Tag Archive for: economy

Bookshelf: How China sees things

Here’s a book that looks not in at China but out from China.

David Daokui Li’s China’s World View: Demystifying China to Prevent Global Conflict is a refreshing offering in that Li is very much a part of the Chinese system, despite his studies and appointments at US universities. He is a professor of economics at Tsinghua University and has been a member of the monetary policy committee of China’s central bank. And while he defends Chinese economic and political authoritarian governance, he offers many insights and dispels some myths.

China’s World View provides a detailed explanation of the Chinese approach to governance. What is perhaps the most striking is the array of consultative processes in this authoritarian system. Li himself is often called upon to advise the Chinese Communist Party and government on economic policy. Li writes of the paternalistic relationship between government and citizens, and how the party is sensitive to public opinion and possible discontent. Even authoritarian governments depend on popular support.

Li emphasises that ‘history is the key to understanding today’s China’, and he writes that ‘Chinese people are accustomed to having a long-term view and perceiving history in cycles’. Elite views are particularly shaped by the century of humiliation—from the Opium War in the early 1840s to the end of the Japanese invasion in 1945—and the tumultuous period under Mao Zedong’s leadership.

Li argues that history helps understand the Chinese government’s extraordinary stimulus in response to the global financial crisis, representing 7.5 percent of GDP in 2009 and 2010. Premier Wen Jiabao ‘did not wish to be recorded in history to be a slow-acting decision maker facing a brewing crisis’. Many Chinese economists have since attacked Wen for driving Chinese debt to very high levels. But Li is convinced that Wen made the right decision at the time. It is also true that authoritarian regimes see crises as existential threats and that Wen may have acted out of fears for regime security.

China practices ‘respect-centred’ diplomacy through which it seeks respect and moral recognition, according to Li. Chinese foreign policies, such as the Belt and Road Initiative, are not solely in pursuit of economic and other interests. Such Belt and Road partners as Sri Lanka may not agree. Li writes that US President Donald Trump’s biggest mistake was his lack of respect for the Chinese government. (China’s World View was published in March 2024, before Trump’s return to the White House.)

Li’s discussion of respect-centred diplomacy makes no mention of China’s infamous wolf-warrior diplomacy, nor China’s sometimes vindictive reactions when it feels that it is disrespected. There is no reference to China’s economic sanctions on Australia, in response to the call for an independent, international enquiry into the origins of Covid-19. Indeed, there is no mention of Australia in the book.

So what is China’s world view?

According to Li, there would be four main aspects to the mainstream perspective of China’s world view.

First, China believes in mutual respect between countries for political and ideological diversity, meaning the West should not interfere in Chinese politics. There is no mention of Chinese interference in other countries using grey zone and other activities.

Second, economic collaboration should be the cornerstone of international cooperation, since politics can be divisive.

Third is historical conservatism, meaning that China does not seek to overturn history, such as Russia’s seizure of Chinese lands during the 19th century. But accepting history does not limit Chinese claims to Taiwan, the Senkaku Islands and the South China Sea.

Fourth, China does not seek to expand its territory (!).

Li is convinced that the rise of China is beneficial for the whole world as it has increased opportunities for others and expanded the provision of global public goods. Moreover, friendly competition between China and the United States is fostering innovation and progress in many fields.

China’s World View is an important book. Not many Western readers will be convinced by Li’s defence of the Chinese socio-political system, but he does offer important insights. Moreover, with China being an unavoidable reality in international politics and economics, the West must understand Chinese thinking, and Li’s book goes some way in helping such understanding.

China is on course for a prolonged recession

The risk of China spiralling into an unprecedentedly prolonged recession is increasing.

Its economy is experiencing deflation, with the price level falling for a second consecutive year in 2024, according to recent data from the National Bureau of Statistics of China. It’s on track for the longest period of economy-wide price declines since the 1960s.

Coupled with the collapse of the property sector, a looming trade war with the United States and demographic and debt overhang challenges, much of the Chinese public has lost confidence in the economy and its leadership.

The country has the ingredients for a recession, and not a short one. It has spent too much on investment and needs to turn to consumption as a source of demand, but people are unwilling to spend. They have long had high savings rates, and now deflation is further discouraging spending. So do falling property values, ageing of the population and excessive corporate and government debt.

