Southeast Asia’s importance to Australia’s economic future is undeniable, but attempts to meet the promises of the region seem stretched. The upcoming trip to China by the Albanese government, meanwhile, will provide some ground to regaining the former economic partnership with Beijing.
Since the days of Donald Horne and the Five Power defence talks in Southeast Asia, which this author was commissioned to cover, it has been considered that the strategic and economic future for Australia lies in a close relationship with the democracies of Southeast Asia. Recently, a comprehensive report by Nicholas Moore, former head of the Macquarie Group, has detailed a set of recommendations confirming that this should be the case.
Not all Australians support this view. For many, Australia’s best future is to remain tied to the apron strings of the United States, and indeed much of parliamentary time in recent weeks has been devoted to expanding defence arrangements between our two countries to offset what is perceived to be the threat from China.
For many others, especially in the early part of this century, Australia’s future has been seen as tied up with China, until President Xi Jinping’s lifetime tenure in office was confirmed, and China became more assertive, particularly in its relations with the countries bordering the South China Sea.
Some others, though perhaps a diminishing number, regard Australia’s future as a major player in G20, whose annual meeting in New Delhi last weekend was attended by Prime Minister Anthony Albanese.
The importance attached by government to Mr. Moore’s report is reflected in its statements this week. “The most significant upgrade of Australia’s economic engagement with ASEAN for a generation,” the prime minister told us. “This is where Australia’s economic destiny lies,” he added. Foreign Minister Penny Wong said that at a time of heightened geostrategic context, deepening engagement with Southeast Asia is a priority for the government.
Fine words, and they may be true, but they ignore the reality that the implementation of the Moore report is a massive undertaking for which neither the Albanese government, the States, nor Australian business as a whole is in any way prepared for. An undertaking of this scale will require a dynamic to get it under way which currently does not exist in Australia.
It requires a total realignment of many Australian policies that encompass trade, immigration, the use of Australians’ superannuation funds, transport, and environmental links and much else. No doubt some early advances can be made – and there should be no delay – but significant progress will demand systemic and cultural change in schools, universities, business practice, and the financing of risk – to name a few. Without such fundamental adjustment within the next five years, the goal is probably unachievable. Moreover, unless the Australian population as a whole is seized of the importance of this document, implementation will fail.
The report, Invested: Australia’s Southeast Asia Economic Strategy to 2040, emphasises the considerable size of the opportunity for Australia and the region: “… if the two-way trade continued to grow at around the 20-year compound average growth rate of 5.5 per cent, total trade would be around A$465 billion in 2040, an increase of A$287 billion on current levels. But if trade growth could be boosted to 6.3 per cent, total trade would triple by 2040.”
The scale of capital investment required is equally significant, with an estimated AUD$3 trillion in infrastructure investment and a similar amount for green investment. But Australia starts on the back foot: Australian investment in the region is underweight, trade has been stuck at around 14 percent for 20 years, and growth in foreign direct investment has stagnated.
The Albanese government deserves praise for publishing Nicholas Moore’s report at this time. It’s appearance has, I believe, been one of the main catalysts enabling Foreign Minister Penny Wong to orchestrate a dramatic reversal in what had become a serious downturn in Sino-Australian relations, culminating in Beijing’s invitation to Albanese to meet with president Xi Jinping towards the end of this year. It is clear that while the Chinese leadership thought for some time that they could treat Australia with contempt as a marginal trading partner, the realisation that Canberra could, and would, realign itself closely with the successful economies of Southeast Asia, and probably also India, is likely to have led to the shift in Beijing’s thinking. The fact that Senator Wong has drawn former coalition foreign minister Julie Bishop into support of this realignment must also have given Beijing food for thought.
The other foreign policy development worthy of note here is the big swing towards Australia shown by the Philippines. At a brief but significant meeting between Anthony Albanese and President Ferdinand “Bongbong” Marcos the two leaders agreed to a swathe of actions designed to bring the countries closer together and upgraded the relationship to a strategic partnership. Joint naval patrols in the South China Sea will push back against the territorial claims of China, diplomatic and economic ties will be strengthened, and a reciprocal working visa scheme introduced.
Meanwhile, China faces continued economic problems. It seems highly unlikely now that the nation will even manage to achieve this year’s growth target of 5 percent. Figures for August provided last week show that the economy continues to falter, with its currency, the renminbi, falling by 6 percent this year to a new 16-year low. The fall prompted more than US$20bn in foreign outflows from the country’s onshore debt market this year.
As a political leader, Albanese strikes me as a realist, and he will travel to China with optimistic but modest ambitions. These will likely include securing the release of the Australians in China, along with access for Australian wine and lobster to the potentially lucrative middle-class market, and hopefully returning to Canberra with the feeling that relations between our two countries, despite obvious differences, can only get better.
In an instructive article headed “Talk clearly to Xi, and avoid traps” in last weekend’s Australian Financial Review, Richard Maude of the Asia Society Australia advises the PM to transact the hard issues, including China’s threat of force against Taiwan, its territorial claims in the South China Sea, and the imperative of Russia ending its war with Ukraine on just terms.
Albanese ended his regional travels with two days in New Delhi for what was flagged as a potentially significant meeting of G20 leaders. Unfortunately, despite expectations, it turned out to be something of a damp squib, not least because President Xi decided against attending. India’s Prime Minister Narendra Modi was able to show off his cleaned-up capital to an array of high-level visitors, but the final communique failed to condemn Vladimir Putin for his assault on Ukraine, much to the irritation of the delegation from Kyiv.
Colin Chapman FAIIA is a writer, broadcaster, public speaker, who specialises in geopolitics, international economics, and global media issues. He is a former president of AIIA NSW and was appointed a fellow of the AIIA in 2017. Colin is editor at large with Australian Outlook.
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