Vast alumni across Asia is one of Australia's economic strengths: RBA

Vast alumni across Asia is one of Australia's economic strengths: RBA
Jonathan ChancellorDecember 7, 2020

Australia's close links to Asia, the fastest growing part of the world economy, was reason to be confident of the economy's future strengths, according to Philip Lowe, Deputy Governor of the Reserve Bank of Australia.

He noted exports to Asia are up by around 30% over the past five years in his address to the recent Australian Business Economists' annual dinner.

Speaking on factors affecting the national psyche and weigh on the national economic mood, Lowe stressed the Australian economy does have the foundations for a successful and prosperous future.

"How well we take advantage of those foundations depends increasingly on investment not in physical capital, but in human capital."

"I sense a degree of nervousness about our future among some commentators who sometimes ask: what happens to Australia after this mining boom is over?; how can Australian businesses compete internationally given our high costs?; and, where will the jobs come from in the future?

"These are all good questions," he said adding uncertainty was normal.

"Given this, it is important that we guard against the possibility that this uncertainty mutates into chronic pessimism – that is, for it to become normal for us to think that our prospects are limited.

"If this were to become our normal mindset, then we would be well on the way to finding ourselves in the very world that we feared.

"We certainly have a number of strong foundations that provide the basis for this optimism. The question is how well we can use those foundations over the years ahead," adding he wanted to focus on the people-to-people relationship.

"Currently, around 8% of the Australian population was born in east and south-east Asia or India (Graph 1 below).

"This is up from less than 1% of the population around the time that I was born.

"In comparison, in the United States, only around 3½% of the population was born in Asia and for most European countries the figure is below 2%."

Graph 1

Graph 1: Population Born in Asia 

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"There are also large numbers of students from Asia studying in Australia," Lowe said.

"Currently there are around 150,000 Chinese student enrolments at Australian educational institutions, more than double the number a decade ago (Graph 2 below).

"There are also large numbers of students from India, South Korea, Malaysia, Thailand, Vietnam and Singapore.

"All up, there are more than a quarter of a million Asian students studying here.

"In time, these students will add to the already vast network of our alumni across the region."

Graph 2

Graph 2: Chinese Student Enrolments 

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"The strong people-to-people linkages can also be seen in the broader data on international short-term arrivals (Graph 3 below)," he noted.

"At the moment, more than 250,000 citizens from Asia are travelling to Australia every month, with arrivals from China reaching nearly 80,000 a month.

"As is evident from the graph, these figures have grown very strongly over recent years.

"There has, of course, also been very strong growth in the number of Australians travelling to Asia for both business and leisure."

Graph 3

Graph 3: Short-term Overseas Arrivals to Australia 

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"Taken together, this deep and growing people-to-people engagement is an increasingly important national asset," he said.

"It helps us better understand the most dynamic part of the global economy.

"It promotes goodwill and can help identify cross-border business opportunities.

"Some of the students studying here will hopefully become ‘champions’ for our country when they return home.

"Others will remain here and use their knowledge and relationships in their country of birth to build new and stronger business ventures between our countries," he noted in the aim of achieving a highly productive, globally competitive economy that is operating close to, or at, full employment.

"Such an economy would be characterised by: a national currency with sustainably high purchasing power; sustainably high real wages; and sustainably high real returns on capital.

"High purchasing power and high wages mean that for each hour that we work we are able to buy more goods and services.

"And high returns mean that savers get rewarded when they take a risk or defer their spending and save for the future," Lowe noted.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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