ACT selling knowledge, ideas and experiences

“We meet at a time when there is more uncertainty about what the coming year will bring than perhaps any time in the last decade. (But) here in the ACT, we are projecting remarkable stability,” said ACT Chief Minister, Andrew Barr at CEDA’s Economic and Political Overview in Canberra.

Providing an update on the Territory’s economic outlook, Mr Barr said “we are home to 1.7 per cent of Australia’s population but we are now delivering 2.5 per cent of this country’s service exports.

“This matters because Australia’s economic narrative…since the Global Financial Crisis and the end of the mining construction boom has emphasised the importance of Australia pivoting to services – from being a quarry and a farm; to selling knowledge, ideas and experiences.

“But this transition has been quite slow on a national level and there is still much to do, with bulk mineral exports and commodities continuing to make up a very large share of our international trade.

“Although services account for three quarters of Australia’s domestic production, they still make up only around a quarter of Australia’s total exports.

“The ACT is a clear exception.

“In 2017-18, the ACT’s services exports were worth $2.2 billion or 5.5 per cent of our Territory’s total Gross State Product – compared with 4.8 per cent nationally.

“Over the last decade, services exports from Canberra have grown by more than 150 per cent as we have opened this city to the world and begun actively promoting what we have to offer for the first time in Canberra’s history.

“This growth has been particularly strong in two sectors: education and tourism.

“International education is Canberra’s largest export and generated $977 million for our economy in 2017-18 – an increase of more than 100 per cent over the past five years.

“International enrolments have grown strongly year-on-year and there are now around 19,000 international students enrolled at Canberra’s universities, training colleges and schools.

“This is leading to the creation of many more high wage jobs in our city – today around one in 10 working Canberrans are employed in the education sector.

“Our tourism sector is currently the second fastest growing in Australia next to Tasmania.

“A few years ago we set a target to achieve $2.5 billion in overnight visitor spending in our city by 2020. With total annual overnight visitor spending now at $2.37 billion in Canberra; we are well on track to achieve that goal.

“Recently we have seen jobs in the tourism sector growing at a rate of around seven per cent per annum, which is more than triple the rate of jobs growth across the Territory economy as a whole.

“We have supported and championed the growth of these sectors – along with our services sector more generally – because we know that a more diverse economy is a more resilient one.”

US China trade tensions

Providing a broader economic overview Westpac Senior Economist, Matthew Hassan said, “the global growth pulse is definitely slowing” and discussed current trade tensions.

“It’s clearly a source of uncertainty,” he said.

“(It is) very difficult to foresee which way this will break.

“On the one hand we know commitment to reconfigure US-China trade relations is strong within the US. It isn’t simply just a Trump policy, it’s a bi-partisan issue that has support across both sides and within the security and defence establishment. So, some form of reconfiguring global trade is certain to happen.

“The US China negotiations are still live, around increasing (tariffs) from around 10 per cent to 25 per cent.

“A 10 per cent tariff is an FX loss for a business year to year, it’s something they can wear – 25 per cent – that calls for really reconfiguring supply chains completely and (is) much more disruptive.

“We don’t know how forcefully the US will enforce this issue – something between ‘conscious uncoupling’ and a full-scale cold war – we don’t know exactly where we will land.”

2018: the year everyone woke up to China

Also providing insights on China was Australian National University, Australian Centre on China in the World Acting Director, Associate Professor Jane Golley.

“Any deal that the US and China comes to might work out pretty well for them, but it will be trade diversion including in Australia where we will be hurt,” she said.

“There are valid concerns that we have, and the US has, about how China conducts its economy in the global system – Chinese subsidies, State owned enterprises, its use of industrial policies – they’re not the only ones who do it but they’re doing it on a very large scale and that feeds into what is looking like a technology war as well.

“We’re seeing this with Huawei at the moment – it’s being referred to as the new economic iron curtain.

“We need to accept that this is the nature of China’s economic system, and I think that last year was the year when everyone woke up and realised that.”

