The bottom line on the dazzling Asian Century
The Gillard government’s much-touted Australia in the Asian Century report is packed full of eye-popping statistics about the rise of Asia. Did you know, for example, that 80 million people played football in Asia in 2006 and that by 2020, this is expected to reach 380 million?
China is already the world’s biggest buyer of Rolls Royce cars. In the first decade of the 21st century, the number of cars per 100 urban households in China jumped from less than one to more than 18. There are now 80 computers per 100 households in China, up from eight. There are 60 microwave ovens, up from 16. And a whopping 200 mobiles, up from 16.
Are you excited about the Asian Century yet? Wait, there’s more.
India has more than 800 television channels today, compared with just two in 1990. India’s car manufacturing industry employs 5 million Indians.
Every year across Asia, 44 million people - twice Australia’s total population - move from the countryside of Asia to its cities in search of work.
About a million people were lifted out of poverty every week in East Asia between 2000 and 2006. It took the United Kingdom over 50 years to double incomes per person during the Industrial Revolution of the 1800s. China and India did it in a decade.
Asia’s per person income has risen from one thirtieth of America’s in 1980 to one fourth today.
Over the past two decades, the Chinese and Indian economies increased sixfold. Their share of global economic output almost tripled. By 2025, the Asian region will produce nearly half of world economic output.
I’m not done yet.
High school enrolment rates doubled between 1970 and 2001 in Indonesia, Malaysia, Thailand and China. Four of the world’ five highest performing education systems are in Asia, in Hong Kong, Shanghai, Singapore and South Korea.
The average 15 year old studying maths in Shanghai is performing two to three years ahead of their Australian counterpart.
The Asia Pacific region is expected to be home to 3.2 billion “middle class” consumers by 2030 (defined as spending between $US10 and $US100 a day) representing 60 per cent of middle class consumption.
In 1995, just 4.5 million Chinese people went on holiday abroad. In 2010 it was 57 million. The increase in India was from 3 million to 11 million. Every week, 2.3 million people in Asia and the Pacific connect to the internet for the first time.
Ok, I’m done now.
The government says the point of its report is to showcase the vast “opportunities” that lie in Asia. Indeed the words “opportunity” or opportunities” appear 295 times in the 320 page report.
But, more importantly, the report is a wake up call that the easy days of Australians getting filthy rich shipping rocks to China are over.
The best of the mining boom is behind us. The mining boom has three stages, a price boom, an investment boom and an export boom. The first stage, which delivered windfall revenue gains to mining companies and government, is now over, as commodity prices fall. The investment boom is underway, employing more Australians, but is now expected to peak sooner and lower than before.
The third phase - of more exports of mining resources is still to come. But this last phase requires fewer workers, as most of the work is done by machines, and the profits go largely to foreign owned mining companies.
The commodity price boom has fueled rising incomes and standards of living for all Australians. But it is at an end. And it’s not at all clear that selling services to Asia will make up for it.
Buried in the Asian Century report is a warning that falling commodity prices and an ageing population means slower income growth from here on in.
Australia’s real income per person is about $62,000 today, the 13th highest in the world. Qatar is number one, followed by Luxembourg and Singapore.
If incomes grew by their historical average, this would still grow to $70,000 by 2025, or 11th place.
The government says that if we did everything in its report, this would lift to $73,000 and topple Switzerland to be in 10th place.
The policies include: teaching Asian languages in schools, every school partnering with a school in Asia, getting company board members to have more Asian knowledge, lift Australia’s universities to get 10 in the top 100 worldwide by 2025, reducing taxes by increasing the tax free threshold to $21,000, participating in regional forums, making foreign investment rules more transparent, opening more embassies and consulates in Mongolia, China, Phuket and eastern Indonesia, and even down to more heavy handed measures like getting the ABC to broadcast more programs with an Asian focus and “developing sophisticated luxury urban tourism opportunities, such as those offered by Crown Limited”.
If we fail to do these things and repeat the low productivity performance of the 2000s, incomes may only increase to $67,000 in 2025.
That’s a lot of extra work for $6,000 each. And it won’t be easy.
The problem is that, unlike iron ore and coal where Australia has a clear comparative advantage in exporting, we’ll face more competition from Europe and America in selling services to Asia.
But now that the commodity price boom is over, we don’t have a choice: it’s embrace Asia or be left in the cold.
Jessica Irvine is News Limited’s National Economics Editor. Email: email@example.com. Twitter: @Jess_Irvine
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