Australia’s services exports have experienced a quiet tectonic shift over the past 18 months.
Australia’s mounting tensions with Beijing have demonstrated its dependence on China’s trade and fueled momentum to increase ties with Asia’s other giant economy, India.
New international student enrollments from India expanded 32% in 2019 over the previous year and is the fastest growing major market for Australian services. India has overtaken China as the largest source of net migration to Australia, and its diaspora is Australia’s third largest, just behind China and the United Kingdom.
India’s growing population, which will overtake China in 2027, suggests ongoing opportunities for Australia to diversify a business portfolio that currently makes it the most China-dependent economy in the developed world. The need to change things has accelerated as ties sank to their lowest point in 30 years after Beijing took Canberra’s calls for an international investigation into the origins of Covid-19 as a political attack, with China imposing barriers on Chinese barley, beef and wine. Under.
This has Australia looking for its democratic and cricket-loving ally to fill the void. Prime Minister Scott Morrison held a virtual summit with his Indian counterpart Narendra Modi in June and the two signed a defense agreement and enhanced ties to a Comprehensive Strategic Partnership. The trade ministers of Japan, India and Australia recently agreed to work towards supply chain resilience in the Indo-Pacific region.
“We can sell education, healthcare in India, and there is potential in science and technology,” said Ian Hall, professor of international relations at Griffith University in Queensland. “It is much more the consumer market of India’s growing middle class than it is for goods.”
However, trade with India has its own challenges. His government is married to economic nationalism, as demonstrated last year when it withdrew from the Regional Comprehensive Economic Association designed to free up trade.
Delhi wants to send many people to Australia on work visas and does not want to reduce tariffs, according to former Australian Trade Minister Craig Emerson, who started Australia-India free trade negotiations in 2011, resulting in a two-way exchange. only one tenth of China-Australia shipments.
“India is very concerned about its trade deficit,” said Lai-Ha Chan, a political scientist at the Sydney University of Technology, who notes that after signing free trade agreements with South Korea and Japan, India’s trade deficit with those countries soared. “I would be very concerned about Australian agricultural products, such as dairy, harming Indian farmers.”
Australia’s most valuable export, iron ore, has yet to be caught in China’s crosshairs, perhaps due to a lack of alternative suppliers. However, Beijing appears to be giving itself more flexibility, with Emerson noting that China is buying ore carriers that improve the economics of long-distance shipping from Brazil and buying mines from Guinea.
“It is quite possible that China, once it gets the three mineral provinces in a row (Guinea, Brazil and Australia), will play against each other to get a better price,” he said. “If you are China, you would say ‘where is our vulnerability? Iron ore. So let’s diversify, let’s fix that.” They may never need to activate it, but it’s there, it’s available. “
What Bloomberg Economists Say
Australia’s services exports have experienced a quiet tectonic shift over the past 18 months. In education, the growth of Indian enrollments has caused the number of Indian student visa holders to dwarf Chinese students. While China’s dominance in Australia’s goods exports reflects demand for commodities, in the employment-intensive services sector, the importance of China has been questioned by the doubling of services exports to India in the markets. last two years.
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