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Consensus that Australia needs a new post-COVID economic strategy

Amid mounting threats of economic coercion and the looming challenge of a global economic downturn, many public policy experts and journalists are now prompting the government to embrace a diversified plan for sustainable, value-adding economic growth and sovereign industry development.

Amid mounting threats of economic coercion and the looming challenge of a global economic downturn, many public policy experts and journalists are now prompting the government to embrace a diversified plan for sustainable, value-adding economic growth and sovereign industry development.

Driven by an unprecedented economic transformation, propelling once developing nations onto the world stage, the region, the globe and its established powers, including Australia, have enjoyed a period of previously unseen economic prosperity and stability. 

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Australia in particular has been buoyed by the immense mineral and resource wealth of the landmass and the benevolence of the post-Second World War political, economic and strategic order, namely the tactical and strategic freedom enabled by the US to capitalise upon the immense economic opportunities, with little concern for national security and supply chains. 

However, across the Indo-Pacific, competing economic, political and strategic interests, designs and ambitions are beginning to clash, flying in contrast to the projections of many historians at the end of the Cold War – further compounding these issues is the continued instability caused by COVID-19, economic disruption through the advent of automation and artificial intelligence and, of course, concerns about ecological collapse.

For Australia and comparable Western nations, like the US, UK and increasingly across the European Union, the outbreak of COVID-19 has only served to further hasten the economic decline, stagnation and political malaise experienced throughout the developed world, with many once-powerful, world-leading nations beginning to feel the pressure.

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In particular, recent threats of economic coercion, made by Beijing's ambassador in Canberra, Cheng Jingye, combined with growing domestic sentiment about breaking Australia's economic dependence on the rising power has prompted many within Australia's public and strategic policy communities and the Australian media to begin expanding the debate. 

For example, John Coyne of the Australian Strategic Policy Institute (ASPI) has penned a piece, titled 'Making our own luck in the face of a pandemic', calling for Australia to use the impact of the global pandemic to take advantage of the moniker of the 'lucky country' and establish a semblance of national resilience and security, learning the lessons of over-dependence on global supply chains and blind faith in 'market forces' to secure national interests. 

"Australia, like many countries, failed to heed such warnings. Critical pandemic readiness policies were overexposed to short-sighted budget cuts underpinned by the dogged pursuit of efficiency. The long-term development of critical infrastructure was left to the whims of market forces. Nation-building efforts were underpinned by a user-pays model," Coyne states. 

"COVID-19 has already shown that market forces don’t promote adequate national resilience in myriad areas, from broadband bandwidth to the capacity to produce basic medical supplies, and that far too much of our preparation for pandemics, along with national resilience, was predicated on good luck."

More recently, Chris Uhlmann writing for The Sydney Morning Herald has stated, "we can't return to business as usual with China", prompting increased debate in light of the rapidly evolving geo-political and economic environment Australia finds itself in. 

Time to learn from the impact of COVID-19 

Coyne begins with a powerful and timely call to arms for both the Australian public and the nation's leaders, as part of preparing the nation to "make our own luck" in a period of increasing global geo-political, economic and strategic disruption. 

"Experience suggests that Australians will begin their search for the crisis’ heroes and villains well before we beat the COVID-19 virus. Inevitably, there’ll be several years of reviews and commissions of inquiry, involving all manner of finger-pointing and blaming. In that maelstrom, many valuable strategic lessons, especially about national resilience, will be obfuscated by the drama of the day: it’s easier to attribute fault than to learn. Therefore, it’s critical to encourage immediate public discourse on the issue," Coyne states. 

"One powerful lesson from the first few weeks of the pandemic is that our national resilience can’t be left to chance. Yet, Australia’s COVID-19 success during the first two weeks of February 2020 was underpinned by dumb luck."

The key point of this is a growing realisation that Australia's national resilience must be subject to a considered, consistent and well-articulated strategy and policy platform and leadership from within Australia's political and public service class. 

Adequately responding to these challenges also necessitates a clear understanding of the difference between 'national security' and 'national resilience', particularly in the modern context.

Coyne reinforces this, stating, "Until now, Australian long-term funding of national resilience and responsiveness often seemed economically inefficient. Little surprise, then, that policymakers regularly looked to the market to provide such resilience, especially in critical infrastructure investments.

"However, the creation of spare capacity is often not a commercially viable prospect. Arguably, the NT government’s decision to maintain the Howard Springs site, without a clear customer, was a high-risk one."

Echoing these sentiments, Uhlmann is scathing in his positioning of the argument, something that has been long overdue as the nation embodies the very definition of the Lazy Country, something Donald Horne, author of The Lucky Country, considered was a far more accurate descriptor of Australia. 

"To date Australia’s business captains and university chiefs have shown they can’t handle the truth. As long as the rivers of gold flowed, they were happy to urge silence in the face of the militarisation of the South China Sea, industrial-scale cyber theft, the arbitrary arrest of our citizens, rampant foreign interference and the imprisonment of a million Uighurs in Xinjiang," Uhlmann states. 

"Silence means consent. That now includes agreeing to stay mute about the origin of a disease that has killed thousands, impoverished millions, threatened billions and cost trillions."

Doubling down on this, Uhlmann seeks to reinforce the position Australia finds itself in, stating, "And if they understand nothing but money they should now understand this: China is signalling it’s an unreliable partner. Resuming business as usual where supply chains and income streams rely too heavily on a nation that views both as political weapons is to invite the next catastrophe.

