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Punching Above Our Weight
Paul Kelly
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If Australia wants to maintain its influence in the world, it needs to keep reforming its economy and increase its population, says Paul Kelly

Australia 's opinion makers love to discuss our identity. Paul Keating left the Lodge eight years ago but the identity debate, while devoid of its previous passion, still exerts its hold over the quality media. This is no bad thing. Yet its endurance highlights by omission the debate Australia refuses to have—over the nature and extent of its power in the world.

This is a subject not to be raised in polite company and rarely to be confronted in the straightjacket of Canberra officialdom. There are other debates that command attention—our ties with America , our engagement with Asia , our counter-terrorism strategies and our defence force structure. But as a nation we prefer to discuss the various parts of our existence rather than the totality of our existence.

This is because we have belatedly learnt how to behave in civilised company. We know that the old fashioned debates we once had about power were infected with racism, imperialism and a cultural cringe that could only dismay today's sophisticated and cosmopolitan Australians. Past leaders such as Billy Hughes, Arthur Calwell and ‘Black' Jack McEwen were obsessed with Australia's power, or rather its lack of power, and the ideas they championed of nationalistic imperialism, racial-based mass immigration and an unforgiving protectionism are now out of sight and out of mind, interned as the aberrations of political primitives.

There is one discussion that we do have about power. It is about the morality of its use. As academics and journalists are less subject to moral and religious codes in their personal lives so their claims to be moral guardians of Australian policy have become more presumptuous and pompous. Their broad conclusion is easy to summarise—the Keating Government was immoral and the Howard Government is more immoral. Keating's offence was to seek a personal relationship with President Suharto to leverage a series of foreign policy objectives. Howard 's offence is deeper: it is the absence of any moral conscience in his pursuit of objectives from East Timor 's independence to border protection to his alliance with President Bush in the so-called war against terror. When survival is not an issue then morals command a premium.

Our focus on morality helps to substitute for any sustained debate about national strategy. This is because in the two generations since the Vietnam War Australia's strategic circumstances have been relatively benign. (It also reflects our ‘she'll be right' fatalism). Australia is a more confident nation today and is conscious of its transition to national maturity. Sooner or later, however, it must confront the strategic debate inherent in its national situation.

The coming decline of Australian relative power

A premonition of the problem is identified in Making Australian Foreign Policy by Allan Gyngell and Michael Wesley when they report a survey they conducted of DFAT's policy officers (242 responded). While 51% agreed that Australia was important in Asia , nearly half, 46% disagreed. Only 30% felt that Australia ‘is able to influence major issues in ways important to Australia '. And 52% said it was now harder for Australia to influence trends in world politics. These are the people, of course, charged with this precise task.

It is fashionable to debunk the Government's 1997 Foreign Affairs and Trade White Paper that missed the Asian financial crisis but its arguments have a long-run validity. The White Paper warned that the disparity in growth rates between Australia and industrialising East Asia meant that the gap in economic size, technological and industrial sophistication will narrow, and, as a result ‘Australia will be able to rely less on its strategic and economic weight in the region to achieve its policy objectives'. In short, its relative power is in decline.

This idea is no longer popular. Since the Asian crisis the Howard Government has been an exponent of the opposite view. It argues that our influence in the world is increasing (when has any government said otherwise?) with Foreign Minister Alexander Downer insisting that Australia is a very significant nation and the world's 13th largest economy. However, notwithstanding such cyclical trends, the challenges that face Australia are immense.

They begin with the 1997 White Paper's projection of a relative decline in Australia 's ‘hard' power in its own region. The best two measures that define our ‘hard' power are population and GDP. At Federation some of the Founding Fathers dreamt that in 100 years time Australia would have a population of 50 million or aspire to become a second United States . But its arid centre and distance from European cities defied such dreams. Australia is dwarfed by its neighbours— Indonesia (215 million), China (1.3 billion), India (1.1 billion), Thailand (64 million) and Malaysia (25 million). Current trends suggest that over the next half century this gap between Australia and its region will increase and that it will increase in proportional terms.

