8 July 2024

Policy, trade under the spotlight

For a nation of only 26 million people, geographically distanced from global partners, Australia has long punched above its weight in international connectivity. Our economy is the 12th largest in the world and we are a leader in new technology adoption, with Australia often selected as the debut market for testing innovations.

But our international appeal is not guaranteed. To remain competitive and guarantee our economic future, we need to change gears, with the business community playing a key role.

I say this for a few reasons.

First, Australia’s bold ambitions to elevate renewable energy and manufacturing are not unique. There are several markets – including Canada, China, Europe, Indonesia, Japan, South Korea and the US – with similar intentions, subsidies, and incentives.

Moreover, governments worldwide are jockeying to compete for a growing slice of the global investment pie, which has continued to steadily decline since 2010, according to the UN’s annual global investment report.

With 2 billion voters hitting the polls across 2024, shifts in policy, trade, and economic relationships are likely over the next 18 months as elected governments bed down mandates.

Alongside evolving geopolitics and supply chains, a re-shaped political landscape will also spur a re-ordering of future trade and investment corridors.

The headline message is clear: to remain relevant and prominent, we must proactively and thoughtfully bolster existing international connections and strengthen trading where it makes sense.

Pleasingly, we are starting from a position of strength. According to DFAT, Australia is ranked second globally, for trade freedom. ABS data also shows we have one of the most culturally diverse economies in the world, with 30% of citizens born overseas, providing our economy with strong cross-border people-to-people links.

Our aims can be ambitious, but must be grounded in the practical and pragmatic. For example, Australian companies tell us it is challenging to enter and navigate markets with differences between cities and localities.

This reinforces that concerted attempts to build connectivity with any market or region cannot be done in isolation – a whole of ecosystem approach is needed.

China is an example. As Australia’s largest trading partner, constructive, respectful political dialogue has been key to rebuilding trust, resulting in the majority of trade tariffs being lifted from Australian businesses. Continued engagement is imperative.

I have been fortunate to live and work in many of the markets where Australia now seeks deeper relationships, including nations in Southeast Asia, and have first-hand experience of the region’s ability to accelerate growth.

Australia’s ASEAN 2040 economic strategy should be seen as a guiding playbook to strengthening relations with growth nations.

A raft of bilateral and regional Free Trade Agreements struck with ASEAN and its member nations support our strong trade and investment relationship with the region. The launch of technology ‘landing pads’ in Indonesia, Singapore, and Vietnam; establishment of Investment Deal Team hubs; and strengthened interconnectivity from the Australia-Southeast Asia Business Exchange program are further unlocking ASEAN’s potential.

This strategy is one we should seek to emulate with other emerging economies.

Outpacing China for population growth and expected to be the world’s third-largest economy by 2030, India has the potential to become one of Australia’s most significant trading partners.

The establishment of the Centre for Australia-India Relations (CAIR), encompassing government, industry, and academia, is vital to deepening ties and solidifying our relationship, and the ratification of the Australia-India Economic Cooperation and Trade Agreement (ECTA) in 2023 is expected to significantly boost bilateral trade over the next five years.

While the immediate priorities of each nation will shift over time, our partnership with India – based on strong people-to-people links - is enduring.

Another priority will be the Middle East, where Australia’s relationship is in its nascent phase. With a similarly proactive approach, the region can become a more important partner through investment in our green transition and expanded agricultural trade.

While acknowledged for our prosperity, a persistent challenge for Australia is to prove our commitment to enhanced, two-way economic engagement with our neighbours.

The recent uptick in our regional engagement is a step in the right direction. However, international trade and investment dynamics can shift quickly, and Australia’s place amongst the international community is subject to change, meaning good intentions and positive conversations are not enough.

Ensuring Australia and our business community understand shifting global dynamics, identify ways to differentiate our companies and national strengths, and proactively chase opportunities to connect the two, will be critical to the mandate of the BCA’s Global Engagement Committee.

Australia can continue to punch above its weight in international connectivity, but we cannot become complacent. Elevating our proactivity, with our region and others, will be crucial to securing Australia’s economic future, realising our ambitions, and cementing our global appeal.

This article first appeared in The Australian on 8 July 2024.