Kevin Rudd, Australia’s recently elected prime minister, is watching his country being pulled in several directions at once. A natural resource and investment boom are dragging its febrile economy towards China, while climate change and water shortages are threatening its longer-term future. It is an interesting time for a Sinophilic internationalist to take control.

For the moment, Mr Rudd, who has made a confident start since his resounding victory in November’s election, seems convinced he can manage. But tough decisions in both domestic and foreign policy are pressing.

Speaking to the Financial Times in London during an 18-day world tour that has taken in Washington and Brussels, and whose last leg starts on Wednesday in China, Mr Rudd’s previous career as a diplomat is evident in his understated technocratic patter, quite distinct from the combative abrasiveness of Paul Keating, the last Labor prime minister.

Even without his well-known affection for China – Mr Rudd once lived there and is fluent in Mandarin – he could hardly avoid the appearance of a shift in diplomatic focus from Washington to Beijing. He rapidly reversed two of the signature policies of John Howard, his predecessor, who had followed the US into Iraq and shared Washington’s aversion to the Kyoto protocol on carbon emissions.

Though Mr Rudd shrinks from the title accorded to Mr Howard – the US’s “deputy sheriff” in Asia – he is eager to quash any notion that China and the US are competing for attention. “For us there is no either/or,” he says. “We believe we can walk and chew gum at the same time.”

But signs of strain are already appearing. Mr Rudd’s recent comments in the US on human rights abuses in Tibet, which chimed well with the prevailing mood in Washington, provoked diplomatic protests from Beijing, though he has ruled out boycotting the Olympics this summer.

Any mention of China also brings forth an insistence that other countries in Asia, particularly Japan, which he has been criticised for sidelining, are also enormously important as business partners. He is trying to position Australia as “the most Asia-literate country in the collective west”. He says: “The nature of economic globalisation means we are required to have multiple relationships of high levels of importance.”

Some of those relationships might go through rocky patches. One is the growing Chinese interest in buying up Australia as well as trading with it, which raises delicate issues of the power wielded by state­-controlled enterprises.

But for the moment Mr Rudd ducks questions on Chinalco, the Chinese metals company that recently snapped up a 9 per cent stake in Anglo-Australian mining company Rio Tinto.

Another problem is water. The worst drought in a century last year focused attention on the hidden cost of farming, which implicitly ships the precious resource abroad by exporting water-intensive crops such as rice and wheat while Australia’s cities suffer water shortages.

Mr Rudd points to a recent breakthrough – the creation of a single authority to manage the Murray-Darling basin – and places faith in the efficiency gains from a planned billion-dollar investment in irrigation systems. “I am very optimistic about Australia’s long-term future as an agricultural exporter,” he says. “[But] it is going to require some innovation.”

Meanwhile, though ratifying Kyoto is one thing, Mr Rudd accepts that creating its successor will be hard, especially for a relatively high carbon emitter such as Australia. “This will be a very tough set of negotiations,” he says. But again he hopes that technological improvements will come to the rescue, enabling the country’s long economic boom to continue.

And as for Australia’s economy, whose trade deficit is approaching 7.5 per cent of gross domestic product – the highest in half a century, despite rising prices for its commodity exports – he ­prescribes a “productivity revolution” through better education and more public-private partnerships on infrastructure.

Through technology and technocracy, Mr Rudd hopes to avoid being impaled on the horns of a herd of approaching dilemmas. But if the US and China pull in different directions, if better water management cannot supply both farms and cities, if carbon caps bite hard into Australia’s booming growth, or if the global credit crunch hits the country’s internationally exposed economy, those difficult choices will not easily be sidestepped.