Tony Abbott’s recent trip to North Asia could be one of the most historically transformative events in the nation’s economic engagement with our region.
Concluding trade negotiations with Japan, resulting in the highest quality bilateral trade agreement Tokyo has ever made, signing a free-trade agreement with South Korea and strongly progressing negotiations with China have opened the door to enormous growth opportunities for Australia.
The cumulative effect of these three agreements has the potential to transform our economy. This is on top of the benefits that will flow from developing better relations and opportunities throughout our region, such as the Prime Minister’s successful visit to Indonesia immediately following the election.
In Australia today, one in five jobs is linked to trade; and China, Japan and South Korea are our first, second and fourth-largest trading partners. To put the significance of the North Asia visit in context, we should look back to the vision of Bob Hawke and Paul Keating for a regional institution that promoted wider economic integration and which led to the annual APEC leaders’ meeting. We can look to Gough Whitlam’s landmark 1971 visit to Beijing as opposition leader to discuss diplomatic relations. Against a backdrop of widespread community fear of China, Whitlam set aside the potential electoral liability of his visit and focused on the longer term national interest.
These were leaders who understood the vital importance of economic growth to our future prosperity and the role that Asia could play in that growth.
Let’s not forget that Australia’s average growth rate of 3.5 per cent per annum over the past 50 years has afforded us the prosperity we now enjoy as a nation – our health and education systems, our social security system, and environmental improvements that all contribute to our enviable quality of life.
We can only grow if there is a demand for what we produce. For an economy the size of Australia’s, growth comes by either accessing newly emerging demand in developing countries or by capturing existing demand away from other competitors.
Australia’s real gross national income per capita was about $50,000 a decade ago and is about $64,000 today. More than $5000 of this rise in incomes was accounted for by our rising terms of trade, much of which has come from our engagement with Asia. Australia’s total trade in 2012 was about $620 billion, and trade with Asia accounted for about 60 per cent of this, totalling $380bn.
China, Japan and South Korea are home to more than 1.5 billion combined. China in particular has a large and rapidly growing middle class that will increasingly demand products and services Australia can deliver – clean and green agri-products, world-class education and advanced financial, professional and other services. This economic reality gave the North Asia visit its focus.
But equally important to the outcome was the tone set by the government and by Abbott – a tone of national confidence with those involved comfortable in showing our hosts appropriate respect, and humility.
In China, Australia could not have sent a clearer message that we are open for business than the unprecedented size and composition of the delegation led by Abbott. His inclusion of state premiers, one of the most senior and comprehensive business delegations to ever visit China and renowned leaders in the arts and education conveyed in no uncertain terms that Australia is a sophisticated and diverse economy offering a wealth of opportunities for deeper trade and investment links, and stronger community ties within our region.
Abbott’s clear and genuine invitation to his Chinese counterparts to work with us in securing both our people’s prosperity and security – including energy and food security for China’s masses – was embraced with a level of enthusiasm and interest in deepening economic integration.
The government has been pragmatic in establishing the political and economic environment for trade, investment and closer community engagement. It’s now up to Australian business and the broader community to embrace it in the interests of the nation and all Australians.
Business needs to devise implementation strategies to maximise the opportunities that will arise from getting preferential access to North Asian markets, and managing costs and increasing productivity in order to be genuinely attractive to our regional customers.
And the broader community can embrace the increased growth and jobs that will flow from more foreign investment into Australia, including into revitalising regional and rural communities and developing industries that Australia’s domestic capital cannot fund alone.
Of course, the priority has to be investment, which is in the national interest and where there are mutual benefits for the investor and for the recipient nation so that a broad economic gain is realised and community support is maintained. Throughout its history, Australia has relied on foreign investment to supplement domestic savings and contribute to our economic development.
Indeed, three of our five biggest export industries – coal, iron ore and LNG – would not have been possible without the initial investment by Japan and other countries, with linked access to Japan’s large market. Many of our industries in which we will have a comparative advantage will require substantial capital and a large part of that will need to come from overseas sources.
The government has shown it is ready to face criticism of elements of its reform plan, including encouraging higher levels of foreign investment, to do what is in Australia’s long-term interests, just as Whitlam did 40 years ago.
There is renewed vigour within the business community thanks to a belief government is serious again about working together to boost trade and investment.
By embracing and maximising these opportunities, Australia can benefit from stronger economic growth, more jobs, and an investment in enduring prosperity.