almost evenly balanced.

This is bad news for the nation’s shopkeepers as retail sales in Australia were already showing signs of weakness.

Four of the five components of the index fell this month, with a particularly big 9 per cent fall, also,  in the number of Australians expecting good economic conditions over the coming five months.

There was further bad news yesterday, with a report showing that the number of first home buyers entering the nation’s housing market falling for the sixth consecutive month.

To an extent, this was expected, as many young families took advantage of bonuses the Federal government offered first home buyers last year, as part of its stimulus measures, in the wake of the global economic crisis.

However, Ben Phillips, a senior economist with the Housing Industry Association, warned that higher interest rates, scarce finance and planning problems are all adding to the problem.

Meanwhile, Mr Stevens warned of emerging problems with  family debt levels in Australia.

Speaking in Sydney, Mr Stevens said  that unlike several European countries, Australia does not have a problem with public debt.

“The rise in debt in the past couple of decades has been in the household sector,” he said.

Mr Stevens said that, overwhelmingly, Australian families had handled their higher debts “very well.”

“But that doesn’t mean it would be wise for the build up in household leverage to continue unabated over the years ahead,”he added.

And in Perth, the Prime Minister Kevin Rudd urged West Australians to look at the need for long term economic reform for Australia.

He said the government’s proposed super profits tax, on the mining industry, is an important part of that reform.

The State’s mining executives have been prominent in the industry’s campaign to kill the proposed super profits tax.

Mr Stevens also said he expects Australia’s terms of trade to return to the 50 year high point, last seen in 2008.

That improvement is being driven, above all, by high levels of demand for Australia’s iron ore and coal.

However Mr Stevens also said he is not confident  that this high point will be be sustained.