"Of course we should trade with China but it has to be with our eyes wide open and consistent with a national interest that is not just measured in cash.

"In the words of a former intelligence officer: 'I don’t understand why Australian politicians think that we have to build a relationship of trust with China in order to do business with it. Russia and China understand each other perfectly because they don’t trust each other at all'."

Have we been backing the wrong horse? 

Make no mistake, Australia's economic dependence on China is entirely manufactured, China's meteoric economic rise has provided Australia with unrivalled economic opportunity, but at the cost of our own economic independence and security. 

However, China is far from the only economic powerhouse in the Indo-Pacific, Japan in particular is emerging from the COVID-19 outbreak and the period of disruption as one of the major partners for Australia to partner with, particularly in the Indo-Pacific region. 

Indeed recently, Japanese Prime Minister Abe Shinzo has recently announced an economic support fund worth approximately US$2.4 billion ($3.66 billion) to promote local businesses bringing manufacturing back to Japan from China, or to move it to other countries in south-east Asia – something Australia is well-positioned to capitalise upon, based on Australia's relationship with Japan, the geographic proximity to the rising markets of the Indo-Pacific and the nation's abundance of raw resources, thus shortening supply chains. 

Now many will cite Australia's high labour costs and productivity challenges as reasons to why such an arrangement can't succeed, however that is when you've associated manufacturing with low-cost consumer goods, namely textiles, household consumer goods and small scale electronics. 

This doesn't bare out when measured against large scale advanced manufacturing in industries like the aerospace and aviation industries, next-generation automotive manufacturing, renewable resource infrastructure manufacturing, defence, pharmaceutical and high technology manufacturing – thus Australia's world-leading position in additive manufacturing and industry 4.0 is well suited to promoting economic diversity and collaboration with Japan. 

Looking further into the region, it is important to recognise that Japan serves as the major economic investor for much of south-east Asia, including rising powers like Thailand, Vietnam, the Philippines, Singapore and Indonesia – this is best articulated by Michelle Jamrisko for Bloomberg, who states, "Japanese-backed projects in the region’s six biggest economies  Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam  are valued at US$367 billion ($561.5 billion), the figures show. China’s tally is $255 billion ($390.1 billion)."

Each of these nations represent voracious markets eager for raw resources, high-quality agricultural products and the consulting, economic, financial and education services the Australian economy is renowned for, combined with high-quality, value-added manufactured goods Australia is, with the right support, well positioned to supply. 

Indeed, just from the resources and consulting front alone, Australia could immensely benefit from what the Asian Development Bank estimates is a US$210 billion ($321.3 billion) annual spend on infrastructure, with avenues to support Australia's own local estimated $500 billion infrastructure (when including water security, energy and transport infrastructure) backlog in the process. 

Nationally critical heavy industries 

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, identifying these failures of the past and the limitations of Australia's past incarnations of heavy industry. 

Identifying these industries is the first step in building a cohesive, long-term plan as part of a broader National Strategic Industries Act – using the legislative power of government to counter-balance industry development policies of allied, yet still competitor nations like South Korea – which leverages the industrial development policies of export-oriented industrialisation (EOI) to develop its economy into a major economic and modern, advanced manufacturing powerhouse. 

Water security, agriculture and strategic resource reserves 

As the driest permanently inhabited continent, Australia is dependent on reliable access to water both for consumption and industry use, particularly the agricultural industry, which is responsible for feeding both Australia's growing population and increasingly the populations of the Indo-Pacific's rising powerhouses. 

Both agriculture and water security serve as pivotal components of a truly holistic nationally strategic industries policy and the broader introduction of a National Strategic Industries Act  embracing the potential of these factors, particularly water security infrastructure and the flow-on economic impact on traditional heavy industry and manufacturing, combined with the environmental and broader national and regional economic opportunities, should necessitate the inclusion of both in the development of a national policy platform. 

Furthermore, the growing importance of strategic resource reserves, is another area of critical importance within the confines of a national strategic industry support and development platform.

Until recently contemporary Australia has been far removed from the harsh realities of conflict, with many generations never enduring the reality of rationing for food, energy, medical supplies or luxury goods, and even fewer within modern Australia understanding the socio-political and economic impact such rationing would have on the now world-leading Australian standard of living. 

Your thoughts

Australia’s position and responsibilities in the Indo-Pacific region will depend on the nations ability to sustain itself economically, strategically and politically.

Despite the nations virtually unrivalled wealth of natural resources, agricultural and industrial potential, there is a lack of a cohesive national security strategy integrating the development of individual yet complementary public policy strategies to support a more robust Australian role in the region.

Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability, serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.

However, as events continue to unfold throughout the region and China continues to throw its economic, political and strategic weight around, can Australia afford to remain a secondary power or does it need to embrace a larger, more independent role in an era of increasing great power competition?

Further complicating the nation’s calculations is the declining diversity of the national economy, the ever-present challenge of climate change impacting droughts, bushfires and floods, Australias energy security and the infrastructure needed to ensure national resilience. 

Let us know your thoughts and ideas about the development of a holistic national security strategy and the role of a minister for national security to co-ordinate the nation’s response to mounting pressure from nation-state and asymmetric challenges in the comments section below, or get in touch with This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it. 

Consensus that Australia needs a new post-COVID economic strategy
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