Ross Garnaut believes that Australia’s period of trade exceptionalism is coming to an end, and our economy will shift back to how it looked between 1980 and 2000. He predicts our dollar will naturally settle at below parity, offering big opportunities once again for manufacturing and agricultural exports.
But in launching a report by AsiaLink – Our Place in the Asian Century: Southeast Asia as ‘The Third Way’ – Garnaut warned that if we are to make the most of this opportunity we need to shake ourselves from our economic complacency and foster much deeper ties.
Garnaut believes Australians have failed to recognise that the last decade was "exceptional”, and that the prices for commodities over that time were a factor of a very small and particular period in one country’s – China’s – history.
It can be argued that the current state of America and Europe are also part of a very small and particular period in world history. On that basis, we should be preparing for that period to end, and our dollar to no longer be held hostage to our country’s position as a safe haven.
This will open up the way for a re-diversification of the Australian economy; one that he believes will look more like it did between 1980 and 2000. The focus should now shift to a narrow scope of high-end manufacturing and agricultural exports, as well as Australia's existing strength in services for which Asian demand is high.
But in order for Australia to capitalise on this shift, business and the broader population must be alert to the scale of the opportunities on the doorstep.
Our relatively undeveloped relationship with Asia is brought into stark relief when you consider that 50 per cent of our trade is with the region, yet only 5 per cent of our investments lie there.
At the Asialink report launch, Corrs Chambers Westgarth chief executive officer and Asian Century white paper taskforce member John Denton pointed to Asian infrastructure as a major investment opportunity for Australia, of which we are currently largely unaware.
The Asia Development Bank reported that its 32 member countries are currently crippled by a $US8 trillion shortfall in infrastructure funding, with their current investment siting at around $US330 billion.
Given Australia's expertise in construction and project management, you would think our companies would be chomping at the bit for an opportunity to invest.
Another example would be our health/aged care sector. There are already over 160 million over-60s in China, and by 2030 there will be just two workers for every over 60, something the Brookings Institute has described as a time-bomb.
Pitcher Partner's director of cross-border business, Rohini Kappadath, says that our know-how in this field is being exported, but not to our long-term benefit. A Malaysian healthcare company who bought into the Australian aged-care sector is now adapting the systems and methodology to buy up swathes of the corresponding sector back in Malaysia and across Asia.
If Australia already has state-of-the-art capabilities in this area, why isn't it acting directly?
At the core of all this Asian growth and economic restructuring, however, is one key factor as far as Australia is concerned: the rapid growth of a middle-class in the region. China has a population of about 1.3 billion and the ASEAN bloc has a population of 613 million.
From China's point of view, Garnaut said much of the rebalancing would be driven by a fundamental shift in economic policy away from its heavy focus on hard infrastructure to address all the issues around widening inequality within its population; a focus on services; and environmental amenity – all indicators of a need to placate an upwardly mobile population.
In terms of South East Asia, the Asialink report says that back in 1988, Australia's GDP was still larger than the entire ASEAN bloc (at the time consisting of five states: Thailand, Indonesia, Malaysia, Singapore and the Philippines) but that now Indonesia's purchasing power parity already exceeds Australia's and that by 2050 the Philippines and Indonesia will both have larger economies than Australia. Malaysia and Thailand will be nipping at their heels.
These trends led Garnaut and Denton to point to both Australia's complacency about its place in the region and the lingering presence within the Australian psyche of "anachronistic thinking", which will be to our peril.
Assuming Australia wants to awake from its resources stupor and realise the opportunities on its doorstep, it needs to know what they are.
The government's white paper copped a lot of flak for its sweeping suggestion that by 2025, one third of all the ASX-200 company boards should have deep experience and knowledge of Asia. But looking at the region's current trajectory it's probably not possible for them to have enough.
When Australia's commodity tide goes out
Neither the commodity boom nor the high dollar are here to stay, says Ross Garnaut. So it's time to deepen our relationship with China and ASEAN countries and utilise our strengths.
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