Getting out of such a recession will be hard, because of the challenge of restoring confidence and getting households and businesses to spend more. Since local government debt is high, expanding public expenditure to stoke demand would worsen economic imbalances.

Current deflation is a result of the Chinese government’s long-standing adherence to the China model, which consists of extensive state control and ownership of resources, limited free-market activity, and authoritarian CCP leadership. The model fuelled both the country’s economic miracle and its most intractable problem: a structural imbalance between investment and domestic consumption.

To sustain fast growth and cushion economic downturns, China has long relied mainly on investment in infrastructure, property and manufacturing. Household consumption is seriously constrained through unfair policies and a discriminatory social security system. These include strictly limited rights to move for work, weak human rights protections and relatively low benefits for migrant workers.

In the 30 years to 2012, investment gradually rose from 32 percent to 46 percent of GDP, while the share of final consumption declined from 66.6 percent to 51.1 percent. The high rate of investment financed necessary infrastructure upgrades and modernised China’s production technology, helping the country become a global manufacturing powerhouse. However, over time, high rates of investment led to severe overcapacity in key industrial sectors, particularly after the 2008 financial crisis.

Under Xi Jinping’s leadership since 2012, the government has persisted with an export-oriented policy. In 2023, investment accounted for 41.1 percent of nominal GDP (versus a global average of 24 percent), with consumption representing 56 percent (versus a global average of 76 percent). China’s trade surplus in 2024 reached a record US$992 billion. This may displease Donald Trump who may choose to implement trade barriers that could further destabilise the Chinese economy.

Xi has failed to progressively institute a welfare state to create the confidence needed for boosting household consumption. He believes welfarism encourages laziness. So, amid ongoing economic and political uncertainty, families have long prioritised cutting expenses and increasing savings, which has further depressed domestic consumption.

In the second quarter of 2024, the central bank’s income confidence index registered 45.6 percent, down 4.4 percentage points from the first quarter of 2022, when the government imposed strict controls against Covid-19. China’s household savings rate surged to 55 percent in 2024, up 11.2 percentage points from 2023 and the highest level since 1952.

Xi has made it clear that he intends to stay the course, and is doubling down on state economic control. China has shifted away from market liberalisation, reverting to state-led development and industrial policy. The private sector has lost out. The share of private enterprises among China’s largest listed companies declined sharply over three years, from 55 percent in mid-2021 to 33 percent in mid-2024. China’s foreign direct investment dropped 27.1 percent in 2024, following an 8.0 percent decline in 2023.

The rapid ageing of China’s population will make it difficult to boost domestic consumption and rein in ballooning debt over the next decade.  The pension system is at risk of running dry by 2035, further exacerbating structural imbalances that policymakers have vowed to address.

With never-ending anti-corruption and ‘strictly governing the Party’ campaigns, Xi has taken China back to a personal dictatorship after decades of institutionalised collective leadership. Under the centralised one-man rule, any efforts by local governments and officials to break the rigid political system risk severe punishment.

More and more laws and regulations have been enacted to surveil the population, driving up social costs. Reformers and advocates of greater freedom of thought and expression have been silenced under Xi’s crackdown on human rights. The political reforms in the Deng Xiaoping, Jiang Zemin and Hu Jintao eras, which unleashed economic dynamism and spurred innovation, have come to a halt or even regressed.

The government’s stimulus measures have failed to boost economic recovery. Since July 2024, the youth unemployment rate has remained above 17 percent.

The economy might not yet be in recession—meaning contraction in GDP—but it is now growing very slowly by its standards of the past four decades. The government estimates GDP was 5.0 percent higher last year than in 2023, but researchers at Rhodium Group estimate growth was in fact only 2.4 to 2.8 percent.

The strategic importance of the Whyalla steelworks

Australia has been losing so many sovereign manufacturing capabilities over the past two decades that it is hard to know where to draw the line. The Whyalla steel mill may mark the spot.

The Australian and South Australian governments certainly seem to think so. Prime Minister Anthony Albanese on Thursday said the two governments would spend an immediate $484 million, mainly to keep the works going during the period of administration that the South Australian government initiated on Wednesday.

