In an era of shifting global dynamics, Australia’s economic future is increasingly intertwined with its Southeast Asian neighbours. The South East Asian Economic Strategy 2024, put forth by Nicholas Moore, emphasises the urgency of deepening economic ties with Southeast Asia, a region of growing importance. With a burgeoning market of 687 million consumers and a collective GDP of approximately $3 trillion, Southeast Asia is projected to become the world’s fourth-largest economy by 2040. This incredible growth offers an array of major economic opportunities for Australia.
The Growth Potential of Southeast Asia
Pre-COVID, Indonesia, a prominent nation in Southeast Asia, was on track to become the world’s fourth-largest economy by 2050. This positioning would have placed Indonesia in league with global economic giants such as China, the United States, and India. The potential growth in Indonesia’s economy is a testament to the rapid development and potential of the Southeast Asian region. Notably, Southeast Asia is forecast to achieve an average growth rate of 4% until 2040, making it the world’s fourth-largest economy by that year, trailing only behind the United States, China, and India.
Southeast Asia: A Key Economic Partner
Australia, as a close neighbour with considerable economic complementarities, should enhance its trade and investment partnership with Southeast Asia. Concentrating efforts in Southeast Asia is vital not only due to its central position in the Indo-Pacific region but also because of the substantial economic potential it offers. In 2022, Australia’s trade with ASEAN countries exceeded that with its second and third largest bilateral trading partner, Japan the United States, surpassing $178BN in 2022.
Southeast Asia is not just an economic partner for Australia; it represents a potential economic powerhouse with a population of 687 million people, including a growing middle class with a propensity for higher-value products such as education, healthcare, premium food, and beverages. Despite these opportunities, Australia’s level of economic engagement in the region remains low, and its trade performance has not kept pace with Southeast Asia’s GDP growth. Notably, New Zealand has surpassed Australia in direct investment in the ASEAN region, with AUD 855 million and AUD 45 million, respectively (ASEAN, 2019).
Diversifying Economic Links
Diversifying Australia’s trade relationships is imperative due to its significant economic reliance on China, its foremost trading partner in goods and services, constituting 32% of its global trade. Geopolitical disputes have disrupted this critical partnership, making it vital for Australia to reduce its dependency on a single trading partner. Australia’s heavy dependence on China renders it susceptible to the immediate effects of China’s economic slowdown, impacting Australian exports and commodity prices. The Southeast Asian Economic Strategy 2024 underscores the importance of expanding Australia’s economic ties beyond traditional trade partners, recognising diversification as a cornerstone for future prosperity and economic security.
The Four Key Enablers
The South East Asian Economic Strategy 2024 has identified four key enablers essential for growing economic ties with Southeast Asia:
- Raise Awareness: Increasing awareness among Australian businesses and the public about the opportunities Southeast Asia presents.
- Remove Blockages: Identifying and mitigating impediments to trade and investment, ensuring smoother economic interactions.
- Build Capability: Building the skills and capabilities necessary for businesses to navigate and thrive in the Southeast Asian market.
- Deepen Investment: Encouraging and facilitating deeper investment in Southeast Asia, ensuring that Australia is well-positioned to harness the region’s immense potential.
Priority Sectors for Enhanced Trade
Under the 2040 economic strategy, the Australian government has identified several priority sectors that can significantly boost trade between Australia and Southeast Asia. These sectors encompass a broad range of opportunities, from innovation in green energy to the development of robust infrastructure networks and advancements in healthcare.
- Agriculture and Food
- Green Energy Transition
- Education and skills
- Visitor economy
- Digital economy
- Professional and financial services
- Creative industries
Australia’s economic prosperity is undeniably linked to its dynamic Southeast Asian neighbours. However, despite its proximity and vast potential, there has been a disconnect. The South East Asian Economic Strategy 2024 recognises the urgency of the situation and outlines a roadmap for Australia with clear recommendations to unlock opportunities in Southeast Asia. As the global economic landscape continues to evolve, this strategy calls for a more proactive government role in facilitating economic engagement, ensuring that Australia remains a strong player in Southeast Asia’s transformative economic journey. In a world of ever-shifting alliances and economic dynamics, deepening ties with Southeast Asia is not just an opportunity; it’s a necessity for Australia’s sustainable growth and prosperity, and a nuanced diplomatic approach is critical for navigating the complex web of relationships in the region.
Author: Mimi Doan, International Policy Committee at Professionals in International Trade (PIT), bringing a wealth of experience from diverse roles within the private, public, and not-for-profit sectors of the international trade industry. Currently, Mimi holds the position of International Trade Manager at Horticulture Innovation Australia, where her role centres on driving innovation through research, development, extension, and marketing initiatives. Her role is dedicated to delivering industry programs and tailored solutions to bolster Australia’s horticulture export trade. Mimi’s expertise extends to market analysis, trade promotion, and business development and holds a Bachelor Degree in Commerce.