The Asian Century: an Australian opportunity

By the end of the decade, Asia's economy will grow larger than the US and Europe combined. But Australia's location alone won't be enough to make the most of opportunities beyond resources.

With Asia set to become the world’s largest economic region before the end of this decade, the Asian century offers our nation immense opportunities.

While the shape of the Asian century is not set in stone, the structural shift of global economic gravity towards our region mean the scale and pace of Asia’s rise in the coming decades will be truly transformative.

Within only a few years, the Asian region will not only be the world’s largest production zone, it will be the world’s largest consumption zone.

Asia will not only remain home to the majority of the world’s population, but will be home to the majority of the world’s middle class.

According to Treasury modelling prepared for the Australia in the Asian Century white paper:

-- By the end of this decade, Asia is set to overtake the economic output of Europe and North America combined to become the world’s largest economic power.

-- By early next decade, the combined output of China and India is expected to exceed that of the whole Group of Seven.

-- Average GDP per person in Asia is set to almost double by 2025 -- a feat that took the United Kingdom over 50 years to achieve during the Industrial Revolution.

-- By 2025, four of the ten largest economies in the world are expected to be in the Asian region, and Asia is likely to account for almost half of the world’s economic output. 

-- Between now and 2025, China and India are expected to make the largest contributions to global and regional economic growth relative to any other national economy. Indonesia, Malaysia and other countries in Southeast Asia will also grow rapidly and make major contributions to regional growth.

-- Productivity gains are expected to underpin rapid growth in Asia into the next decade, notwithstanding short-term volatility in the global economy.

-- There is significant potential for continued labour productivity growth, with output per person in China only 20 per cent of that in the United States, while India and Indonesia have barely reached 10 per cent.

-- Even under a slow growth scenario -- assuming that productivity gains are 50 per cent less than anticipated -- Asia will still be the fastest growing region in the world, with four of the ten largest economies in the world still projected to be in Asia by 2025. 

The fundamental message of the white paper is that the Asian century will offer enormous opportunities for Australia across all sectors of our economy -- including resources, services, agriculture and manufacturing.

We have already seen Asia’s demand for raw materials create an extraordinary boom in minerals and energy investment, and Asia’s ongoing industrialisation and urbanisation will continue to drive robust demand for a wide range of mineral resources.

We can be confident that Australian resources investment will remain at high levels over the medium term and will continue to lift resource production and exports.

Asia’s transformation will bring unprecedented opportunities for Australia beyond resources, with Asia’s middle class anticipated to increase by more than 2.5 billion people by 2030 and account for around 60 per cent of global middle-class consumption.

This means countries in Asia will demand a diverse range of goods and services, from health and aged care to education to household goods and tourism, as well as high-quality food products. Australia is in the prime position to meet this burgeoning demand and take advantage of the enormous opportunities unfolding right on our very doorstep.

A key theme of the white paper is that one of Australia’s great strengths is our people -- we have a highly-skilled, adaptable and creative population with deepening connections with the region and demonstrated capability in innovation and complex problem-solving.

We also have an open, flexible and resilient economy -- by any measure one of the strongest in the world -- with world-class institutions and a high level of productivity.

Our economy has been built on the back of hard work, good decisions and an appetite for forward-thinking reforms.

To make the most of the abundant future opportunities we need to sprint to keep up with the rapid changes in our region -- we cannot assume that we will benefit from location alone.

This means building resilience and lifting productivity growth, finding new ways to operate in and connect with growing Asian markets, building sustainable security and forging deeper and broader relationships in our region.

Critically, we must continue investing in our most valuable resource -- our people -- to ensure that all Australians can participate in and benefit from the Asian century.

This will require a concerted and coordinated effort by governments, business and the broader community over many years, and is a challenge that our entire nation must prepare for.