Discussing slowing growth rates, Ms Golley said the Chinese government had deliberately tried to slow down the economy to lead China into a “new normal, more sustainable rate of growth in the future.”

“But that still seems to cause a lot of anxiety across the globe. Even when it drops from 6.5 to 6.3 per cent, there seems to be a lot of criticisms and commentary about how China is going to boost growth and whether or not they should,” she said.

“There is a whole bunch of causes for the slow down…credit has been tightening, there’s been dropping in retail sales and industrial output, falling consumer and investor confidence, but also a challenge or pattern of rebalancing the economy…a deliberate policy measure to try and reduce the amount of export growth and also investment growth and shift into higher consumption growth.

“They’ve also been trying to boost growth by having more babies.

“Despite saying that they want the economy to slow and that they’re trying to steer it in that direction, they announced in January that they would put another $1.5 trillion into their high-speed railway network, to expand it by 6800 km in 2019 alone.

“That is twice the length of Spain’s entire high-speed railway network system and Spain has the second largest railway system in the world so it is a very significant expenditure and reminds me…about infrastructure led growth and what that all might be about.

“For China it is about the Belt and Road Initiative…President Xi’s signature foreign policy initiative.

“He talks about the five connectivity’s and they are: infrastructure network, policy dialogue, tariff reduction, financial support and people to people exchange.

“It’s a plan that’s not going anywhere. It is written into the (Chinese) constitution, we don’t know how big it’s going to be but we’re currently looking at estimates in the range from US $1 trillion up to $8 trillion.

“I do believe it is going to change the centre of economic activity in China’s favour, and that can be a good thing for us.”

Coaltion fighting election on its safe ground: economy and national security

Providing a domestic political overview, Saturday Paper Political Editor, Karen Middleton said that the Coalition Government is determined to fight the election on its safest ground: the economy and national security.

“Labor’s decision to back Independent Kerryn Phelp’s medical evacuation bill enabled (Prime Minister, the Hon.) Scott Morrison to fight on turf he knows well as the ‘Inaugural Ministerial Head of Operation Sovereign Borders’," she said.

“This is one of the developments that make the timing and the shape of this year’s election a little clearer than they were even just a couple of weeks ago.

“Morrison was pleased…to be able to claim a clear division between the Coalition and Labor on the boats issue.

“He and his colleagues now have a scare campaign in full swing.

“(A) ‘no holds barred’ campaign on border protection against Labor, with echoes of John Howard’s successful version in 2001.”

In regard to the election, Ms Middleton “at this point, the government looks a goner” but said there are political variables to consider as the year unfolds.

Australian defence industry strategy acknowledges the need to look abroad for industry opportunities

Australian Defence Export Advocate, David Johnston discussed the Australian Defence Export Strategy.

“The strategy provides a framework to assist the Australian defence industry to achieve greater export success to build a stronger, more sustainable and more globally competitive defence industry, in support of our own defence capability needs,” he said.

“The Australian defence industry provides innovative and technologically superior capabilities to support the Australian Defence Force across land, sea and air domains.

“The defence export strategy acknowledges that the Australian defence industry cannot sustain itself on the needs of the Australian defence force alone.”

Mr Johnston mentioned recent innovations from Australian companies including a Tasmanian company, CBG, which has developed an insulating fabric that assists with protecting ships by capturing thrust as an aircraft takes off. This is currently being implemented into the Queen Elizabeth Aircraft Carriers in Scotland.

“The business model of only having one customer is not too good and is (a) very high risk to our defence industry players,” he said.

“Better access to global markets makes economic sense, and strategic sense. If our companies are thriving, they can do more research and development and the beneficiary of that R&D is our own defence force.”

2019 Economic and Political Overview: download report

Associate Professor Jane Golley and Karen Middleton contributed to the 2019 Economic and Political Overview report. Read their chapters on China and the domestic political overview as well as the Australian economy, and overviews for the US and Europe here.