Submission to Joint Standing Committee on Trade and Investment Growth (JSCTIG) Inquiry into Diversifying Australia’s Trade and Investment Profile
By Hugo Seymour and Dr Jeffrey Wilson
– Australia’s economic success has and always will depend upon the strength of its international trade and investment relationships. However, the existing market and sector orientation of Australia’s trade and investment relationships is unsustainable, and unlikely to underpin future prosperity.
– Australia is presently facing a number of external economic shocks, including COVID-19-induced interruptions to global value chains, and rising trade protectionism. Together, these shocks pose the most adverse external economic environment Australia has faced in generations.
– At the same time, Australia’s trade and investment relationships are not currently reorienting and strengthening in line with the growth of the major emerging economies in the Indo-Pacific. Most stark is the underdevelopment of Australia’s economic ties with India, Indonesia and Vietnam.
– Reputable economists also forecast the plateau of global demand for Australia’s existing major export industries. In particular, demand for Australian iron ore is forecast to decline over coming decades, and gas and coal demand is likely to peak over coming decades.
– The lack of diversity in Australia’s current economic relationships magnifies the domestic effects of these shocks. A narrowly concentrated industrial export base, and dependence on a small number of trade and investment markets, increases Australia’s risk exposure in this deteriorating environment.
– Australia must therefore begin diversifying its trade and investment relationships as matter of national priority. A more diversified Australian economy will increase national resilience to near term external economic shocks, and support Australia’s long-term integration into the emerging corridors of global growth, trade and capital flows.
– Diversification efforts should focus on building new trade and investment relationships with key Indo-Pacific partners. A number of practical and immediate steps to begin this agenda are identified, with a particular focus on Indonesia, Vietnam and India.