Australia 's economic growth over the past decade tops the rankings among the industrialised OECD nations. It has been a stellar performance. But many East Asian nations at an earlier stage of economic development than Australia can be expected to record higher growth rates in coming decades. When the ANU's Professor Glenn Withers superimposes current economic trends and population projections he finds that Australia 's GDP ranking slips by mid-century from sixth to 11th in the Asia-Pacific. Indonesia , Thailand and Hong Kong —all smaller economies than Australia 's today—would be larger. China would be more than 30 times as large; Thailand now a third the size of Australia 's economy would be larger. It is true that Australia benefits from being in a dynamic region. However, as the 1997 White Paper says (or sometimes leaves unsaid) these economic trends mean the advantages Australia enjoys in technology and economic weight will be eroded or reversed over time.  

It is easy to say that such long-run trends defy precise prediction. It is however difficult to argue that this trend is improbable. And if it is probable, then this decline in Australia 's ‘hard' power must have serious consequences for its future influence.

Strategic realities

The situation is compounded by a series of strategic realities. First, unlike the situation facing many other middle powers there is no political or regional economic union for Australia to join. Australia will not join the European Union. It will not become a state of the United States . It will not be accepted as a fully fledged member into any subsequently created East Asian economic union. In short, it will not find safety in numbers by trading away sovereignty to enter a regional federation. Its location and the absence (apart from New Zealand) of neighbours at a comparable stage of economic development means that Australia's destiny will be determined as a free standing nation state and not as a component in a larger political, economic or regional bloc. This will be the situation regardless of how many current model FTAs Australia signs with the United States or anybody else.

In this sense the contrast between Australia 's strategic circumstances and those of the original member nations of the old British Empire are illuminating. Ireland has solved its centuries old dilemma by joining the EU with some panache. South Africa is destined to a leadership role within its own deeply troubled continent. Canada , in security terms virtually co-terminus with the US , is fully integrated into the US economy (which takes more than 85% of its exports). Finally, the United Kingdom is a member of the EU outside the Euro zone, enjoys its trans-Atlantic links and is a member of NATO. These constitute for our former Empire partners an intensity of regional bonds and networks that transcend any comparable ties Australia is likely to create with its own geographic, political and economic partners.   

Second, Australia is in a region where dislocation and conflict are on the rise. Australia is the metropolitan power in the South Pacific and a key player in a trouble-afflicted South East Asia . The South Pacific is increasingly beset by state failure and self-determination disputes; witness the recent crises in Fiji and Solomon Islands and the alarm in Canberra about Papua New Guinea 's stability. The future of East Timor remains problematic. South East Asia represents an intersection of rising Muslim extremism, growing secessionist disputes and weak central governments, notably in Manila and Jakarta . The Howard Government's 2000 Defence White Paper said that Australia ‘cannot be secure in an insecure region' yet our own region is becoming more insecure and the forces driving such insecurity will not be expended soon.

As a consequence Australia will have to assume a greater role within its own neighbourhood not just as a security partner but to uphold civil society and check the drift towards failed states. This awareness is seen in the Howard Government's more interventionist approach to Papua New Guinea and Solomon Islands . The threat of Islamic terrorism will drive Australia into deeper collaboration with Indonesia , the Philippines and other regional partners—a direction set after the Bali bombing.

Third, as a free standing middle power Australia is highly exposed to the impact of globalisation. In the globalised world relative economic power is changing faster than before. The consequences of nations getting things wrong (for example Indonesia and Thailand in the Asian crisis) are worse than before and the dividends that flow from getting things right (witness Ireland and Australia itself) over the past 15 years can be immense. Globalisation also demands the management of multifaceted change. There is not much point being a superior electronics producers if your financial system is broken (witness Japan) or a major resources producer if you have a susceptibility to systemic failure (witness Argentina) or being the world's biggest oil producer if you are a dysfunctional society exporting terrorists (witness Saudi Arabia). One of the laws of the globalised age is that you are only as strong as your weakest link.

