Megatrend three: The "Switzerland" of Asia?
This is a six-part series on megatrends, exploring the compelling economic, social, environmental, political and technological issues facing Australia, as part of the CSIRO’s new report, Our Future World 2012.
In part two of this ongoing series on megatrends, Stefan Hajkowicz examined whether we have opted to allow biodiversity to dwindle, or whether collective efforts may still alter this trajectory.
In part three, Hajkowicz discusses whether we are smart enough to become the Switzerland of the Asia.
One of the things that has fascinated the CSIRO Futures team is a paper published in the journal “Global Policy” by Professor Danny Quah of the Economics Department of the London School of Economics and Political Science.
This paper contains a world map showing the centre-of-gravity of world economy activity each year since 1980 and projected out to the year 2030. The centre of gravity is based spatial extrapolation of GDP at almost 700 locations.
In 1980, the hot spot is in the Atlantic Ocean in between the economic powerhouses of the United States and Europe. By 2010 it’s over Saudi Arabia. And by 2030 it’s firmly between India and China.
The world economy is shifting from west to east and, to a much lesser extent, from north to south. The five year five year outlook by the International Monetary Fund (2012) still has year-on-year economic growth at 8% for the “developing Asia” region compared to economic growth in advanced economies of around 2% to 3%. Sub-Saharan Africa, Northern Africa, the Middle East, Latin America and the Caribbean all have growth rates in the vicinity of 4% to 6%.
The new world economy is being built with BRICs. Data from the OECD show that China and India have contributed 20% of global GDP over the past decade. Staff at Goldman Sachs observe that when China and India are added to Russia and Brazil, the economic output from these countries will exceed the United States by the year 2018. By 2030 the bulk of global GDP will be generated from non-OECD countries.
All this has big implications for Australia. We’re potentially well-positioned to take advantage of the new world economy. But we face some challenges too. On the upside is the potential for increased investment flows and tourist flows out of Asia into Australia.