Economist and senior fellow of think tank Per Capita, Stephen Koukoulas says if the US implements the protectionist policies President-elect Trump has touted, Australia would be right to closer embrace Asia.
“If he does withdraw the US power base in the Asia region, it’s indirectly a bit of a snub to Australia and then of course it’s in our interest to form closer ties with Asia,” Mr Koukoulas told nestegg.com.au.
“Of course it’s important we maintain good ties with the US, but they’re diminishing just like the UK has diminished over the last 50 years or so. It could well be the start of the US pulling up the drawbridge and we’ve got to look elsewhere, so it wouldn’t be at all surprising then if we did align ourselves with Asia, not just China,” he said.
While Britain’s exit from the EU was followed by suggestions it may seek strengthened ties with the Commonwealth, Australia’s future lies firmly in the Asian region, according to HSBC chief economist Paul Bloxham.
“I think the fundamental opportunities for Australia stem from its growing ties to Asian economies and particularly to China. Seventy per cent of our exports going to Asia and 30 per cent of [those] exports go to China specifically. Those economies are growing a whole lot faster than the Western world,” Mr Bloxham told nestegg.com.au
“One illustrative statistic is looking at growth over the last eight years since the GFC began. The British economy has grown by 8 per cent, the Australian economy by 24 per cent and the Chinese by 90 per cent. So if you want to think about where our growth opportunities lie, and if recent history is any guide, I think a clear-eyed focus on growth opportunities in Asia would be the best strategy in my view,” he said.
Looking ahead, the nature of that trade relationship is shifting, with China’s growing middle class demanding more of Australia’s services.
“China depends on us not just for resources and hard commodities, but [is] increasingly trading with us in terms of services so there’s significant scope for us to continue exporting services and China to keep benefitting from more of our service exports, in the areas if education, tourism, and financial services for example,” Mr Bloxham said.
“That relationship is both growing quickly and a key source of Australia’s growth, and it’s broadening beyond just a commodity story.”
While there continues to be substantial furore surrounding Chinese ownership in Australia, Mr Bloxham said foreign investment remains crucial to Australia’s economic development.
“We’re a small population with a large resource endowment in a large country and we are looking to do more than we can fund with our small savings so we borrow from abroad to achieve that. Traditionally, that has come from Western markets but with China now the biggest economy on purchasing power parity, more and more of that is going to come from that.”