11 April 2006
Australia could prosper from India and China's growth but may have to choose between its commercial and economic interests and its strategic international alliances, ANZ Chief Economist Mr Saul Eslake has warned in the latest issue of Monash Business Review.
"China is increasingly seeking a role in regional and global affairs commensurate with its population and growing economic weight," he said. "Inevitably this means there will be issues and areas of conflict."
Mr Eslake said Australia had more to gain than lose through the emergence of China and India in the world economy and markets for tradeable goods and services, commodities and labour as well as financial markets.
"Australia is one of the few countries whose principal exports won't be priced out of global markets by China and India, thanks to our program of unilateral trade liberalisation," he said.
China can't conjure up reserves of coal, uranium, iron ore, nickel and natural gas -- needed to fuel its rapid industrialisation and growth -- and India's pursuit of global dominance in services industries, such as IT and business process outsourcing, has little impact on demand for Australia's principal commodity exports.
Mr Eslake said a more prosperous and wealthier India would undoubtedly be a positive influence in the region and for the world. "But India's pursuit of global dominance in services industries does potentially put at risk jobs in our services industries, which account for more than 70 per cent of total employment."
"India's rapid growth serves to remind Australians that even as we become more economically dependent on China, and its seemingly insatiable thirst for our resources, we will need to continue to deepen and strengthen our economic, political and cultural ties with other Asian nations, including India, as well as our other long-standing friends and trading partners in East Asia.
"China is not, and probably never will be, a strong ally of the US. On some issues -- international terrorism and the North Korea nuclear weapons challenge -- their interests coincide, but mostly they diverge," Mr Eslake said. "India's interests are less likely to conflict with those of the US -- a point which has not escaped the attention of leading US policymakers.
"The world has rarely responded rationally to the rise of a new economic power. Let's hope that we do not mismanage the rise of China and India like the world's policymakers did Germany and Japan last century," he said.
The current issue of Monash Business Review focuses on the economic rise of India and China, and the implications for Australia. For more information email: mbr@buseco.monash.edu.au.
For further information contact Mr Saul Eslake, ANZ, on +61 3 9273 6251 or Ms Jacqui Golding, Faculty of Business and Economics on +61 3 9903 2265 or 0438 009 621.
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