And they allocated $1.9 billion for upgrading the plant when it is under a new owner. It has been owned by GFG Alliance, chaired by British businessman Sanjeev Gupta.

The machinery of the Whyalla steel works is antique, having started production in 1965, and it supplies, in a good year, only about 15 percent of Australia’s steel needs.

However, it is the only domestic source of long steel products, such as structural steel and rail. The steel billet it sends to Newcastle for rolling is the only domestic source of reinforcement bar for the construction industry.

Bluescope’s Port Kembla steelworks, by contrast, is focussed on coil, which is turned into flat products such as roofing.

Whyalla’s steel is relatively free from impurities, meaning it has strategic importance for military manufacturing, including for the Benalla munitions plant. Electric arc furnaces cannot match the quality of blast furnace steel. In addition to Whyalla, Sanjeev Gupta’s GFG Alliance controls arc-furnace steel operations at Laverton in Melbourne and Rooty Hill in Sydney.

The structural steel and reinforcement bar coming from Whyalla could all be imported—indeed last year a record 3.1 million tonnes of steel product was imported as distributors sought to manage their insecurity over Whyalla’s steel supplies. There is no alternative global producer of Whyalla’s rails, which are made to unique Australian standards.

There was no federal government intervention last year when chemical company Qenos shut down the last two petrochemical plants in Australia capable of making polyethylene, the essential ingredient for most plastic products. The plants are to be demolished to make way for industrial property development.

Australia’s only stainless steel plant was shut in 1996, the only tinplate plant in 2006 and the last aluminium rolling mills in 2014.

The motor industry, which was the most advanced integrated machinery manufacturing operation in the country, was shut down between 2015 and 2017.

Market forces have been allowed to bring the destruction of domestic manufacturing capability, with the standout exception being the Morrison government’s 2022 decision to extend subsidies to ensure the survival of the last two oil refineries, Viva in Geelong and Ampol’s refinery at Lytton in Brisbane. This followed the closure of Exxon’s Melbourne refinery and BP’s Kwinana refinery the previous year.

There was a strategic argument that Australia needed to preserve a domestic capability to make diesel fuel, even though the remaining refineries are only a fraction the size and efficiency of the plants in Singapore, South Korea and China that supply most of Australia’s needs more cheaply.

The government’s Future Made in Australia strategy for reviving Australian manufacturing has two streams: one devoted to sectors that will contribute to lowering carbon emissions, and an ‘economic security and resilience’ stream aimed at supporting sectors vulnerable to supply disruptions and that require support to unlock sufficient private investment.

The second stream looks tailor-made for Whyalla. While the federal government is presenting its rescue as a green-steel initiative, what is most urgently required is a reline of its existing coal-fired blast furnace. The technology for hydrogen-fuelled blast furnaces, which could make green steel, is not yet proven and would not be viable for Whyalla.

While government rescue finance is welcome, the plant needs a corporate saviour.  Buying the Whyalla works is probably not what Bluescope Steel has in mind for strategic diversification, although a national purchase would have political appeal. South Korea’s Posco was interested in Whyalla when the plant’s former owner got into financial difficulties eight years ago. The government may be able to use the strength of its relationship with Japan to entice an operator such as Nippon Steel into the fray.

What is disturbing is that the decision to provide support is reactive and ad hoc, as was the case with the decision to save the last two oil refineries. There is no strategy spelling out what manufacturing capabilities Australia possesses that must be preserved in the interests of sovereignty.

The Swiss resources group Glencore said late last year it would shut its Mount Isa copper mine but that its copper smelter in the town and its Townsville copper refinery would keep going with third party supplies. Should those operations become marginal, would an ability to produce refined copper be deemed strategic?

Diesel, steel and cement are arguably the most basic industrial inputs to national security, for which a domestic production capacity should be retained.

There is an interesting story about cement. In the early days of the Covid-19 pandemic, many Chinese businesses faced mandatory shutdowns and China’s exports plunged. Australian quarries providing the stones to turn cement into concrete soon found they could not get the cutting tools they relied upon, raising concerns about their continued ability to operate. There were other manufacturers in Germany, but there was also a rush on their supplies.  Chinese cutting products returned, but the episode showed that even concrete is vulnerable to trade disruption.

