Analysis: The importance of the bush

Rural Australia almost cost Julia Gillard her job. Rural China could ensure that she keeps it for a very long time.

What happened at home has been reported to death, so there's no need to dwell on the close election, the deals, and yesterday's decision by two regional independents to give Gillard another go at being Prime Minister.

The winning card for the PM was the promise of the $43 billion national broadband network which will be run to almost everyone in the bush.

The chances of that giant project sticking to its budget are about zero, while the chances of the cable being laid around Australia being overtaken by wireless technology are about 100%.

Whatever the cost estimate, or even the utter futility of laying cable in a wireless age, the key political point to emerge from events in Australia and China is that the bush is revolting, and politicians are busy doing what they do best; oil squeaky wheels with your money.

The interesting aspect to all this is that China too is busy placating its rural and regional heartland, not in the interests of winning votes, a rather unnecessary step in a communist dictatorship, but in the interests of preventing social unrest among its 750 million poor peasants.

In parts of China, where most farmland is still owned by local collectives, an experiment is underway in allowing farmers to use their asset ownership rights (a share in the collective) as collateral for a bank loan.

Until now it has only been urban dwellers who could leverage off their land ownership rights, contributing to a property price-bubble in Chinese cities, and helping accelerate the problems of a two-speed China made up of rich city dwellers and poor farmers.

Extending bank credit to rural China could, if well managed, create a repeat of the China boom of the past 20 years, triggering a fresh round of investment in new homes, and purchases of modern appliances - all of which need Australian minerals and metals.

No-one is quite sure what the Chinese Government is doing with its rural bank credit experiment, but there is a pattern of information flowing out of the regions which points to the next phase of an industrial revolution.

Last week, while Australia was figuring out to form a government, the Chinese Government invited domestic and foreign banks to buy some of the country's rural credit cooperatives.

The China Banking Regulatory Commission said outright sale of the co-ops was preferred because many of them could not stand on their own and needed new ownership.

That domestic banks have been invited to take up 100% ownership of a rural credit co-op is not news. That foreign banks are being invited into rural China is a huge policy shift.

Hot on the heels of that development The Times newspaper in London reported that trials were underway in permitting Chinese farmers to use their share in collective land as collateral for a bank loan.

One result of the early trials is that farmers allowed to use their new-found property right have been borrowing twice as much from banks as those without the same right.

According to what has been reported the rural farm-loan trial will go national soon with one foreign banker saying that if it does it could lead to a boom in domestic consumer spending "and potentially the biggest economic stimulus ever conducted, anywhere".

For Australia the Chinese rural banking experiment is both an enormous opportunity, and challenge.

The opportunity is that the boom in the states which have chosen to encourage the development of their resources (as opposed to those determined to prop up failed manufacturing industries) will continue to grow rapidly.

The challenge will be efficiently managing a two speed Australia where the gap between the haves and have-nots gets ever wider.