Doing business amid economic upheaval
Updated
Despite warnings from Australia's Reserve Bank about slowing growth among Australia's main trading partners in Asia, the Federal Treasurer Wayne Swan is talking up the strength of the Australian economy. We take a closer look at Mr Swan's comments, and at the challenges of doing business in the region during the financial crisis.
Presenter: Tom Fayle
Speaker: Kevin Hobgood Brown, chairman, Australia-China Business Council
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HOBGOOD-BROWN: I think he (Wayne Swan) is right. I think the members of Australia-China Business Council and their activities in China find that the Chinese economy is still quite robust. The Chinese Government still has many mechanisms at its disposal to stimulate growth should that be required, but overall we think that the financial future of China continues to be extremely strong.
FAYLE: So there is a reasonably optimistic mood among your members?
HOBGOOD-BROWN: Oh there is indeed. I think that when we consider the challenges to our domestic economy here at home, everybody is being reasonably prudent. But Australia is increasingly engaged economically with its Asian neighbours, in particular, China and that continues to represent great opportunities for growth for us.
FAYLE: But isn't the Australian economy in a sense living on borrowed time, given its reliance on commodities and that many lucrative resources contracts are due to expire next year?
HOBGOOD-BROWN: Well, I think that we're going to see a continuing dance and certainly a cycle in the next 10-15 years in regard to the renegotiation and renewal of these supply contracts. But if you look at the long term projections in China, India and some of our other immediate neighbours, growth there is expected to be strong for the next 15-20 years and so we'll continue to have periods of uncertainty as prices are established and quantities are determined, but that's part of the normal commercial cycle, I think.
FAYLE: But you do expect prices to come back somewhat?
HOBGOOD-BROWN: I'd leave the price projections on commodities to people who are a little bit more expert in that area. But there is no indication that there is going to be a long term slowdown in places like China. So I think that prices will remain strong, whether they are going to retreat a little bit from time to time, who knows. But I think as any long term supplier would be interested in, we can be quietly confident that our major customers are going to be buying for sometime to come.
FAYLE: One impact of the current financial crisis is the dramatic weakening of the Australian dollar. It's down something like 24 per cent in three months. How has that been impacting trade with China?
HOBGOOD-BROWN; Well look, it hits everybody slightly differently. Many exporters of other things that we sell here in Australia are of course pleased to see the dollar go down a bit, because it makes their products a little bit more competitive overseas. And so when you look at some of the analyses that have been done on the swing of currencies, there is always some groups that benefit slightly and other groups that are hurt slightly by the currency going up or down. I think the long term issue to really remain focused on is whether our own economic essentials are strong here in Australia, and by all accounts they appear to be.
FAYLE: Now China's Premier, Wen Jiabao and Australia's Prime Minister, Kevin Rudd, by all accounts have been chatting on the phone about the need for greater coordination and cooperation. Do you give these sorts of exchanges much weight, or is it just going through the diplomatic motions?
HOBGOOD-BROWN: No, no, it's more than just a diplomatic motions. I think that Prime Minister Rudd's personal rapport with the leadership in China makes a huge difference, in terms of the confidence and transparency of those communications.
As many of your listeners would be aware, the People's Bank of China, which is the Central Bank of China established a liaison office in Sydney a year before last. That helps with the flow of information and I think a growing level of confidence between the two economies and their financial managers.
