Australia / From the Founder
The World in Historic Perspective

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by Phil Ruthven AM, Founder IBISWorld
Aug 22 2019

History is at its most useful when it provides perspective, encourages discussion and gives direction for our future. The two charts below remind us of the world’s extraordinary journey in population and GDP growth terms over many millennia, especially with the advent of the Industrial Age in the late 18th Century. The exponential growth thereafter is mind-blowing.

We emerged from the seemingly dormant Middle Ages during the 14th to 17th Century, due in no small part to the Renaissance and Age of Enlightenment. From then on, starting with the 18th Century, growth in every sense could almost suggest there was a different race of people inhabiting the Earth. However, the pyramids of Egypt, the Mayan and Aztec ruins, and myriad other artefacts around the world remind us of the genius of our distant ancestors.
Over the past 250 years, we have experienced:

  • Several empires and hegemonies (British, Ottoman, US)
  • Several economic ages (Agrarian, Industrial, current Infotronics Age)
  • Depressions (global and national)
  • Revolutions (American, French, Russian)
  • Emergence of modern democracies
  • Great wars (WWI & II)
  • The big battle between capitalism and communism/socialism
  • Science, research, innovation and entrepreneurship galore

So, what about where we are now and where are we going? Going into 2020, the order of our 230 biggest nations, principalities and protectorates is changing, as we see below.

China’s economy is now No 1, having overtaken the USA in 2016 and regained the top position it has held for millennia (except the past century and a half). India has overtaken Japan, and our neighbour Indonesia has overtaken Brazil and all the European nations except Russia and Germany (which will likely happen in the 2020s). We have slipped out of the Top 20 due to our slowing growth.

The next graphic shows the geographic clustering of nations into 8 regions, some federated. Australia is part of the Asia Pacific region, the world’s fastest growing. However, the Indian subcontinent is starting to do even better.

Combining the Asia Pacific region with the Indian subcontinent gives us greater Asia. That is our new economic and cultural region for centuries to come, having been only been considered geographically part of it for 230 years since British settlement. Our Aboriginal population, despite their history of 60 millennia or so, had only fringe contact with neighbouring nations over most of that long period.

Australia represents just 2.1% of the region’s GDP, as we see below, and a smaller 0.6% of the megaregion’s population.

However, we are well integrated into the economy and population of Asia. Over two-thirds of our migrants and tourists come from Asia, and over 80% of our merchandise exports are to elsewhere in the megaregion, as seen below.

All of this poses what 2020 and the rest of this century might look like for Australia. The short to medium term is worrying:

  • the global populism vs rationalism dilemma
  • near-zero central bank interest rates around the world
  • a potential second GFC
  • the US/China trade war
  • climate change
  • worries about the value of our dollar and the share market
  • our productivity growth is awful
  • the economy is growing very slowly
  • wages aren’t rising much
  • are we in for a recession?
  • Can we keep our old friends (especially the USA) while adding new ones (China, India and others) with mutual benefits in security, trade, investment and culture?

We have had no meaningful reforms to the labour market, our tax regime, innovation and R&D. Venture capital investment is also below desirable levels. We have to fix these ourselves.

Then again, we haven’t had a recession for 28 years, a record since the 1820s. But that may be part of the problem: no wake-up calls.

Compared to past centuries, our first one-fifth of the 21st Century has been benign. That said, we could expect some challenges and set-backs in the future, if past centuries are any guide.

However, we are on a slow but certain path to be a Eurasian society by the end of this century, with our standard of living (GDP/capita) rising at least 3-fold yet again. This is something to look forward to for our children and grandchildren.