Advertisement

The Stats Guy: Australia won’t always rely on China for trade

Global trends mean a reliance on China will not endure, writes Simon Kuestenmacher.

Global trends mean a reliance on China will not endure, writes Simon Kuestenmacher. Photo: TND/Getty

You’d be excused if you were nervous about our national reliance on trade with China.

There is plenty of news that should make you worry about the Middle Kingdom.

I listed a few of them in a previous column: China is a rapidly ageing country, has a shrinking population (that it accidentally over-counted by around 100 million people – but that’s a story for another time), a property sector on the brink of collapse, and the potential desire for some geopolitical adventures.

Right around the time the pandemic really got going (May 2020) Australia sent 47 per cent of its merchandise exports to China.

There are plenty of ways to measure exports. We shall not worry about the details too much right now since they all show the same trend. The takeaway message is the same anyway – too many eggs in one basket.

Doing business with China was just too good to be true. A gigantic country that still had to urbanise, that saw population growth, that hadn’t established a globally consuming middle class yet, where the economy only ticked upwards, and that just happened to be short of exactly the things that Australia has plenty of (namely resources, food, and universities).

As a double net importer of both food and energy, China has to establish a global trade network to ensure they can keep the lights on and the population fed. In parts this trade network (referred to in China as One Belt One Road) also projects geopolitical power but the need to import foodstuffs and materials to keep the Chinese system operating is more important.

For the past two decades, China really was all the rage for the Australian economy. We made a good buck and really made the most of all the opportunities.

We will slowly expand the range of our export partners to not rely so heavily on China. That’s hardly anything new. We’ve done it before.

An economy adjusts to new circumstances. Trade back in the colonial days was done with the British. Then the US became our most important trading partner and remained in that position until the 1970s when we discovered the joys of servicing the Japanese market.

Much cheaper to ship stuff to Asia than all the way to Europe or the US. Geography still matters after all.

Right around 2008 a few things changed. Smart phones entered the Australian market, social media became omnipresent, Australia recorded the highest migration intake ever (this figure was only surpassed during last year’s record high intake), and China overtook Japan as our biggest export destination.

Australia has a pretty good historical track record of politely trading with the world’s most up and coming economy. I’d expect India becoming a more important trade partner with Australia year after year.

This doesn’t mean that we won’t be doing business with China anymore. Far from it, our mining sector will benefit from the Chinese push towards renewable energy production and the electrification of the Chinese and global transport networks.

There is no renewable energy without mining, there are no car batteries without mining. That’s great news for a nation that’s exporting the relevant raw materials.

Overall, I’d say there is little reason to be structurally concerned about our export partners.

We tend to sell stuff that is hard to find (how many developed democracies can you buy resources from at scale?) and that’s very much needed.

In another decade the reliance on just one trading partner will have softened and we will have put our eggs into a few more baskets.

Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His latest book aims to awaken the love of maps and data in young readers. Follow Simon on Twitter (X), Facebook, LinkedIn for daily data insights in short format.

Advertisement
Advertisement
Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter
Copyright © 2024 The New Daily.
All rights reserved.