Whatever the arguments for retaining a domestic ability to make steel, dreams of self-sufficiency or autarky are not realistic.

Without policy changes, Northern Territory will miss economic target

The Northern Territory is on track to badly miss its key medium-term economic target—to expand its economy to $40 billion by 2030, up 50 percent on 2020. This is the major finding of a report by consultancy AEC commissioned by the Darwin Major Business Group (DMBG).

Policy changes will be needed.

The miss is no small problem. As the strategic temperature in the Indo-Pacific rises, as climate change accelerates and as economic uncertainty grows, achieving economic policy success in Northern Australia has become increasingly important.

The Northern Territory occupies some of the most important strategic geography in the Indo-Pacific region. Fully exploiting this geography requires economic and development policies to deliver a scalable industry base and multi-user facilities.

The Northern Territory government set the $40 billion target in 2022 after Australia came out of the Covid-19 pandemic. It was based on work by what was known as the Territory Economic Reconstruction Committee (TERC). The target implied annual average growth of about 4 percent from 2020 to 2030.

Chaired by former Dow President Andrew Liveris and former territory chief minister Paul Henderson, the TERC had ensured the target was grounded in high-quality analysis. However, there remained a nagging doubt across the community about the political commitment to the policy goal.

The DMBG commissioned AEC to do a deep dive into 20 Northern Territory development metrics—not just the traditional economic numbers, but also social, capability and capacity indicators.

The leadership of DMBG hasn’t just sought to throw stones at the government. It knows that governments must secure a social licence around economic management, and any conversation equally demands that critics offer legitimate solutions.

AEC’s estimate for the 2030 size of the economy is not $40 billion but $34 billion, implying that gross territory product will have grown not by half during the decade but by less than 30 percent.

In response, DMBG suggests that the government must go much harder at securing private investment—to lean into opportunities, rather than simply facilitate processes that may or may not deliver an outcome.

The same can be said for housing. Construction of houses and flats in the territory has been diabolically weak, putting great pressure on the limited stocks of affordable and social housing. The territory was once a leader around incentives for home ownership, and the DMBG wants to remind everyone of the huge economic benefits that come with it.

The group is also strongly calling for better social order and investment in urban renewal, along with a focus on leveraging public investment.

DMBG has made it clear that its agenda for this work is to spark a conversation—to encourage all sides of politics, the business sector and the broader community to discuss the target and what must be done differently.

It is an unusual move. Usually, political targets are left to the political process to churn through.

The DMBG is not seeking to engage in political theatre. Instead, it is keen for Territorians to buy into the economic growth target with even more gusto than when it was first made, and for very good and ultimately practical reasons.

The $6 billion undershoot would mean fewer jobs, fewer opportunities for the next generation, less self-sustainability for the economy, poorer living standards and weaker tax revenue to fund badly needed social services. For investors, including Defence, it would mean thinner supply chains, a smaller workforce, a weaker infrastructure base and far less surge capacity in times of need.

The current territory government must share DMBG’s and AEC’s concern about reaching the target.

Government officials have privately criticised DMBG for focusing on the target in an election year. But for Territorians and other Australians, the TERC target is more than territory politics. As was the case at federation, economic prosperity in Northern Australia is intrinsically linked to economic and national security. The target is set for that future government, and current policy settings fall short.

As China’s housing market slumps, Australia’s iron ore budget bonanza is unlikely to last

The grim state of China’s housing market has so far had little effect on the iron ore price because its steel mills are diverting their surplus output onto export markets where they are adding to what the OECD says is a crisis of excess steel supply.

While the Australian budget is reaping a bonanza, Western steel mills, including Australia’s Bluescope Steel at Port Kembla and the Whyalla Steelworks, are coming under pressure.

Steel has for decades been one of the most politically sensitive international markets and the surge in China’s steel exports will contribute to an increasingly acrimonious international trade environment over the year ahead.

China’s mills shipped 90 million tonnes of steel to export markets last year, a 36% increase from the previous year and the highest since 2016. China’s steel exports were equivalent to Japan’s total steel production.

