Australia’s trade relationships with East Asian countries, primarily China, are key to helping the country recover from COVID-19, according to an analysis article released Thursday by local think-tank, the Lowy Institute.
Author of the article John Edwards used to be a member of the Board of the Reserve Bank of Australia and is now an adjunct professor with the John Curtin Institute of Public Policy at Curtin University. He declared Australia’s economic recovery to be underway despite a second wave of infections in the State of Victoria, with less economic damage than previously feared.
“The handling of the crisis by Australian governments, hospitals, health care workers, and public officials has been more successful than in some comparable countries. So too, the economic response has been swift, well targeted, and substantial,” Edwards said.
However, he pointed to several serious challenges that remain for Australia, including ballooning unemployment, which is expected to reach 10 percent of the workforce by the end of the year, and government debt which is at its highest peacetime level ever.
According to Edwards, crucial factor working in Australia’s favour are it’s existing trade relationships in East Asia, particularly with China, where the pandemic recovery is expected to outpace the rest of the globe by some margin.
“The impact for Australia of lower global demand and production is mitigated because three-quarters of its goods exports are to East Asia, a region that is growing faster than Europe or the United States and which, in most cases, has handled the pandemic well,” Edwards said.
According to International Monetary Fund projections, global economic output will contract nearly 5 percent in 2020, however as a group developing Asian countries will contract by less than 1 percent, and China’s output is predicted to increase.
With China by far Australia’s largest trading partner, the country is well-placed to benefit from it’s regional neighbour’s success. According to official figures released earlier this month China’s share of Australian exports hit an all-time high, rising to 48.8 percent, primarily in iron ore.
However, as well as its impact on global health, COVID-19 has also exacerbated existing international tensions.
Edwards said that while Australia has “inescapably” tied itself to the East Asian economic community centred around China, it also has a long-standing history with the United States as a defence ally.
Edwards points out that Australia is unlikely to overturn the prosperity found in the relationship, which has been developing for several decades.
“Australia would not find new markets for iron ore and coal to replace even a part of what it now sells to China. Nor could it easily replace exports of wine, meat, dairy products, and manufactures to China. The largest share of foreign tourists are from China, as is the largest share of foreign students. Without trade with China, Australia’s living standards would be lower, its economy smaller, and its capacity to pay for military defence reduced,” Edwards said.
Edwards says that the relationship with China and the United States should be better handled moving forward if Australia wants to benefit from the opportunities provided to it.
He says that while Australia can express its own concerns, recently it has acted imprudently by involving itself with other countries’ policies towards China-related issues, leaving it open to backlash.
“Refusing to take sides in the trade and technology competition between China and the United States is Australia’s declared policy. It was wisely adopted — but not deftly implemented,” Edwards said.