Australia in the Asian century is the story of opportunities missed.
This post is one of the series of articles on the Australia in the Asian Century report.
The release of the Australia in the Asian Century discussion paper today raises the question of where the country sees itself and where it is going. It lets us down on many levels.
While there’s a lot more to discuss in the paper, which I’ll do over the next few days, there’s a few issues that come to mind on first reading.
The reliance on mining
A constant in the discussion about Australia’s future is the continued mining boom. This was the underlying theme of Monday’s Mid-Year Economic Outlook and is also the case in the Asian Century paper. Here’s chart 4.4.2 from the document which shows the forecast makeup of Australia’s exports.
Today mining exports are shown as being just over 50% of Australia’s trade with Asia and have mineral income growing to well over 60% of trade by 2025.
What is frightening about this is the belief across Australia’s political and business leaders that the mining boom is here to stay and will continue to keep growing.
Little risk analysis
Also notable about the report is how little acknowledgement of risk there is in the document. Most of the risks are dismissed in six paragraphs in Chapter 4.4
Geopolitical risk does get its own chapter, but even there most of the challenges are glossed over. Eventually most of the risks are dismissed with this line.
None of these developments of themselves make major power conflict likely—in some important ways they will probably act as a constraint. All the major powers recognise how interdependent their economic interests are.
This is reminiscent of the line used in the late 1980s – “no two countries with a McDonalds have ever gone to war against each other.” A glib nonsense which ceased to be true when NATO attacked Serbia in an effort to stop the massacres of the Yugoslavian disintegration.
Trivialising the big risks
Had anyone predicted in 1986 that within five years, there would be a bloody civil war in Yugoslavia, the Eastern Bloc collapse and the Russian Empire’s eagle replace the hammer and sickle on the Kremlin they would have been dismissed as fools.
Yet that is exactly what happened.
The risk of instability within the People’s Republic of China isn’t mentioned or even the effects of what a collapse of North Korea would mean to South Korea – another key Australian mineral market – both of which would have massive effects on Australia’s export markets over the next decade.
While I’m certainly not forecasting the collapse of either the DPRK or the Communist Party of China in the near future, these are massive risks to any plan which purports to look at the next decade. Ignoring them or trivialising them does not help the paper’s credibility.
Australian hubris
Most notable in the white paper is the tone of Australian Exceptionalism through the commentary. In the Prime Minister’s speech she said “we are the nation that stared down the economic crisis.”
Calling massive stimulus packages, reinflating the property market and guaranteeing bank liabilities is hardly ‘staring down’. Australia’s avoiding going to into recession after the 2008 crisis was due to the “go early, go hard” philosophy of pumping money into the economy which was learned by Australia’s bureaucrats in the 1990s recession.
That policy worked to stave off recessions during the Asian currency crisis of 1998, the Long Term Credit Bank collapse and the post September 11 uncertainty. It worked on massive scale during the post-Lehmann Brothers collapse.
Crediting Australia with some sort of miracle economy is hubris on a grand scale and hardly the basis for developing a sensible plan to guide us through the next decade.
What is Australia’s competitive advantage?
Essential to understanding where the nation can prosper from the rise of Asian economies is where our current strengths lie. Apart from empty phrases on “skilled workforces” and “new opportunities will emerge in manufacturing” there’s no explanation of exactly where Australia can profit from these.
In fact most of the case studies refer to Australian companies outsourcing or Asian trading patterns that really don’t need any skilled or valued added contribution at all, a case in point is the story of ‘Hitesh’, one of India’s rising middle class.
Hitesh, 31, is a stockbroker in a firm that he opened with his friend several years ago. He brings in an annual income of US$5,280, placing his family squarely in the middle of Ahmedabad’s middle class.
Nowhere does the case study explain exactly what Australia can offer him – the air conditioners and cars certainly won’t be made or designed in Australia and his daughters’ educations in 2025 might well come through the internet from MIT or the London School of Economics instead of them flying to Melbourne to drive taxis and do barista courses in the hope of getting Australian permanent residency.
In fact if anything, it’s difficult to see why an Asian company would choose to do business with an Australian stockbroker when they earn thirty to a hundred times more than Hitesh.
1980s thinking
Much of what is in the white paper is what we’ve heard before in the 1980s – back then it was Yuske in Nagoya who was going to buy our wine and come to the Gold Coast for holidays.
There’s nothing in the projections we haven’t heard before, except today we’ve squandered two decades of opportunity by ramping up our property markets and building an unsustainable middle class welfare state.
Sometime in the 1990s – possibly around the time of John Howard’s election – Australia turned inwards and insular. We had the opportunity to position Australia as a credible mid-level power in the region but we chose instead to renovate our kitchens.
That opportunity has been lost and repeating the mantras of the 1980s with the words ‘China’ and ‘Chinese’ substituted for ‘Japan’ and ‘Japanese’ won’t cut it.
Australia in the Asian Century was an opportunity to show some vision and stake a claim on sharing some of the 21st Century’s riches. Instead the writers chose to give us platitudes underpinned by the certainties of a never ending economic boom.