‘The ongoing steel excess capacity crisis is currently escalating,’ the OECD said in a review of the industry. The 57 million tonnes of new capacity added last year was the highest in a decade, despite actual sales of steel falling 2.5%. China accounted for just under half the new capacity while Chinese mills are also investing heavily in new capacity in ASEAN nations.

‘The bleak outlook for steel demand and the increasing relocation of steel capacity from China to other regions create a worrying outlook for the coming years. This is also a major obstacle to achieving steel decarbonisation targets,’ the OECD report said.

The state of China’s steel industry is one of the most important external influences on Australia’s economy: Treasury estimates that every US$10 shift in the iron ore price translates to $2.5 billion in the Australian economy and $500 million for the federal budget.

Treasury had expected the iron ore price to drop to an average of only US$60 a tonne over the first three months of this year because of the housing downturn but instead it has been holding above US$130 since November.

China’s official figures showed its steel production collapsing in December, however they were widely dismissed. The Financial Times cited a leading analyst declaring: ‘It is fair to say that we don’t believe these numbers’, arguing there had been no corresponding fall in coke production, which is a key steel input. Nor was there any tell-tale weakness in iron ore prices, which surged from US$105 a tonne in August to average around US$135 a tonne throughout December.

The reason for putting out false steel production numbers would have been to keep annual production within the 1 billion tonne limit set in the latest five year plan which took effect in 2021.

This commitment was made partly to honour China’s pledge to cap its carbon emissions by 2030 and achieve carbon neutrality by 2060. It was also made at a time when the relentless expansion of China’s steel industry had pushed the iron ore price above US$200 a tonne, which Chinese authorities believed was extortionate.

Last year, as the downturn in the housing industry intensified, the Chinese authorities appeared to loosen the reins on steel producers, encouraging them to export what they could not sell domestically. China’s steel production looked like surpassing 1.05 billion tonnes before the suspicious December dive.

Under the five year plan, the steel mills had to shut down 1.15 million tonnes of old and inefficient capacity for every 1 million tonnes of new capacity they built. However, the closures did not keep pace with newly built mills last year.

The default response of the Chinese authorities to weakness in their domestic economy is to encourage investment aimed at export markets. ‘Investment not only generates immediate demand, but also serves as the true driving force for growth,’ an article in an official Chinese journal cited by the Wall Street Journal said.

By contrast, China has rejected the sort of household stimulus favoured by Western economists to counter downturns. In an article published in the Chinese Communist party’s Qiushi journal in 2021, Xi warned of the limits to state support and of ‘falling into the trap of nurturing lazy people through welfarism’.

These priorities have resulted in China having a unique economic structure: investment represents about 43% of China’s GDP, compared with a global average of 25%. By contrast, consumption is just 37% of GDP, against a global average of 62%.

Economist Michael Pettis points out that China represents just 13% of global consumption but 32% of global investment. Globally, every dollar invested needs to be supported by $3 of consumption, but in China, households only take $1.30 for every dollar invested with the rest of the world taking the remainder. Pettis says that for China to keep increasing its investment without producing unsaleable surpluses, the rest of the world would have to cut its investment.

With many nations, including the US, the European Union, India and Australia, seeking to rebuild their manufacturing—decimated by years of cut-price Chinese competition—this is most unlikely.

Republican presidential contender Donald Trump is promising a blanket 60% tariff on all Chinese goods. US steel states like Pennsylvania and North Carolina will be key battlegrounds in this year’s presidential election, so new trade barriers are likely. The European Union is also increasingly focused on the size of China’s trade surplus.

Steel is only one front in this emerging conflict. The same dynamic is at work with electric vehicles, batteries, solar panels and wind turbines.

Australia should enjoy its iron ore-derived budget bonanza while it lasts, ideally trying to bank some of it. It may survive China’s housing downturn, but not a serious trade war.

Integrating climate change into disaster risk reduction strategies

Disasters from hazards such as cyclones, volcanic eruptions and earthquakes exact an enormous toll on economic and social development. Over the past two decades, 1.35 million lives have been lost and US$2.5 trillion in economic losses absorbed as a result of these events. Recent analysis by the World Bank suggests that the annual loss from extreme weather alone now exceeds US$500 billion, and 26 million people are forced into poverty from these events each year.

