A new study shows that three of the world’s top five economies by 2033 will be Asian, with China number one, India third and Japan fifth. The US will be second and Germany fifth.
This suggests Australia’s trade and investment focus for the next 15 years needs to swing more sharply to Asia.
The study is the World Economic League Table, published annually by the Centre for Economics and Business Research, or CEBR, in London.
It would be timely for Australia to radically change its approach to diplomatic appointments – our “plum” diplomatic postings remain Washington and London, but should now shift to Beijing, New Delhi and Tokyo.
We need to boost our presence in other Asian economies too – South Korea is set to become the 10th-largest, Indonesia (12th), Thailand (21st), the Philippines (22nd), Bangladesh (24th) and Malaysia (25th), all making the top 25.
On top of this, one of the world’s greatest transformational projects is on our doorstep – China’s Belt and Road Initiative might be controversial but is a growth driver. Infrastructure spending is set to increase from US$11.5 billion, or 13.5 percent of global GDP last year, to US$27.4 billion, or 15.5 percent, by 2032, largely due to this initiative.
While China is high profile, quietly building a supersized economy is India which in 2018 remained ahead of China to retain the world’s fastest growing large economy status.
Yet Australia has largely put India on the backburner, unable to complete the kind of trade agreements that we have with China and other Asian countries. This low focus on India needs to shift over the next 15 years of growth there.
David Morris, and Australian who chairs the United Nations Asia Pacific Business Forum, agrees that Asia is now vitally important to the global economy. His consistent message is: “We are in the midst of the biggest global economic shift in memory, with East Asia now driving growth in the world economy”.
The Australian specialist India advisory firm India Avenue Investment Management points out that Indian equity markets performed quite well relative to their emerging market and developed market peers – yet our focus has been on three regions which fared particularly poorly in 2018 – China, Australia and Emerging Markets (which China dominates).
Granted, Australia has shifted focus to Asia, as shown by the 2016 opening of our largest and most expensive embassy in Jakarta, Indonesia at a cost of A$415 million and hosting 500 staff.
Despite this, one of Australia’s major research houses, the Lowy Institute, has long claimed that our Department of Foreign Affairs and Trade is “under-resourced over a period of several decades”.
The symbolism at the very top suggests we are struggling against the shift to Asia – former Ministers and Prime Ministers almost salivate at the chance to take the top post in London or Washington.
It is time to shift this focus to New Delhi, Beijing and other parts of Asia – while these are the epicentres of our future, it is unlikely ex politicians will pursue them as vigorously as they chase the old world.
Perhaps appointing Julie Bishop as our Ambassador in a major Asian country would send better signals?
Symbolism is important, especially for investment and trade, so sending top ranking former politicians into Asian posts could have a powerful effect – so long as we give them the resources to do the job.
Knowledge of Australia remains dangerously low across the whole of Asia, including Commonwealth partners such as India and Malaysia. We are variously seen as a “kangaroo nation” or a giant mine and even a “white enclave” (admittedly said more in private these days), showing ignorance of our major multicultural achievements. This ignorance is dangerous for diplomatic and defence relationships and is restricting our trade.
Education and tourism are the two sectors that can really turn this around, giving Asians a first-hand experience of what a great country Australia is. We are boosting efforts in both, but do we really grasp the vast potential size of the market?
Only by shifting our diplomatic resources more and more to Asia will we gain a true understanding of these markets and how we can build a positive future together.