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The American President, in a press conference with Prime Minister Scott Morrison, has responded to concerns about the enduring strategic economic competition between the US and China – raising important questions for Australia and its own economic stability.
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As Australia continues to set records for its unprecedented near-three-decade period of economic growth, the changing nature of the Indo-Pacific presents a need for Australia to future-proof its main sources of its economic growth, diversifying the nation’s investment and competitiveness among the rising economic powers of the region.
However, this period of relative stability has been pushed to breaking point as US President Donald Trump sought to rebalance the trading and broader economic relationship between the US and China through a series of tariffs. Domestic economic policies, including incentives such as corporate tax cuts, have seen the US economy rebound on the back of strong employment growth and a return of manufacturing opportunities.
Further compounding the growing strategic competition between the world’s two largest economies, the economic and strategic competition between Japan and South Korea, equally important US and Australian allies, which have longstanding, robust links to Australia’s economic security, combined with an increasing possibility of recession, is placing the nation at the mercy of the perfect storm of regional, global and domestic factors.
Despite the writing appearing to be on the wall, 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.
Further confusing the nation’s position is continuing efforts by the US President to pursue absolute capitulation by the Chinese, placing Australia again at the crossroads between its largest economic partner and its largest strategic partner.
President Trump has used the recent state visit with Australian Prime Minister to reaffirm his commitment to directly confront China’s economic manipulation as it impacts the economy of the United States, telling journalists: “We’re looking for a complete deal. I’m not looking for a partial deal. China has been starting to buy our agricultural product, if you noticed, over the last week, and actually some very big purchases. But that’s not what I’m looking for. We’re looking for the big deal. We’ve taken it to this level. We’re taking in billions and billions of dollars of tariffs.
“China has devalued their currency, and they are putting a lot of money into their economy. And they have a very bad economy right now. And I don’t want them to have a bad economy. But it’s the worst in, they say, 57 years. Two weeks ago, it was the worst in 22 years, now it’s 57 years, and it’s only going to get worse. Their supply chain is being broken up very badly. And companies are leaving because they can’t pay the 25, soon to go to 30 per cent, tariff. And we have 30 per cent very shortly on $250 billion.
“We have another tariff that is a slightly smaller number, as you know, on other, on about $300 billion worth of goods and products. So, they would like to do something. As you know, we are talking a little bit this week. Talking a lot next week. And then top people are going to be speaking the week following. But I’m not looking for a partial deal. I’m looking for a complete deal."
Recognising the commitment of the US to directly challenge China, Australia finds itself in a unique conundrum, with the nation’s economic security and, by extension, it’s strategic security directly vulnerable, or does it?
An opportunity to hit the reset button
The economic emergence of the Indo-Pacific has presented the opportunity to rewrite 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 policymakers 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 slowdowns and direct economic confrontation between allies all position 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.
Leveraging our greatest natural resource – the Australian people to redevelop the economy
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 have 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 and the limitations of Australia’s past incarnations of heavy industry.
Your thoughts
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 geopolitical, economic and strategic interests, places the nation at the centre of the 21st century’s “great game”.
Get involved with the discussion and let us know your thoughts on Australia's future role and position in the Indo-Pacific and what you would like to see from Australia's political leaders in terms of resetting the nation's economic debate as it relates to long-term national security in the comments section below, or get in touch with