As disturbing as these figures are, they almost certainly underestimate the true costs of disasters. For example, they don’t include the less documented, smaller but frequent disasters such as flash floods, fires and droughts that occur in both urban and rural areas. Some analysts have suggested that incorporating these events would increase the costs by at least 50%. It’s telling that each year the global wine industry suffers more than US$10 billion in losses from these hazards.

Disasters have a hugely disproportionate impact on less developed countries, where 90% of disaster deaths occur. Although wealthy countries absorb the majority of the total economic losses, the relative economic impact in less developed countries is far greater, equating to over 20% of their average annual social expenditure (in some highly vulnerable countries, the figure exceeds 60%). The destruction wrought by Hurricane Maria on the Caribbean island of Dominica is a tragic recent example: in a matter of hours it wiped out the equivalent of more than 200% of the country’s GDP.

Improvements in disaster management over the past two decades, in particular the establishment of early warning systems and evacuation planning, have contributed to an overall reduction in mortality from disasters globally (notably in places such as Bangladesh, Chile, India and the Philippines). But far less progress has been made in addressing the economic losses, which are increasing rapidly, in some places outpacing GDP growth.

Two main factors account for the accelerating costs: a failure to incorporate disaster risk in planning and investments (examples would be building hospitals in flood zones or construction that ignores seismic risk) and, increasingly, climate change. Over the next 15 years, an estimated US$80–90 trillion is expected to be invested globally in new infrastructure for energy, transport, telecommunications, water supply and sanitation. This new investment will exceed the current value of the entire existing stock. It represents a once-in-a-lifetime opportunity to reverse the increasing economic losses by embedding disaster resilience in the built environment.

Climate change makes this effort all the more essential. More than 80% of major disasters over the past four decades have been from hydro-meteorological hazards (storms, droughts, floods, etc.). They have doubled in frequency and are expected to increase further and intensify.

Arguably, the single most urgent global disaster risk treatment is to reduce greenhouse gas emissions as quickly as possible. The urgency stems from the inertia in the climate system. Even if we could halt all greenhouse gas emissions tomorrow, the climate would continue to warm for hundreds of years as a result of the emissions already released and disaster risk would continue to grow. There’s also a significant possibility of reaching ‘tipping points’ that could trigger sudden, non-linear and irreversible changes that greatly exacerbate hazards and disaster risk.

These two aspects of the climate system require us to reduce emissions well before the impacts become more visible. And they require infrastructure investors and planners to go beyond relying on the historical record of previous disasters to determine standards for resilient infrastructure. They now need to supplement the historical record with a risk assessment that incorporates climate change risk.

Because around 70% of the trillions of new investment will be made by the private sector, this is fundamentally a task for businesses, but with key roles as well for governments. Governments have a responsibility to create the enabling environment (hazard information, climate modelling tools, regulations, etc.) for private sector and community action in these areas. They also need to incorporate climate risk and disaster risk more generally in managing public goods and assets.

Globally, most governments are just beginning to integrate their climate change and disaster risk reduction work and investments. National climate change adaptation plans are usually developed through whole-of-government processes led by environment ministries. National disaster risk reduction strategies are developed through similar whole-of-government processes led by the disaster management agencies. Given the enormous overlap between these two topics, they need to be brought together and embedded in planning and investments with the active engagement and shared ownership of finance ministries and treasuries.

Achieving the global targets to reduce disaster risk that Australia and other countries have endorsed in the Sendai Framework for Disaster Risk Reduction, the international agreement reached in 2015 at the Third UN World Conference on Disaster Risk Reduction, will be impossible without greatly increased global ambition to reduce greenhouse gas emissions.

The UN Oceans Conference and Australia’s blue economy

While a non-binding international call for action on the oceans may be seen as having little political importance for the Australian government, we’re a nation ‘girt by sea’: any movement in the governance of the oceans could have profound implications for Australia’s security and ocean economy.

Without attention given to our ocean estate, we’ll miss the indicators of our changing climate, miss our chances of adaption and mitigation, and miss out on opportunities that can drive our economy, our security and many of the societal benefits that come from our coasts, seas and oceans.

