Interview: Australia set for major economic developments in year ahead

From Britain's vote to exit from the European Union to Donald Trump's election to the U.S. presidency, major events of the past year are poised to impact the global economy in 2017.

Many of these will play a significant part in defining Australia's economic relations with China, the region and beyond, Professor Fariborz Moshirian, Director of the Institute of Global Finance at the University of New South Wales Business School in Sydney, told Xinhua in an email interview.

Brexit, or Britain's exit from the European Union, could actually open up new opportunities for Australia and enhance trade between the two countries, Moshirian said.

"If Brexit goes through the United Kingdom Parliament, the UK will be looking for new trading partners. The Australian Minister for Trade has reached a preliminary agreement with the UK Secretary of State for International Trade to establish a Working Group that will consider the possibility of creating a free-trade agreement between Australia and the UK," he said.

The considerable effects of the China-Australia Free Trade Agreement will also continue to roll out, with closer trade and investment links between the two countries helping to create employment, growth and other opportunities, Moshirian said.

"On Dec 20, 2015, Australia implemented the China-Australia Free Trade Agreement. The key drivers behind this decision were lower tariffs and increased government support. The ChAFTA removed tariffs on most exports, relaxed investment barriers and abolished labour market testing in relation to Chinese temporary visa applicants.

"According to the China-Australia Business Engagement Index, the ChAFTA influenced the decisions of approximately 75 percent of Chinese firms to increase business focus on Australia."

Australia could similarly experience a greater role in trade with Donald Trump's election as the President of the United States.

"Australia has close trade link ties with both China and the US. Donald Trump's election as the President of the US and the prospect of greater tension between the two countries give Australia a greater role in strengthening trade and other ties between these regional powers through forums such as G20 and APEC," Moshirian said.

"For Australia, the Centre of Policy Studies' modelling suggests that a full-blown China-US trade war might cause Australia's economy to shrink by 4 percent over the next 10 years. However, as China is unlikely fully to retaliate, new opportunities are likely to offset Australia's trade losses. Overall, the study suggests that Australia "should not try to do anything" about Trump's threatened trade war."

US withdrawal from the TPP might also result in Japan ceasing to support it and that is "likely to deny Australia of the trade gains promised" under the trade pact, Moshirian said.

"Japan was already one of the more reluctant members of the TPP. The Japanese Prime Minister has also recently stated that a Trans-Pacific Partnership without the US is "meaningless". If the US withdraws from TPP, Japan's backing for an agreement with the remaining TPP members also seems doubtful.

"If both the US and Japan withdraw from the TPP, then Australia has more potential to play a greater role in seeking bilateral free trade agreements with countries that would otherwise have been members of the TPP to promote free trade and to mitigate Japan and the US's withdrawal from the TPP."

In fact, Australia and China could "intensify free trade within Asia, if the US promotes protectionism in 2017".

"Australia and China could play a significant role in the process of economic and financial integration in the Asia-Pacific region via ASEAN Plus Six," Moshirian said.

Ongoing trade between Australia and China in 2017 will also ensure "stronger economic growth in Australia and secured resources exports to China from Australia". Endit