ANALYSIS
Australia's economic ties with the US shouldn't be forgotten
USSC CEO Professor Simon Jackman
A narrative about our economic reliance on China is a mainstay of the
Australian national conversation. This not just an elite perspective. Public opinion research by the US Studies Centre reveals that an overwhelming 71 per cent of Australians incorrectly nominate China as Australia's largest source of foreign investment.
Too often Australia's national strategic discussion is shoehorned into a simple dichotomy: "balancing" our prosperity (read "trade with China") and security (read "the US-Australia alliance"). Reality is not so simple. This simplification of Australia's circumstances is alluring in its simplicity, yet dangerous in its lack of rigour, depth and foresight.
The two-way investment relationship between China and Australia has grown to be worth a cumulative A$163 billion. But this is a mere 9 per cent of the size of Australia's two-way investment relationship with the United States - now valued at a mammoth A$1.82 trillion, which is about 90 per cent of the value of the entire Australian share market and roughly equivalent to a year's worth of Australian GDP. More than one in four dollars invested in Australia from abroad can be sourced to the United States. And similarly, more than one in four dollars of Australian investment seeking yield abroad goes to the United States.
Despite this extent of American investment throughout the Australian economy, in the same USSC survey of 1054 Australians, only 17 per cent correctly identify the United States as
Australia's largest investment partner. Like much about Australia's relationship with the United States, the depth and longevity of the investment relationship seems to be taken for granted, under-appreciated in its value and contribution to Australia's prosperity.
So as Australia faces down its first recession in almost three decades, what do these facts portend about global and national economic recovery?
First, amid the most pressing strategic circumstances since at least the Cold War, Australia's economic relationship with the United States seems more resilient than that with China. This seems surprising. On the one hand, Trump's election and the way "American First" has found voice in US trade policy has been a source of global disruption and uncertainty. Multilateral
institutions the United States helped create, like the WTO, have been pushed to near breaking point by the Trump administration. Cuts to US corporate tax rates have seen much less capital flowing out of the United States in the past, as American corporations take advantage of the opportunity to repatriate profits built up offshore. Australian exporters have wondered whether they would be casualties in any preferential trade arrangements struck between the United States and China.
But for all this turbulence of the last three years, the two-way investment relationship between Australia and the United States has risen by A$280 billion, a remarkable result during a period in which the world has largely shied away from foreign direct investment, with the two-way investment relationship between Australia and China having decreased by A$4.6
billion.
As a first-term of President Trump draws to a crisis-ridden close, it's clear even the starkest expression of America first has ample room for Australia.
This article is an excerpt from an article originally published in the Canberra Times.