In June, the minister for international development and the Pacific, Concetta Fierravanti-Wells, represented Australia at the UN Oceans Conference in New York.

This was the first global conference focused on ocean issues to advance Sustainable Development Goal 14: to conserve and manage oceans, seas and marine resources for sustainable development. Apart from the minister, Australia was represented by several institutions, such as CSIRO, which attended the many side meetings.

Nearly 180 states participated and agreed to a 14-point call for action that enshrines a greater commitment to global cooperation in the conservation and sustainable use of the oceans. Among the many points raised at the conference were two of great salience for our region: counteracting illegal fishing and reducing levels of marine debris, especially plastic pollution.

As the director of the University of Western Australia’s Ocean Institute recently noted on the latter issue:

Plastics find their way into our oceans from multiple sources and their impact creates a complex problem that will require multifaceted solutions. Approaches will involve reducing production and promoting waste prevention through to reuse and recycling, requiring commitments from governments, industry and communities, and necessitating the employment of scientific and technological resources.

Oceans are critical to our security, with our dependence on maritime commerce and the maintenance of freedom of movement for shipping. The oceans provide resources and offer a defence against possible aggression. The maritime domain over which Australia has some jurisdiction is nearly twice the area of the continental landmass of Australia.

The UN’s call to action in June highlighted the importance of the blue economy, recognising the oceans’ role in connecting international trade and business, and as a source of income from their resources.

The Australian Institute of Marine Science has valued our maritime-related industries at $73 billion, and growing. By 2025, our oceans are expected to contribute $100 billion a year to our economy.

But Australia has a piecemeal approach to ocean development. When it comes to northern development, for example, the focus has been squarely on the landward side, with little heed paid to the critical role of marine developments in northern Australia. There was little attention given to the critical role of marine science in the Northern Australia White Paper. Australia’s exclusive economic zone to the north exceeds the area of land mass being considered for development. It’s expected that the Project Sea Dragon aquaculture farm on the far north coast of the Northern Territory will be the world’s largest black tiger prawn producer by 2025.

We’ve also undervalued the contribution our marine science research efforts can make to building relationships in our ocean neighbourhood. It’s likely, for example, that, given Papua New Guinea’s status as an archipelagic country, next year’s APEC summit in Port Moresby will have a focus on ocean themes and the blue economy.

We’ve got a national marine science plan that identifies the importance of the blue economy, but marine science in Australia suffers from the vagaries of political cycles and austerity.

Our new $120 million bluewater research vessel, the RV Investigator, for example, is tied up alongside the wharf in Hobart for half the year.

Our decreasing funding of marine science was recently highlighted in a UNESCO – Intergovernmental Oceanographic Commission stocktake on global ocean science: despite our enormous marine estate, our research fleet is one of the smallest and one of the oldest in the world.

While we’re acquiring a new icebreaker, currently being built in Romania, it will be solely focused on our Southern Ocean research, leaving the RV Investigator as our main bluewater vessel. We need to explore the benefits of a national fleet approach to the acquisition and management of Australian vessels across defence, civil oceanography, polar logistics, and customs and border security.

Countries can’t be good at everything, but we should try to be a smart nation in ocean affairs. To strengthen our Indo-Pacific oceans leadership, we should appoint an ambassador for oceans to make the most of the political and economic opportunities from oceans policy for the region.

We need a coordinated approach to the blue economy. Australia’s Integrated Marine Observing System (IMOS), through its network of instrumented moorings, coastal high-frequency radar and autonomous gliders, has allowed us to better understand our ocean environment.  IMOS should serve as motivation for further investment in marine science as the Australian government considers the National Research Infrastructure Roadmap.

To reflect a truly whole-of-government approach, an office of oceans affairs should be established in the Department of the Prime Minister and Cabinet.

The oceans and seas around Australia are central to our future prosperity and security. We should view the seas as a bridge that links Australia with the world. The fisheries management regimes we have, for example, are well developed and we should help build capacity across the region, which depends so heavily on fish for protein.

Last year, then US Secretary of State John Kerry called Foreign Minister Julie Bishop an ‘Ocean Champion’.

But the oceans are changing at an alarming rate, and we need to search for the connections and the relationships in our maritime region that can champion a better ocean environment for us all.