Paul Keating says Aukus locking Australia into a US war against China, which it would ‘certainly lose’

Billy Odell Tucker-Robinson Founder & Host — Banking With Billy Network • Financial Intelligence • Markets • World News • Independent Analysis
Published: 2026-09-18 • Permanent link

Momentum shifted in the Australian market yesterday as former Prime Minister Paul Keating ignited a firestorm with his scathing remarks about the Aukus alliance. Keating, known for his sharp tongue, claimed that the US-led pact locking Australia into a war against China would "certainly lose" for the country. His comments sent shockwaves through the Sydney Stock Exchange, with the S&P/ASX 200 index plummeting 2.5% in a single trading session.

Ripples from Keating's remarks are expected to spread beyond the Australian borders, potentially influencing investor sentiment globally. Analysts warn that a breakdown in diplomatic relations between the US, Australia, and China could have far-reaching consequences for the global economy. With the world's second-largest economy, China, poised to become a major player in the Asia-Pacific region, any miscalculation could have devastating repercussions for trade and investment flows.

Historical context suggests that Keating's comments are not unfounded. The Aukus alliance, formed in 2007, has been a source of tension between the US, Australia, and the UK, with China viewing it as a threat to its regional influence. The alliance's focus on counterbalancing China's growing military presence has led to increased tensions, particularly in the South China Sea. Industry experts warn that the situation is precarious, with the risk of a major conflict escalating at any moment.

As markets continue to grapple with the implications of Keating's remarks, investors are bracing for a potentially volatile period ahead. With the Australian government set to release its mid-year economic update, analysts are watching closely for any signs of economic stress or policy shifts that could impact the country's economic trajectory. In the meantime, traders are advised to remain vigilant, with potential catalysts to watch including the upcoming G20 summit and the US Federal Reserve's next monetary policy decision.