The spectacle of American and Japanese soldiers trampling through the Australian bush is a potent symbol of how the strategic centre of gravity has shifted. This is not a war game for tourists. It is a rehearsal for the unthinkable: a confrontation in the Pacific where distance and logistics are the first casualties.
For the City, the message is clear: the era of cheap globalisation, predicated on open sea lanes, is over. Risk premiums for trans-Pacific trade are being repriced in real time. The AUKUS pact, once a ministerial press release, now has mud on its boots.
Markets loathe uncertainty, and this exercise injects a fresh dose of it into an already febrile environment. Defence stocks may rally, but the real story is the cost of capital for nations and corporations that depend on the status quo. Gilt yields, already twitchy on fiscal incontinence, will not be comforted by the knowledge that our allies are gambling on a long, expensive commitment to a theatre far from the North Atlantic.
The Treasury will note that every pound spent on the Pacific is a pound not spent on shoring up domestic infrastructure or social care. The balance sheet of empire is being rewritten, and the auditors are not impressed.
