Chief economist urges Australia to leverage alternative trade avenues

A chief economist has emphasised the opportunity Australia has in terms of growing its economy sustainably and effectively in the three key areas of renewables, education and new trade relationships.

At the CPA Australia ECTA Unleashed: India and Australia in action event in Parramatta on Tuesday morning (23 September), HSBC chief economist Paul Bloxham gave a macroeconomic update highlighting the need for Australia to pivot away from the traditional growth engines of iron, coal and gas.

Bloxham said the global economy would be “less friendly to Australia” as demand from China and the rest of the world shifted towards consumer and service-based industries, rather than minerals and fossil fuels.

“What that means is we have to pivot into other things. We have to find other drivers of our growth. It's not going to be iron or coal and gas. What's it going to be? Well, part of it's going to be making the energy transition ourselves,” he said.

“We have been slow at making the energy transition, and we need to move faster, and that's important for two reasons. One, because we need energy security ourselves, and two, because once we've got a lot more renewable capacity.”

Bloxham said the second avenue, education exports, was an avenue Australia already leveraged quite well; however, it was noted to be a fundamental growth opportunity as other “big players” were accepting fewer students.

Bloxham noted that, based on America and Canada not wanting as many students, “the time was now” for Australia to increase its presence in the space.

“We can take more [students]. We should be taking more. This, to me, is a great opportunity that we just haven't latched onto as hard as we should, because we're more concerned about a housing supply problem,” Bloxham said.

“Fix the housing supply problem separately, focus on education as a growth engine. That's my answer.”

Third, it was suggested that Australia look into alternative countries that could widen its trade routes and relationships, such as India.

From his perspective as a macroeconomist, Bloxham shared a question he often pondered: why hadn’t Australia strengthened its trade relationship with India, seeing as it was home to 1.5 billion people and was one of the fastest-growing and emerging economies on the planet?

Based on this, Bloxham said both the answer and the challenge were identifying how Australia as a nation could trade more and how to “furnish it” efficiently, as well as leveraging people-to-people connections with Indian Australians.

“Because the global economy is investing in other places, we need to work on these other growth engines, the renewables transition, the education export story and the new trading partners to the south of us that are the fastest growing parts of the global system.”

Within his presentation, Bloxham also reflected on the recent global economic activity induced by US President Donald Trump and his various tariff decisions.

According to Bloxham, Trump’s decision had and would continue to create waves of “big change and considerable uncertainty”.

“Economists think that what he's doing in terms of economic policy is probably going to lead to higher US inflation. If you're lifting tariffs and straining migration, you're constraining key inputs into production in the US, therefore delivering a constraint on supply, which will likely see a pickup in inflation,” he said.

“This combination of the collection of measures is likely to both weaken US growth, not tip them into an outright contraction. If you think about what it means for the global economy, this is likely to weaken global growth.”

“The US is going to be a lesser source of demand for the sorts of things that the rest of the world produces. That's likely to weaken the global growth story and see a slowdown across the rest of the world, and for the rest of the world, economists think this is likely to be primarily disinflationary.”