Global recovery and the future of Australian trade

10 March 2021: China will continue to play a crucial role in Australia’s trading profile – despite the ongoing domestic and international challenges.

This was one of the key insights shared at CEDA’s annual Economic and Political Outlook forum, which explored and analysed critical issues such as economic recovery, the future of Australian trade, investment, geopolitics, and the outlook for the year ahead.

The panel discussion, moderated by Kirsty Needham, Australian and Pacific Politics Correspondent, Reuters, included expert panellists:

  • Richard Yetsenga, Chief Economist, ANZ Banking Group
  • Professor Caitlin Byrne, Director, Griffith Asia Institute
  • Professor Jane Golley, Director, Australian Centre on China in the World, Australian National University
  • Mukund Narayanamurti, Chief Executive Officer, Asialink Business

Global recovery

Richard Yetsenga, Chief Economist, ANZ Banking Group said that global recovery is strong. He explored the view that we are experiencing a health and economic crisis, rather than a financial one, which makes the current crisis different to the GFC.

Asia is more than a third of the global economy and it is already above pre-pandemic levels of activity. The US and China are back to pre-pandemic levels of activity and unemployment in Australia is falling.  Last year was the deepest downturn in 100 years, but what we are witnessing is a quick recovery.

US relations

Looking to the United States, Professor Caitlin Byrne, Director, Griffith Asia Institute shared her thoughts on how Australia will manage to work with the US and China going forward.

Professor Byrne said there were significant issues faced by the Biden administration and identified that allies will play a key role in the administration’s foreign policy going forward. How the Biden administration responds to domestic issues such as health, social and economic pressures will be critical in restoring the reputation of the US leadership. Professor Byrne expects there will be a renewed commitment to multilateralism, which will be important for Australia in the future as the US rebuilds relationships with key allies including Australia, Japan, Korea, Canada, and Mexico. 

On reflection Professor Byrne said, “We will have a more predictable ally in the US… a more proactive ally, particularly on key issues of health and climate change.”

Australia’s strained relationship with China

Professor Jane Golley, Director, Australian Centre on China in the World, Australian National University highlighted that the strained relationship between Australia and China equates to “troubled times ahead”. 

In 2020, China’s economy was the only major economy to have expanded having achieved growth of 2.3%. This year, China’s economy is projected to grow by 8% while India’s is expected to grow by 7.9% off the back of a 10% contraction last year.

Despite the strained relationship between Australia and China - China still accounted for over 40% of Australian exports last year, with surging exports of iron ore. But shocks were felt in sectors such as wine, barley, beef, and timber.

China is investing in Africa, Brazil and Papua New Guinea which will see potential future impacts on our resources sector. International education will continue to be heavily impacted by international borders remaining shut, potentially resulting in a shrunken university sector.

Australia’s market diversification agenda

Mukund Narayanamurti, CEO Asialink Business agreed that despite the many challenges in the diplomatic relationship with China there have been record trade surpluses.

While the Australian business community has been frequently called on to speak about the relationship with China, narrow casting rather than broadcasting is required to foster positive business relationships with our Chinese counterparts.

Market diversification and recognising that neither India nor South East Asia represent the next China for Australia is critical, as both regions have their own unique market characteristics and opportunities.

In closing, Mukund highlighted that regionalism is the new globalism, and in an environment where Australian companies are increasingly competing with Asian companies, we must engage with speed and purpose and ask what we can learn from Asia.