Phil Ruthven considers the growing global dominance of the Asia-Pacific region and asks whether Australia should do more to stake its claim as a key player.
Australia’s home region for the 21st century and beyond is clearly Asia-Pacific, the largest and most populous of the world’s eight regions. It has always been Australia’s geographic region, but is now our economic and community region as well.
Indeed Asia-Pacific is so large and fast growing that its economy is expected to be bigger than Western and Central Europe, mainly the European Union (EU) and North America combined by the middle of the next decade. It already has a population two and a half times larger than both these regions.
In 2015, the shares of world gross domestic product (GDP) are forecast to be Asia-Pacific (31 per cent); North America (23 per cent); Western and Central Europe, mainly the EU (19 per cent); Indian sub-continent (7.2 per cent); Central and South America (6.1 per cent); Middle East (6 per cent); Africa (4 per cent); and Eastern Europe and the Russian Federation (3.6 per cent).
Some of these regions have become “sovereign” economic regions and include the EU, North America (North American free trade agreement) and the Russian Federation. Central and South America and Asia-Pacific are slowly moving in that direction, as is Africa. So too is Asia-Pacific via the Asia-Pacific Economic Cooperation (APEC) agreement.
The two fastest growing regions are Asia-Pacific and the Indian sub-continent. Combined, they represent the Asian mega-region, with a combined GDP of $US36 trillion in 2015. This is nearly 40 per cent of the global economy and together with its 57 per cent of the world’s population, it certainly justifies the often-used term: Asian Century. Its constituent nations are shown in the chart opposite.
The giant of the region is of course greater China with nearly half the mega-region’s GDP and 40 per cent of its population. India is fast moving into the limelight with even faster growth than China expected in 2015 for the first time since the recession and depression in China under Mao Zedong up to 1976.
China has already overtaken Japan, whose economic engine began spluttering in 1989 and has sadly limped along for over a quarter of a century. It is now buried under a net national debt of over 150 per cent of GDP, second only to the more publicised debt of Greece.
Our nearest neighbour, Indonesia, has overtaken the Australian economy and is a third bigger than us, at least in purchasing-power-parity terms if not yet in USD market price terms. With a population over 10 times Australia’s 24 million, it is a long way behind our standard of living; but it is a nation growing at over 5 per cent per annum and it is improving the lot of its citizens.
This brings us to Australia. We are small in the population stakes: our population of 24 million is just 0.6 per cent of the region’s massive four billion citizens. However, our economy ranks sixth overall, with 3.1 per cent of the mega-region’s GDP, compared to 12th in population size. Eventually we will be overtaken by the more populous nations of Thailand, the Philippines, Vietnam and Pakistan. But this won’t happen for many decades.
We are integrating into the region’s economy, community and culture. The majority of our immigrants now come from Asia. Over three quarters of our inbound tourists emanate from Asia, with tens of millions more expected each year within a decade or so and earning more export dollars than minerals. We are becoming, however slowly, a Eurasian society.
Over 80 per cent of our exports are now into Asia, with an almost equivalent share of imports. The only facet that seems to have been lagging has been investment flows. Australia invests more heavily in Europe and the US in both direct and portfolio formats. The same applies to inflows.
However, this is changing. China is starting to invest assiduously in dwelling property and our rural industry; the latter reflecting its long-term food-security worries. We have often been labelled the “lucky country” after the eponymous book written by the late Donald Horne in 1964.
The author used the term quite critically, in stark contrast to its later usage as a term of endearment: “Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”
While clearly an exaggerated conclusion, given Australia is now well placed in the world’s top 10 countries for the highest standard – a position held even before the recent mining boom – we are a nation needing to better understand our role in Asia as this century unfolds.
What should our population and immigration levels be, as a good Asian citizen? Are we going to develop the thinly inhabited and thinly wealth-creating top one third of our land mass? What industries will distinguish us in the mega-region? Which industries, usually around 65 – 70 per cent of GDP, will stay in Australia as essentially domestic suppliers of goods and services to our own population?
Our leaders and would-be leaders need to work through these issues and many others to justify their positions. They need to create vision, even though visions need modifying from time to time. And they need the ability and courage to make them come to fruition.
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