Treasurer Josh Frydenberg has waned Australian businesses to lessen their reliance on China as tensions with the rising superpower drive domestic policies aimed at diversifying the economy and protecting critical infrastructure.
In one of the most direct speeches by a cabinet minister on China relations, the Treasurer said Australia will always seek partnerships but “heightened strategic competition is the new reality we face … now and likely into the future”.
“Our task is to prepare for and manage this competition,” Mr Frydenberg said in a speech to the Australian National University on Monday.
The government is facing criticism for a lack of a holistic strategy on economic diversity or adequate attention to innovation, after years of sliding down global rankings and a growing reliance on a single trading partner.
Mr Frydenberg said the government is building economic resilience and supporting businesses to be less reliant on China through several policies and new laws to protect national interests.
But a “premium” will need to be paid to make the Australian economy more resilient, he said, and businesses will need to share the costs.
He contrasted the Cold War and the international isolation of the Soviet Union with the economic rise of China, which is much more globally connected and now accounts for nearly a third of Australia’s global trade.
“This combination of economic weight, global integration and assertiveness poses new and significant challenges for many countries around the world,” Mr Frydenberg said.
“And Australia is no exception. Indeed, Australia is facing this pressure more sharply than most other countries. Australia is on the frontline of strategic competition, but highly resilient.”
The impact of China’s recent trade restrictions with Australia had damaged certain industries but had only a “modest” impact on the overall economy, the Treasurer said, but Australia still needed to diversify its trade partners and build long term economic resilience.
Last month, the government resisted calls for new policies to drive trade diversity and economic resilience, saying its current approach was adequate.
On Monday, following his warning on China, Mr Frydenberg said existing government policies around manufacturing, exports, cyber security and supply chain resistance are helping Australian businesses adapt to new environments and are “reducing their reliance on any single market”.
Controversial new laws to protect critical infrastructure assets and reforms to foreign investment rules to put a greater focus on the national interest and nationally security have also been introduced by the Coalition government.
But some Australian businesses will need to share the costs, Mr Frydenberg said.
“Some of these measures involve economic costs of their own. Through increased regulation or necessary investments in new capabilities. And we will always seek to minimise these costs for business.
“But given the changes in our external environment, there will be times when we must pay a ‘premium’ to protect our economy and ensure our long‑term economic resilience.”
Mr Frydenberg said businesses – particularly those which rely on the Chinese market – need to be aware that the “world has changed”.
“And in the same way that governments are investing in economic resilience. So too, should Australian businesses — from cyber risks to supply chains and everything in between.”
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