Government ministers and officials at the ADC Australian Leadership Retreat on Hayman Island have set out a remarkable blueprint for our country. It was a display of exciting forward thinking, but the plans are not without risk.
If we get anywhere near the target, Australia will be one of the more prosperous countries on earth, but will have some roller-coaster rides along the way. For example, an essential part of the plan is an ambitious link to Asia.
It is unsettling that we are embarking on this adventure at a time when relations between Australia and China and Australia and India are at a low point. The Government is also assuming that President Barack Obama will deliver on his July 2009 doctrine (Ten steps to a new world order, July 28), which stated that Americans will consume much less and this consumption will be replaced by Asian consumption – mainly from China.
Australia expects to be a major beneficiary of such a change in consumption patterns. However, if a fall in consumer demand in the US is not matched by a rise in China – or the changeover is managed badly – there is potential for serious disruption of global growth.
The international community will need to bring China further into the decision making tent. And so, for example, China needs to join the IMF to receive support as it attempts to introduce a better social safety net (old age pensions, medical benefits and educational help), which will be necessary if it is to get its consumers to spend rather than save.
Under the Government’s grand plan, Australia must undertake a series of initiatives to prepare for the Asian future:
According to Government officials, four industries will be among the biggest beneficiaries from Asian growth – resources, leisure (tourism), education and health. Resources already have their own momentum and we are seeing major efforts from China to buy equity. The others are not always seen as growth sectors but the Government believes that the combination of the Asian transformation and the national broadband network will change their outlook.
For example, the NBN will enable doctors based in Australia to have the potential to practise globally. The Government believes that on its own the health industry has the potential to make the NBN viable. It will also enable much better Australian tourism promotion in Asia and better management of Asian tourists.
But not all these developments will be possible unless the Chinese and Indian relationships with Australia improve.
There are also a few other hazards. Most of current offshore stimulus packages will be required to maintain overseas growth momentum and then in time those stimulus packages need to be withdrawn in an orderly way.
This will be a tricky exercise especially as in the US relations between the President and the Congress have become muddied and it will become difficult for America to gain further stimulus funds and undertake necessary reforms.
Another hazard is the NBN development itself. The Government is seeking private capital to help fund the NBN, but will be offering a utility level of return rather than the approximate 48% that Telstra earns on its copper wires. The utility rates can vary between 7 and 12%.
If the Government’s estimates of much higher growth in the Asian market are right then a vast number of Australian companies will do extremely well and our stockmarket will be among the best performers in the world. Already our currency is linked to Chinese electricity production. But it will not be a smooth road.
This article first appeared on Business Spectator.
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