30 September 2020
In April 1985, Bob Hawke stood alongside Chinese Communist Party boss Hu Yaobang atop an iron-rich hill in the Pilbara and envisioned a new era of Sino-Australian economic relations. Hawke's dream that day was for China and Australia to invest jointly in an iron ore mine - a prospect he'd raised with premier Zhao Ziyang in Beijing a year earlier. The prime minister's active involvement paved the way for the signing of the Channar joint venture between Rio Tinto and Sinosteel in 1987, China's first major overseas investment. More than 250 million tonnes of iron ore has since been shipped to China, creating thousands of jobs and billions of dollars in export revenue. Seventeen years later John Howard as prime minister played his part in securing another critical export market for Australia. In August 2002 he announced the Woodside-run North West Shelf venture had been awarded a $25bn contract to supply the southern Chinese province of Guangdong with liquefied natural gas. Howard had travelled to China to lobby president Jiang Zemin and premier Zhu Rongji to win the contract. It was the first long-term LNG purchase deal completed by China and it helped to pave the way for other deals for Australian exporters. Today we remain China's biggest LNG supplier, with exports worth $17bn a year, and the industry employs thousands. Hawke and Howard showed that our most important trade and investment relationships do not occur by accident. It takes years of sustained effort and political leadership. Today, as the most China-dependent major economy in the world, apart from Hong Kong, we are faced with the striking need for trade diversification. China bought about 5 per cent of Australia's goods exports 20 years ago; that is now almost 50 per cent, despite the deteriorating political relationship. This is welcome: China continues to buy iron ore, LNG and other products in record volumes, and this has cushioned the pandemic shock to our economy. But Chinese demand for our commodities is forecast to plateau in coming decades and for some China-exposed sectors, including our meat exporters, winemakers and barley growers, it has become painfully apparent China is willing to limit imports from us for reasons that can be unclear. We are overly reliant on four exports: resources, agriculture, tourism and education. A recent Harvard Growth Lab Atlas of Economic Complexity ranked Australia 93rd in the world for the "complexity" of its exports, lagging Kazakhstan, Uganda and Senegal. It should not be like this - Australia should be in the midst of a job-making national effort to increase export complexity. There is much said about establishing a lithium battery industry but little action. Where is the government effort to attract investment from the battery-producing powerhouses of Japan and South Korea to build Australia's capacity beyond basic processing of lithium, nickel and rare earths? It's also time we finally got serious about building stronger economic relationships with India and the nations of Southeast Asia, particularly Indonesia and Vietnam. We cannot snap our fingers and find a replacement for a huge market such as China but we must make the effort. Instead, we have a government that appears blind to the challenge of diversifying Australia's trading economy. Take, for example, the languishing economic relationship with India. India's share of Australian merchandise exports has fallen below 2 per cent, the lowest level in 17 years. In 2018, former Department of Foreign Affairs and Trade secretary Peter Varghese completed an impressive 500-page report that found no single market across the next 20 years offered Australia more opportunities than India. The report cited myriad opportunities in areas such as education, agriculture, energy, resources, tourism, healthcare, financial services, infrastructure, science and sport. Scott Morrison announced "in principle" support for Varghese's recommendations. Two years later, the government has delivered remarkably little, and it has failed the industry Varghese identified as the cornerstone of the future India-Australia economic relationship: higher education. While Hawke and Howard fought for the development of export industries, this government has gone out of its way to cut down the higher education industry that could underpin a game-changing relationship. Blocking Australian workers at universities from accessing JobKeeper, and failing to help international students trapped in Australia during the pandemic, will reverberate for years to come. Our economic links with Indonesia also are going backwards. Australia invests more in Luxembourg and Ireland than we do in Indonesia. Indonesia accounts for about 2 per cent of Australia's exports, although there is hope that the Indonesia-Australia Comprehensive Partnership Agreement, which came into effect in July, will boost trade volumes. By 2050, India and Indonesia are forecast to be among the world's four largest economies. Vietnam will be in the top 20. These countries have large urbanising populations of middle-class consumers. And they are geographically close to Australia. Free-trade agreements and encouraging words by politicians achieve only so much. This government seems to believe that it's the responsibility of Australian companies to open up new markets. But it is evident from our history that little will happen unless the commonwealth takes the lead. Political will is a prerequisite for trade prosperity.
This piece was first published in The Australian on Wednesday, 30 September 2020
Authorised by Madeleine King MP, U 4-5 Chalgrove Ave, Rockingham WA 6168