As Australia continues to set records for its unprecedented period of economic growth, the changing nature of the Indo-Pacific presents a need for Australia to future-proof the main regional sources of its economic growth, diversifying the nation’s investment among the rising economic powers of the region.
Australia has enjoyed a record setting three decades of uninterrupted economic growth buoyed by the voracious appetite of a growing China, however all good things come to end as the political, economic and strategic competition between the US and China enters a new phase placing both the global and Australian economies in a precarious position.
Further compounding these emerging challenges is the growing period of economic and strategic competition between Japan and South Korea, equally important US and Australia allies, which have long-standing, robust links to Australia's economic security. As this vortex of competition continues to devolve into a game of economic brinkmanship, resulting in trade tariffs and hindered supply chain access, many within Australia's political, economic and strategic policy communities have sought to redouble the nation's exposure to volatile and slowing economies.
Australia's earliest economic and strategic relationship with the British Empire established a foundation of dependence that would characterise all of the nation's future economic, defence and national security relationships both in the Indo-Pacific and the wider world.
As British power slowly declined following the First World War and the US emerged as the pre-eminent economic, political and strategic power during the Second World War – Australia became dependent on 'Pax Americana' or the American Peace.
The end of the Second World War and the creation of the post-war economic and strategic order, including the establishment of the Bretton Woods Conference, the International Monetary Fund and the United Nations, paved the way towards economic liberalisation and laid the foundation for the late-20th and early-21st century phenomenon of globalisation.
While the collapse of the Soviet Union and the end of the Cold War cemented America's position as the pre-eminent world power. This period was relatively short lived as costly engagements in Afghanistan and Iraq, peace-keeping interventions in southern Europe and enduring global security responsibilities have drained American 'blood' and 'treasure' – eroding the domestic political, economic and strategic resolve and capacity of the US to unilaterally counter the rise of totalitarian regimes and peer competitors in both China and Russia.
An opportunity to hit the reset button
The economic emergence of the Indo-Pacific has presented the opportunity to re-write the nation's economic narrative, leveraging areas of natural competitive advantage, supporting the industrial reset with the birth of the fourth industrial revolution. Economic diversity and competitiveness is an essential component of enduring and sustainable national security.
However, this period of economic, political and strategic competition and brinkmanship provides interesting opportunities for Australian policy makers eager to navigate the economic, political and strategic competition of the region – the vast size and potential of Indo-Pacific Asia, particularly the economic opportunities and competition between global manufacturing hubs, the advent of Industry 4.0 and the new industrial revolution, combined with Australia's vast resource, energy and agricultural wealth serve as viable avenues for Australia to develop economic, strategic and political independence.
Undeniably China is an immense economic, political and strategic power – with a voracious appetite driven by an immense population and the nation positioning itself as the manufacturing hub of the world – however, beyond the 1.4 billion people, Indo-Pacific Asia is home to approximately 2.5 billion individuals each part of the largest economic and industrial transformation in human history.
Importantly, as Australia's traditional strategic benefactors continue to face decline and comparatively capable peer competitors – the nation's economic, political and strategic capability are intrinsically linked to the enduring security, stability and prosperity in an increasingly unpredictable region.
This period of unravelling relationships, seemingly fickle, transactionally focused strategic partners, economic slow downs and direct economic confrontation between allies all positions Australia as a stable, reliable and responsible nation committed to the economic, political and strategic stability of the Indo-Pacific.
What this does require is a shift in the way in which the nation views not only itself, but also its position within the region – this also requires an opportunistic approach to the competition embroiling key allies like Japan and South Korea, and the global shift away from China driven by US President Donald Trump's continued pressure on companies with heavy operations in the rising power.
The rise of these economic powerhouses – driven by a combination of increased resource, energy and consumer goods consumption and the development of an advanced domestic manufacturing base – places Australia in both an opportune and precarious position, as the growing economic wealth has translated to increased demand for resources, energy, agricultural and consumer goods, but also increased investment in defence capability.
Australia as a nation, like many Western contemporaries, has been an economy and nation traditionally dependent on heavy industries – capitalising upon the continent's wealth of natural resources including coal, iron ore, copper, zinc, rare earth elements and manufacturing, particularly in the years following the end of the Second World War.
However, the post-war economic transformation of many regional nations, including Japan, Korea and China, and the cohesive, long-term nation building policies implemented by these nations has enabled these countries to emerge as economic powerhouses, driven by an incredibly competitive manufacturing capability – limiting the competitiveness of Australian industry, particularly manufacturing.
Recognising this incredibly competitive global industry and the drive towards free trade agreements with nations that continue to implement protectionist policies buried in legislation, Australia needs to approach the development of nationally significant heavy industries in a radically different way, recognising the failures of and the limitations of Australia's past incarnations of heavy industry.
Indo-Pacific Asia's rise means the ‘tyranny of distance’ has been replaced by a ‘predicament of proximity’. China, India, Indonesia, Thailand, Japan and several other regional nations are reshaping the economic and strategic paradigms with an unprecedented period of economic, political and arms build-up, competing interests and rising animosity towards the post-World War II order of which Australia is a pivotal part.
The nation is defined by its relationship with the region, with access to the growing economies and to strategic sea-lines-of-communication supporting over 90 per cent of global trade, a result of the cost effective and reliable nature of sea transport. Indo-Pacific Asia is at the epicentre of the global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and choke points of south-east Asia annually.
For Australia, a nation defined by its relationship with traditionally larger, yet economically weaker regional neighbours, the growing economic prosperity of the region and corresponding arms build up, combined with ancient and more recent enmities, competing geo-political, economic and strategic interests, places the nation at the centre of the 21st century's 'great game'.