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Tectonic forces are edging Australia towards Asia, and so is the economy, according to a 2012 government paper called Australia in the Asian Century. A newspaper cartoon captured the real Asian strategy. A teacher tells his pupils: “Children, the Asian century is upon us. Here are some phrases you need to learn in their languages. ‘Do you have a lot of money?’; ‘Please, bring it to our casino in Barangaroo’; ‘Feel free to smoke’.”

The reality is more complex. As highlighted by recent imbroglios with Indonesia over spying and illegal refugees, and with China over its self-proclaimed air defence zone, talk of an Asian Australia is misleading.

In negotiating the financial crisis, Australia became a byword for a developed economy re-engineering itself by linking with Asia. China, Japan, India and members of the Association of Southeast Asian Nations are its leading trading partners. Asia is the destination for 40-50 per cent of its exports, primarily mineral and agricultural products.

But as the commodity boom slows, Australia is desperate to increase sales of other goods and services (food, education, healthcare and financial services) to Asia; as well as to attract tourists, tapping into the region’s growth and its rising number of middle-class consumers.

Given that most nations in the region are reluctant to proclaim anything like an Asian century, Australia’s economic pivot is flawed. Growth in Asia is slowing, reflecting weakness in their leading markets (the US and Europe), pressure from rapid cost increases and the effects of fast credit growth.

Asia also faces structural problems as countries evolve into middle-income economies, compounded by rapid ageing of populations. It lacks innovation and needs to improve productivity. Corruption persists. And, while the region has achieved significant milestones, the size and purchasing power of its middle class is overstated. An annual minimum income of $10,000 per household is used to designate middle class – which amounts to about 20-25 per cent of average incomes in developed economies.

Australia’s cost structures are also uncompetitive, a fact compounded by a strong currency. Physical distance and Asian economic nationalism also undermine its position. There is little to show for decades of efforts to position itself as a regional financial centre. So the Asian strategy is, at best, a wish list. It assumes Australia will have an innovation system ranked in the top 10 globally; excellence and dynamism in business combined with a creative problem-solving culture; a top-five school system; a clear, fair tax system; and efficient regulation.

There are few hard initiatives other than greater proficiency in Asian languages, links with Asian schools and a target that by 2025 a third of senior civil servants and company board members will be Asia experts. There is no specific funding for any of these initiatives.

The strategy steers clear of issues such as the inherent contradiction between its political and defence partnership with the US and its economic dependence on Asia. Australia also frequently pursues its interests unilaterally. Prime Minister Tony Abbott has promised action to stem the flow of asylum seekers, including a policy of forcing boats to turn back to Java; buying fishing boats from Indonesian villages to prevent them being used to transport refugees; and paying Indonesians to inform on people-smugglers. Indonesia has opposed the strategy.

There are also significant cultural barriers. At the 1919 Paris peace conference, Prime Minister William Hughes voted against an amendment to the League of Nations covenant that would assert the equality of the world’s races. Australia subsequently committed itself to a “whites only” immigration policy, which continued until the 1960s.

Ordinary Australians show lukewarm support for greater engagement. There is increased xenophobia about immigration from Asia and foreign investment. Aside from mining and farming, businesses remain domestically focused. The new education minister is proposing a revision of the school curriculum to emphasise western civilisation.

Australia’s ambivalence towards Asia was captured by John Howard, the conservative former prime minister, who said in 1997: “We do not have to choose between our history and our geography.” He was wrong – but Australia is no closer to making a choice.

The writer is a former banker and author of ‘Extreme Money’ and ‘Traders, Guns & Money’

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