Twelve of Australia’s largest fifteen trading partners are in Asia, accounting for two-thirds of Australia’s total exports. The contribution of trade to Australia’s economy is significant, representing more than 40 per cent of nominal GDP and providing employment for more than 2.2 million Australians working in trade-related activities.

Asia – The future epicentre of growth

Over the next ten years, Asia will deliver two-thirds of global growth. The International Monetary Fund predicts that in 2023 the growth rates of India, Vietnam and Indonesia will be among the highest in the world, and higher than that of China.

Generating growth in Australia’s digital economy, renewables and advanced manufacturing sectors will be supported by Asian expansion.

Asian trading partners will impact Australia’s economy more as they continue to grow in size, affluence and purchasing power. Industrialisation, urbanisation, trade liberalisation and digital innovation are shifting the demands from Asian markets.

Asia’s changing landscape and potential as trading partners

Their appetite for clean and green produce, quality education services, healthcare and clean energy transition plays to many of Australia’s current and emerging strengths. In many instances, generating growth in Australia’s digital economy, renewables and advanced manufacturing sectors will be supported by Asian expansion.

The level of digital transformation in Asia continues at warp speed. Google estimates the digital economy in Southeast Asia alone will be worth US$300 billion by 2025.

The pandemic pushed many consumers in the region over a technological tipping point, which accelerated the rate of adoption in completely unexpected ways. A far greater number of Asian consumers are not just shopping online, but they are discovering and evaluating all types of products and services via the web.

Australian trade contributes more than 40 per cent of nominal GDP to the economy and provides employment for more than 2.2 million Australians working in trade-related activities (Rinson Chory/Unsplash)

Tensions rising the Asia-Pacific region during the pandemic

Tapping into this growth is increasingly challenging due to rising geopolitical tensions and international competition in the region. Australian exporters have been confronted with politically motivated flare-ups such as China’s trade sanctions on wine, beef, barley and coal.

Competition is intensifying as other countries have invested more time, energy and resources to put themselves at the forefront of opportunities in Asia. Competition is also coming from within Asia itself, with intra-regional trade now accounting for 60 per cent of Asia’s total trade. Many Asian countries now export more to Asia (even excluding China) than to the United States or Europe.

This paints a picture of a region that is economically resilient and increasingly self-reliant.

With these shifts in mind, the critical task at hand is to match Australia’s sectoral capabilities with the specific opportunities available in our region. Achieving success will require more work in developing the relevant knowledge and expertise of each market of interest compared to the convenient trade that characterised much of our export history to an insatiable China.

Great diversity exists between individual markets, many sizeable in their own right. A shallow, one-size-fits-all approach to doing business with the region will be inadequate.