Australia has an “enviable economic record” but its “lucky streak” could come to an end due to domestic infighting and an over-reliance on Chinese trade, according to a report published today.
- China is Australia’s largest buyer of iron ore, copper, wool and wine
- If China chooses to boycott Australia it would shake Australian livelihoods
- Political infighting and a revolving door of PMs has become a cause for concern
The report, written by The Economist’s Asia editor Edward McBride, says Australia has one of the “world’s top economies” based on its steady economic growth and relative resilience during two financial crises.
It adds that no other wealthy country has had comparative economic growth when looking at the stable increase of wages in contrast to widespread global wage stagnation.
McBride attributes this to reforms made 30 years ago by former prime ministers Bob Hawke and Paul Keating — who floated the Australian dollar and deregulated the financial sectors — as well as the more recent diversification of the economy at the end of the resource boom.
Speaking to the ABC, McBride said Australia’s 27 years without a recession and affordable health care and pensions were some of the key reasons for Australia’s position.
However, the report says Australia’s reliance on Chinese trade, as well as domestic infighting, has the potential to destabilise policies which have underpinned the country’s economic success.
A Beijing boycott would shake Australian livelihoods
China is Australia’s largest bilateral trading partner with imports and exports worth some $183 billion last year, according to the Australian Trade and Investment Commission.
The second biggest trading partner is now Japan at $71 billion after it took over the United States last year.
But China is Australia’s largest buyer of iron ore, copper, wool and wine, and it also provides 16 per cent of Australia’s tourists.
In his report, McBride says a potential economic boycott by Beijing could have a significant impact on Australia.
“Should Chinese tourists disappear, or Chinese drinkers stop slurping Australian wine, many Australians would lose their livelihood,” he writes.
A boycott situation would not be beyond the realms of possibility as similar events have happened in the past. Last year Beijing orchestrated a boycott against South Korea due to Seoul’s decision to allow the installation of an American anti-missile system.
However, Hans Hendrischke, a professor of Chinese business at the University of Sydney, said the trade relationship was reciprocal.
“The problem with this scenario is that any unilateral reduction of trade links between China and Australia would cause immediate economic harm for no as of yet evident political benefit,” he said, adding both sides provide goods and services the other does not have.
Minister for Trade Tourism and Investment Simon Birmingham told the ABC Australia would continue to support the multilateral trading system, and it was “opening new doors” for Australian businesses through trade deals with Indonesia, Hong Kong, and the European Union.
“We have strong trade and investment ties with China, the United States, and many other countries,” he said in a statement.
“I continue to urge all parties to respect the long established rules of international trade and to avoid action that could ultimately damage their economies and those of other nations.”
Domestic politics ‘a cause for concern’
(ABC News: Matt Roberts)
In another key finding, the report says while the Australian economy “is without equal in the rich world … its [domestic] politics are a cause for concern”.
But the infighting within Australian political parties has impacted businesses to the point of being a cause for concern not only for the economy, but also for diplomatic relations.
The report says Australia’s recent fast turnover of prime ministers has created feelings of disillusionment towards future policies.
“That is especially alarming because the trend of rising incomes which marks Australia out from the rest of the rich world is running out of steam, and the consensus around policies that underpinned it, such as openness to immigration, is eroding,” the report says.
If politicians do not sort themselves out, the report adds, Australia risks becoming as troubled as everywhere else.
“I’m surprised by how few Australians seem to realise how much their country stands out, not just in terms of how long it has gone without a recession, but also in terms of income growth, immigration and economic reform,” McBride said.
“It’s an amazing record, and one that is important not to jeopardise.”
By Tasha Wibawa