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26 March 2014
hongi Julia Gillard

Australia's Gillard on the Asian Century

The Australian and Asian economies are joined at the hip, and Prime Minister Julia Gillard is charting a new strategy for Australia in the "Asian Century".

The Australian and Asian economies are joined at the hip, and Prime Minister Julia Gillard is charting a new strategy for Australia in the "Asian Century".

Last year, Australia's Prime Minister Julia Gillard commissioned a “White Paper” on Australia in the Asian Century, which is due to be published in the coming weeks. In a 24 September speech to the Asia Society and the Economic Club in New York, she shared some thoughts on the subject.

Australia's economy has "strength", in the words of Gillard -- good growth, low unemployment, low debt and high investment. Many observers attribute this to a mining boom, and in particular China's demand for commodities.

But Australia’s economy is less reliant on mining than many imagine. Mining only employs two per cent of Australians. In the next four years, three times as many new jobs could be created in health care, social assistance, education and training, as will be created in mining. Australia's third biggest export is education. And nearly eighty per cent of Australia’s GDP is in services. In short, resources is only part of the Australian story.

Moreover, Australia is not threatened by the softening in resource prices. They are still much higher than a few years ago. Indeed, resource export revenues will continue to increase as the investment boom still underway translates into growing exports. And resource exports are diversifying away from coal and iron ore. Australia's exports of liquefied natural gas to Asia are set to quadruple in the coming years.

Despite all the China talk, Australia is not leveraged against any one national economy. Over the past five years, the US was the biggest investor in Australian resources.

It is important to keep the possible Chinese slowdown in perspective -- even growth at six per cent would be very substantial. And the tide of Chinese growth will continue to be driven by urbanization, as another 250 million Chinese could move to the cities in the next twenty years.

There is more to Asia than China. Indonesia has a diverse society, with a large Islamic population, a democratic state, and a nation of two hundred and forty millions. Then there is India, a vast democracy, and home to more English speakers than the United States.

These economies are being driven by emerging middle-class consumers, a key point for advanced, service-based economies like Australia. According to Gillard, "In the century ahead, it’s precisely economies like ours – advanced, knowledge-oriented, service-rich economies – which are best placed to prosper."

But Gillard is conscious that Australia will have to compete for these middle class markets. Productivity, innovation, new ideas and education will be necessary.

What's more, Gillard says that "to prosper in Asia, we’ll need to know Asia. We’ll need Asia-literate policies and Asia-capable people ... The most challenging risk is if we can’t make and sell the things that Chinese and Indian and Indonesian and Thai consumers are buying in 2033".

Gillard's “White Paper” on Australia in the Asian Century is billed to be "a national blueprint for a time of national change – designed to set ambitious national goals for lifting the Asia capabilities of the Australian Government and people".

Gillard's ideas are both ambitious and necessary. Australia has been a lucky and lazy country for a very long time. A succession of Asian miracle economies have come along to save the country by buying its natural resources. But as Asian urbanization runs its course, and competition from other resource suppliers grows, the lucky country will eventually be faced with the need to produce something for middle class consumers.

This will be a challenge. By all accounts, Asian literacy is in decline in Australia. And reversing this would require motivating a public that has long had it too easy.

It is striking that Gillard made no mention in her excellent speech of the potential of the country's growing population of Asian Australians (currently 12% of the total population) to creating exports for Asia's growing middle class, and to contributing to Asian literacy more generally. They could well turn out to be Australia's greatest resource ever!

Author

John West
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
Tags: asia, Julia Gillard, Australia, Australian White Paper, Asia Society New York, Economic Club, New York

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