Opportunities for Australia in the Asian century will not be limited to the economic powerhouses of China and India, with strength in the ASEAN (Association of South East Nations) countries increasingly providing growth prospects.
Business leaders at the opening session of the In the Zone conference at The University of Western Australia today said Asia was not one homogenous market but rather a region with enormous differences in growth models, political and economic challenges.
Dr Michael Chaney AO, Chancellor of The University of Western Australia, Chairman NAB, Woodside and Gresham Partners, and fellow panellists Dr David Gruen, Executive Director, Macroeconomic Group, Australian Treasury, and Mr J. T. Macfarlane, Executive Chairman and Chief Country Officer, Australia and New Zealand, Deutsche Bank, said Australia should not ignore the importance of the 10 ASEAN countries, which represented huge trading benefits.
Dr Gruen referred to statistics in the Australian Government's Asian Century White Paper, in which he was involved as a Task Force Member.
"By 2025, Asia will have four of the top 10 economies in the world," Dr Gruen said. "China will be No. 1, India No. 3, Japan No. 4 and Indonesia No. 10. By the middle of (President) Obama's current term, China will be bigger than the US."
He described Indonesia as a clear success story, with the country growing strongly since the 1997 - 99 Asian financial crisis to be an important neighbour and trading partner. "There is not one Asian story, there is a multitude of Asian stories," Dr Gruen said.
The panellists said the growth of China and India would continue despite the potential for a range of political, geostrategic, demographic and environmental issues to impede progress.
"I am optimistic that China will continue to achieve acceptable growth," Dr Chaney said. "I don't think they can afford not to."
However he noted the significant challenges for China, where growth to date has been based on investment and exporting. "The world simply can't take the same rates of growth in exporting. There is a need in China to turn inward and develop a consumption-focused economy," Dr Chaney said.
Mr Macfarlane said India was a country of enormous potential for Australia, although it had a different growth model to that of other Asian countries. "One of the challenges is that the structure of business tends to be family-oriented. How do you access capital to drive reform?" he said.
Mr Macfarlane said China remained a hugely opportunistic country, and predicted that rural sector reform would free up labour, while financial sector liberalisation would contribute to continued growth.
The panellists agreed that Australia's prospects for optimising the strength in Asia relied heavily on government policy settings.
"I am quite concerned that if we don't manage to lift our productivity, we'll find it very hard to lift economic growth," Dr Chaney said. He said capital and labour productivity growth in Australia had been poor for the past decade due to over-regulation and the difficulty in progressing projects, with the current industrial relations legislation also working against productivity growth.
"The most critical thing we need to do is get our own economic house in order," Dr Chaney said, calling for an economy that was "open, transparent and flexible."
Dr Gruen said that while the resources sector would continue to be an important part of the economy for some time into the future, Australia would find other areas of competitive advantage.
He said the agricultural and services sectors would increase in relevance. "But Australia will need to find niches because we will have competition in supplying goods and services to the growing Asian middle classes," Dr Gruen said.
The White Paper's focus on the importance of Asian languages and culture to Australian students was debated by the panel, with agreement about the theoretical aspects of the plan but doubts about the practicalities involved in implementing widespread changes given student choices and the paucity of teachers.
Dr Chaney said the teaching of languages went beyond the practical and encouraged cultural and social understanding of other countries.
"One of the great problems of political life in Australia today is parochialism and a lack of understanding about what is going on in the rest of the world," he said. "The more we can help people to realise what is happening in other countries and where we stand in that context, the better we will be."
In the Zone is an intensive meeting of national and international leaders from the business, government and academic sectors.
With the theme ‘The Geography of Global Prosperity', the conference provides an opportunity for discussion and debate about the increasingly complex global neighbourhood and key policy questions facing Australia and the region.
The conference follows the success of the 2009 In the Zone Conference and the 2011 Business Forum.
For more information about the In the Zone conference: www.zone.uwa.edu.au