Australia will become the 11th largest economy on earth within the next eight years. The forecast is from UK think tank the Centre for Economics and Business Research, and is contained in its World Economic League Table 2018 report.
“One of this year’s themes is that countries depending on brainpower will generally overtake countries depending on natural resources,” says the report.” Australia is one of the most popular countries in the world for inward migration as well as having natural resources.
“The growing population means that the economy is forecast to rise from 13th largest in 2017 to 11th largest economy in 2026. Investment in urban infrastructure will need to accelerate as population increases.”
There is a perception amongst many in Australia that we have a small economy. While Australia is well behind global leaders such as the USA and China, it is larger – in terms of economic output – than many countries we might
As the report points out, the key driver of Australia’s economic growth is more people. Population is growing much more quickly than most other countries the Western world, primarily as a result of high immigration. Both major parties support this policy, though there is now something of a backlash against it.
The findings have significant ramifications for public policy makers. The report mentions the need for higher spending on infrastructure, but it also means that Australia will be increasingly important on the global stage. Government policy at all levels will need to reflect this.
A key aspect of the report is the growth of Asia, and in particular Australia’s largest trading partner China, which is forecast to overtake the USA the world’s top economy by 2030. “This remains a remarkable achievement from an economy that was only 12 percent the size of the US economy as recently as 2000.”
India will shortly overtake UK and France to become the world’s fifth largest economy (Japan and Germany will remain third and fourth). By 2032 three out of the world’s four largest economies will be Asian (China, India and Japan) while Korea and Indonesia enter world’s top ten, and Taiwan, Thailand, Philippines and Pakistan enter world’s top 25 economies.
“As formerly developing countries develop, they will become the majority of the world economy. As recently as 2000 the developed world was 76 percent of the world economy and the other countries 24 percent. Not surprisingly world politics was dominated by the 76 percent. By 2032 their share will have dropped to 44 percent while the formerly developing nations are 56 percent. Political influence is bound to follow the changing economic share and the former developing economies are likely to get increased political leverage in world bodies and bilateral relations.
Other highlights of the report:
- India leapfrogs Britain and France to become the world’s 5th largest economy in dollar terms in 2018.
- Brexit effects on UK less than feared and the UK bounces back to overtake France in 2020.
- China overtakes the USA to become the world’s largest dollar economy in 2030.
- Because the impact of President Trump on trade has been less severe than expected, the USA will retain its global crown a year longer than we anticipated in the last report.
- Cheap energy boosts growth for energy consumers but hits energy producer.
- As a consequence of a weak oil price, Russia will drop from 11th in 2017 to 17th in 2032.
- Brazil will overtake France and the UK and become the 6th largest economy by 2028 • Italy will drop out of the ten largest economies by 2023 and fall to 13th in 2029.
The World Economic League Table tracks the size of different economies across the globe and projects changes over the next 15 years. This year the main revisions reflect dramatic changes in economic assumptions
“If major risks can be avoided, our central forecast is for a period of stronger growth than we have seen for the past five years, driven by cheap energy and by technology.
“The price of oil has been edging down over the last decade, driven by weaker demand, a falling ratio of energy usage to GDP as output dematerialises and, on the supply side, the growth of energy production from renewables and from fracking which has changed the traditional relationship between GDP and oil prices. We expect this change to persist through to 2032.”
The report is available here.