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Myth 1: the China-led boom in Asia doesn’t affect most of us. Nothing could be further from the truth. The five income tax cuts handed down by the Howard and Rudd governments were paid for by higher company tax take, thanks in part to booming mining profits.
The terms of trade – the value of exports compared with the value of imports – has soared, boosting national income and adding up to 2 per cent to economic growth annually. That affects all of us, from a stronger employment market to higher interest rates. The price of wages, houses, food and a host of other daily items have risen, or fallen, thanks to the Asia boom.
Myth 2: it’s the miners, not the rest of the economy, reaping the rewards. Again, not true. Ask Australia Post management, who have negotiated a joint venture in China. Or speak to law firm Mallesons Stephen Jaques or mining services group Orica. They both earn substantial income thanks to China. In fact, about 25 per cent of Australia’s exports to Asia are non-commodities. The top nine export destinations for local education providers are Asian nations and the business is worth more than $11 billion annually.
Myth 3: big business can get in on the party but it’s tough for small business. That is simply not true. There are plenty of big companies pushing to get into Asia, such as insurer QBE, Australia and New Zealand Banking Group and Commonwealth Bank of Australia, law firms and accounting firms. However, there are about 4500 small and medium Australian businesses working with Chinese companies.
In fact, there are 3000 Australian businesses of all sizes with a physical presence in China, from the behemoths of BHP Billiton and Rio Tinto through to one-man operators.
Myth 4: China is flavour of the month, a bit like Japan in the 1980s, but it is a cyclical phenomenon and the growth phase will pass. True, China is flavour of the month and there is a cyclical element to it. Nonetheless, the rise of Asia and particularly China represents a structural shift in the Australian economy. Reserve Bank of Australia Governor Glenn Stevens and BHP Billiton chief executive Marius Kloppers have both recently pointed out the long-term benefits of China.
Australia’s economic prosperity is now well and truly tied to Asia, especially China. The growth rates of China, India and other countries in the region will dwarf most of the rest of the of the world in 2010 and beyond, the International Monetary Fund reports.
This year, China will expand at a 10 per cent clip and India will grow 8 per cent. Compare that with the United States (2.7 per cent), Europe (1 per cent) and Japan (1.7 per cent).
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