The point, overall, is that Australia 's strategic circumstances are unique. Our national debate needs to be anchored more firmly in this reality. Australia 's situation is not that of Sweden or Canada or Japan and whether the issue is global people movements or the Iraq war or the Kyoto Protocol it is to be expected that Australia 's response will reflect its unique national interest. The revival of the ‘national interest' phrase—it appears in the title of both 1997 and 2003 foreign policy White Papers—is welcome. There will always be differences over what constitutes the national interest but its injection into the foreign policy language of Coalition and Labor helps to re-focus the public debate.

The economic response

Given Australia 's position as outlined, what constitutes a strategic national response?

It begins with a recognition that ‘hard power' assets are important and that Australia's future influence will be determined, in part, by these assets—GDP, population size and technological sophistication.

Our improved relative economic performance since 1983 has been a trigger for favourable global re-assessments of Australia . Globalisation while constituting a challenge for Australia is also a distinct opportunity. Australia has been more successful in adapting to globalisation than many other nations. This is a function of our ability to embrace economic reform and a more flexible economy, the quality of our institutions and governance and our capacity to maintain a skilled workforce. However despite this success there is a deep uncertainty about the place of Australia in the global economy and the political left and right seek to repudiate the framework of the past generation.

The logic of Australia 's position is to convert the non-availability of any political or economic union into a plus—that means becoming a state-of-the-art exemplar of the globalisation model. It requires becoming one of the most open and competitive economies in the world exposed to global markets and the disciplines they demand. This is the direction in which Australia has been heading since 1983, however there is a reluctance among political leaders to articulate this goal as a national strategy.

This is because they fear it will frighten too many people and vested interests and, in turn, provoke a backlash. This reflects the Howard years— Howard is a ‘two steps forward and one step back' reformer, not the neo-liberal depicted by his critics. However this political/psychological threshold needs to be crossed. The Australian people now expect economic progress and such progress is maximised by making Australia a model of successful globalisation or, put another way, making globalisation work in our favour. The sooner this reality becomes explicit in our political dialogue and public policy the better.

This recognises that our economic destiny is more in our own hands than many concede. For example, the Secretary to the Treasury, Dr Ken Henry argues that the best response over the coming decades to the ageing of the population is to tap the sources of faster GDP growth for Australia . This involves further reform to labour, product and financial markets, lifting the workforce participation rate, lifting skills levels, improving the education system from early childhood to university to lifelong learning, reforming welfare to promote the transition from welfare to work, and encouraging greater microeconomic reform by strengthening competition, efficient resource allocation, boosting productivity in the water, energy and transport infrastructure and fostering a culture of innovation. It is a daunting list—and the discretion in this matter is entirely our own.

Putting a premium on this reform agenda is not to underestimate the benefits to Australia of either closer trade and investment ties with the US or our emerging role as a supplier to China's expansion—prospects that can excite the imagination of politicians and publics. The deeper integration of Australia into both the US and Chinese economies is important and historic in its own right. But it is part of a larger story—the internationalisation of Australia 's economy and society as the best guarantor of its future growth.

In this process Australia is learning that a market economy creates a network of global stakeholders and that ours are more diverse than is usually appreciated. Our major region for trade is Northeast Asia; our six main trade partner nations are, in order: the US, Japan, China, the UK, New Zealand and South Korea (three from Northeast Asia); the regional bloc that constitutes our most important trade partner is the European Union (our trade with the EU outranks that with the US); and our main investment partners are the US, the European Union (mainly because of the UK) and Japan. This shows Australia as a nation with global economic interests and regional economic priorities.

