A narrative about our economic reliance on China is a mainstay of the Australian national conversation. This not just an elite perspective. Public opinion research by the US Studies Centre reveals that an overwhelming 71 per cent of Australians incorrectly nominate China as Australia's largest source of foreign investment.
Too often Australia's national strategic discussion is shoehorned into a simple dichotomy: "balancing" our prosperity (read "trade with China") and security (read "the US-Australia alliance"). Reality is not so simple. This simplification of Australia's circumstances is alluring in its simplicity, yet dangerous in its lack of rigour, depth and foresight.
The two-way investment relationship between China and Australia has grown to be worth a cumulative A$163 billion. But this is a mere 9 per cent of the size of Australia's two-way investment relationship with the United States - now valued at a mammoth A$1.82 trillion, which is about 90 per cent of the value of the entire Australian share market and roughly equivalent to a year's worth of Australian GDP. More than one in four dollars invested in Australia from abroad can be sourced to the United States. And similarly, more than one in four dollars of Australian investment seeking yield abroad goes to the United States.
Despite this extent of American investment throughout the Australian economy, in the same United States Studies Centre survey of 1054 Australians, only 17 per cent correctly identify the United States as Australia's largest investment partner. Like much about Australia's relationship with the United States, the depth and longevity of the investment relationship seems to be taken for granted, under-appreciated in its value and contribution to Australia's prosperity.
So as Australia faces down its first recession in almost three decades, what do these facts portend about global and national economic recovery?
First, amid the most pressing strategic circumstances since at least the Cold War, Australia's economic relationship with the United States seems more resilient than that with China. This seems surprising. On the one hand, Trump's election and the way "American first" has found voice in US trade policy has been a source of global disruption and uncertainty. Multilateral institutions the United States helped create, like the WTO, have been pushed to near breaking point by the Trump administration. Cuts to US corporate tax rates have seen much less capital flowing out of the United States in the past, as American corporations take advantage of the opportunity to repatriate profits built up offshore. Australian exporters have wondered whether they would be casualties in any preferential trade arrangements struck between the United States and China.
But for all this turbulence of the last three years, the two-way investment relationship between Australia and the United States has risen by $280 billion, a remarkable result during a period in which world has largely shied away from foreign direct investment, with the two-way investment relationship between Australia and China having decreased by $4.6 billion.
As a first-term of President Trump draws to a crisis-ridden close, it's clear even the starkest expression of America first has ample room for Australia.
In the same period, Australia's export-based economic relationship with China has run into considerable headwinds. Coal has languished on Chinese ports, tariffs have been imposed on Australian barley and Chinese state media has issued recurring and direct threats to exposed sectors of the Australian economy like tourism, agriculture and education.
With flashpoints in Hong Kong, the South China Sea and, to a lesser extent, Taiwan starting to glow, economic resilience necessitates a clear-eyed understanding of Australia's opportunities and vulnerabilities while navigating the post-COVID-19 world.
Secondly, understanding Australia's investment realities and the scale of the stress in the global economy points to viable pathways for new opportunities for Australian workers. As Prime Minister Morrison acknowledged: "The jobs and skills we'll need as we come out of the crisis are not likely to be the same as those that were lost."
The United States is responsible for 81.5 per cent of all foreign investment in Australia's information services, 28 per cent of foreign investment in financial services and 42 per cent of foreign investment in its professional services. American firms are also directly responsible for 323,000 jobs in the Australian workforce, with salaries averaging over $100,000. These investments are about much more than injections of capital. They bring major American firms to Australia and with them, direct knowledge pipelines to Silicon Valley and the cutting edge of future work and industries. These types of industries and jobs supply a vital foundation to the Australian economy - a key part of what it means for an economy to be "resilient" - a reservoir of time, expertise and capital critical to Australia's recovery from the COVID-19 crisis and a bulwark against crises perhaps yet to come.
It is a mischaracterisation to paint the totality of the Australia-US relationship battleship grey, solely through the prism of a security alliance and 100 years of shared military sacrifice. The Australia-US security alliance and the Australia-US Free Trade Agreement (fifteen years old this year) are the institutional and government-to-government infrastructure of the relationship. But so much of the US-Australian relationship lives and breathes in business-to-business ties, evidenced in enormity of the two-way stock of investment. This economic dimension of the Australia-US relationship has been tested in recent years, and is insufficiently understood by ordinary Australians, but is of great durability, resilience and of immense value to Australia. Now, more than ever.