Asia’s Economic Transformation: Implications for Australia

Abstract

This policy brief details recent economic developments in four of Asia’s largest economies - Japan, India, China and Indonesia - and assesses the implications of these changes for Australia. Jenny Corbett looks at how economic frustrations led to political change in Japan and argues that, despite this year’s devastating earthquake and tsunami, there is opportunity for continued economic growth if the Japanese government, in conjunction with industry, pursues a program of smart rebuilding and does not become mired in prolonged political disagreement. Raghbendra Jha looks at how structural changes in the Indian economy, along with changes in Indian society, have increased the rate of growth in the world’s second largest country. He argues that while trade and investment relations between Australia and India are strong, there is substantial room for improvement. He highlights infrastructure and the services sector as potential expansion areas. Ligang Song sees continued benefits to Australia from China’s ongoing growth in the third part of this policy brief. This rapid growth, however, will bring macroeconomic, environmental, and social challenges in China that can only be overcome through major structural reforms. Finally, Ross McLeod examines the issues confronting Indonesia’s economy, including high inflation, corruption and wasteful energy use. He argues that while these present significant challenges, Indonesia’s economy is still performing strongly, being one of the few countries not to have suffered a severe decline in growth as a result of the Global Financial Crisis.