Population growth

The second strategic response to advance our ‘hard power' is the renewal of Australia 's tradition as an immigration destination. Australia should decide to remain a country of population growth into the 21st century by relying upon immigration and seeking to stabilise the fall in its fertility rate. The ANU's Professor Ross Garnaut argues that the success over the next half century of today's rich countries will be heavily dependent on demography. The rich countries will divide into two camps—most with declining and ageing populations facing the risk of economic stagnation and a small group of rich nations led by the US that take the path of population growth and immigration. This will be one of Australia 's vital choices. Garnaut sees a large gap in economic performance opening between nations of immigration and other rich nations. For Australia it is the choice between a strategy to stay relatively young or submitting to the European twilight of decline.

A decision by Australia to commit to a growth strategy that involves both fertility and immigration would be a sensible response in the national interest. There are political and policy hurdles to such a decision. The political hurdles would arise from being so forthright about population growth. The main policy concerns arise from the contentious debate about whether public policy can influence fertility. The evidence is mixed but that is no reason why the Australian Government should not make its own assessment of this matter in the cause of trying to stabilise fertility decline. Is this not a desirable outcome?

In Australia there is a tendency to denigrate the link in developed nations between population and national power. This is not the case in the US . For example, in his book The Paradox of American Power , Joseph S. Nye Jr . from Harvard University 's Kennedy School of Government, strongly asserts this link. Nye says: ‘Population is one of the sources of power and most developed countries will experience a shortage of people as the century progresses. Today the US is the third largest country; 50 years from now it is still likely to be third (after only China and India ). In its effects on population and the economy, immigration bolsters America 's hard power.' The same argument applies to Australia .

It seems to be an embarrassment in Australia to state this truth. However it was made explicit last year by one of our leading economists, Professor Max Corden , who pointed out that any form of defence ‘costs money and the need is unlikely to increase with population but the capacity to pay for it will'. Corden said: ‘I have no doubt that Australia's influence, whether in the region or the world, would increase if it were a substantially larger economy able to provide more funds in aid, in contributions to international organisations or in joint international action.' He went on to say that ‘there are many ways in which other countries can benefit or harm us, and also many ways in which we can do some good in the world—if that is our desire'.

The difference between having a population growth strategy and not having a population growth strategy could be significant. The successful combination of two policies—strong economic growth and strong population growth—would exert a significant impact on Australia 's GDP rating by 2050. For example, in his recent BCA paper Glenn Withers argues such a trajectory would take Australia by mid-century towards the GDP of middle ranking European nations and keep us around the GDP of middle ranking Asian nations—as opposed to the low growth path that reduces Australia to a third order of economic weight. It is fatuous to think the latter option would not erode our standing, respect and influence within the region. It would also, eventually, undermine our national self-esteem and encourage the multiple social and equity problems that come with low economic growth and population decline.

The conclusion from these arguments about economic size, population growth and productivity is the interaction between domestic and foreign policy— Australia 's success in the world will be a function of its success at home. The challenge facing Australia overall is to increase its capacity to meet its responsibilities.

For many years, indeed for decades, our diplomatic mission has been captured in the phrase that we are ‘punching above our weight'. This is the ritualistic boast of our Prime Ministers and Foreign Ministers. But it is not just a boast—it is engrained into our foreign policy culture and how Australia sees its role in the world. It implies that we possess an influence beyond our power.

However the phrase is evidence that our focus has been on punches, not the weight. The reality is that any serious long-run view of Australia must also focus on its weight. The strategy should be to increase that weight—because it is weight that matters and it matters for middle powers, not just for superpowers. It is as though we have gone to the races and are betting on the jockeys and not the horses. We need to enhance the weight we are so proud to punch above.

About the author

Paul Kelly is Editor-at-Large at The Australian . He is the author of numerous books including The End of Certainty : The Story of the 1980s (1992) and Paradise Divided: The Changes, the Challenges, the Choices for Australia (2000).

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