The US-Australia Alliance in the Twenty First Century

8/10/2019 The US-Australia Alliance in the Twenty First Century

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The US-Australia Alliance in the Twenty First Century

Emerging Asia stream

The world economy in 2100

Five alternative visions of the future and the development of the Alliance

Huw McKay

Westpac Bank 1

Abstract

There is a considerable degree of uncertainty and thus disagreement about the future course of the world economy. This paper seeks to offersome empirical guidance for the debate by presenting a suite of high levellong run economic growth scenarios for the major actors, with an emphasis

on developments in emerging Asia. These projections, which are based on a variety of assumptions on the rate and degree of convergence, aim to covermost of the major stylised positions on Asias economic future. The aim isto provide a catalogue of five scenarios from which non-economists canselect economic anchor assumptions for their deliberations in other fields.Having set out these alternative visions of the future of the global economy,they will then be discussed in the context of the prospective development ofthe Australia-US Alliance.

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There is a considerable degree of uncertainty and thus major disagreement about the future course of the world economy. Over the sort of time

horizons relevant to the choice and assessment of alliance partnerships when a decade or two can appear trivial - even small disagreements on thefuture trajectory of economic growth become substantial disagreements onthe future relative scale of nations. Indeed, when ones view extends over acentury, alternate expectations of relative economic growth can imply

visions of the future that are so far apart that debate on the non-economicaspects of security questions are almost pointless in their presence.

This paper seeks to offer some empirical guidance for the debate by

presenting a suite of high level, long run, global economic growth scenarios with an emphasis on developments in emerging Asia. These projections, which are based on a set of assumptions on the rate and degree ofconvergence, aim to cover most of the major stylised positions on Asiaseconomic future. The aim is to provide a catalogue of five scenarios from

which non-economists can select economic anchor assumptions for theirdeliberations in other fields. Having set out these alternative potentialfutures for the global economy, the implications of the results will be

discussed in the context of the prospective development of the Australia-US Alliance.

The paper will proceed as follows. The initial task is to describe the jumpingoff point for the scenarios, which is the International Monetary Funds(IMF) baseline forecast for the world economy out to 2017, as outlined inits semi-annual World Economic Outlook of April 2012. The second is tooutline and discuss the five long run scenarios in narrative form. The third isto present the resulting profiles for world growth, the distribution of outputand relative living standards at various points between the present and 2100.

The fourth is to draw out implications of these scenarios for thedevelopment of the US-Australia Alliance over the course of the twenty-firstcentury.

The most important points arising from the scenario work are arguably

1. China will be the worlds largest economy for most of the timebetween its IMF forecast takeover of the USA in 2016 and midcentury in every scenario, even the most pessimistic. However, it


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finishes the century at number one just once in the five scenarios, reaching2100 in fourth place twice and second place twice.

2. India is the largest economy in the world in 2100 in three of thefive scenarios and is a close second in another two. In four out of fivescenarios India spends at least some time as the worlds largest economy.

3. The scenario that produces a world economic structure most consistent with abalance of power scenario (between the USA, Developed Europe, Chinaand India) is one where emerging Asian economies collectively stall around themiddle income level . This is also the scenario where the USA ralliesback to number one by centurys end after falling behind in itsmiddle decades.

4. Developed Europe finishes the century as the worlds third orfourth largest economy in each scenario, indicating that it willremain economically relevant even in the face of the Asian ascent.

5. While the Japanese will remain a wealthy people, the economys size will be surpassed in all scenarios by Indonesia, in most scenarios byBrazil and Russia, and on a single occasion each by Canada and thePhilippines.

6. No economy outside the top four will comprise more than 6.1% of

world output (a relative position equivalent to China circa 1996) inany scenario. What is highly notable outside the top four is thatIndonesia finishes the century as number five in every scenario but one. Thatimplies very strongly that the widely used BRIC grouping ofcountries is not a particularly useful one for long run analysis. Thesescenarios highlight that not only are China and India in a verydifferent league to Brazil and Russia, but also that Indonesia will bea bigger long run economic factor than either of the latter two

powers. That is of course a particularly relevant point for anyconsidered discussion of the Australia-US Alliance. 7. The scenarios draw out the stark differences in the long run

demographic profiles of the major economies (as projected by theUnited Nations). Societies that are already old (Japan, South Korea,Developed Europe) with contracting working age populations willfall away appreciably in relative economic scale in the first half ofthis century. Younger societies (India, Indonesia, the Philippines)

with growing working age populations in the second half of thecentury forge ahead. Those in the middle including the Alliance


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partners show some resilience in defending global market share.Chinas unique combination of modest income levels and an ageingpopulation makes its share of global activity highly vulnerable to thefuture maturation of its catch-up growth phase.

8. Weak growth in the advanced countries, particular for the frontierdefining US, would be very damaging for absolute global livingstandards in the long run. Weak growth in the emerging world

would keep the West in the game from a scale perspectivethroughout the century, but the trade off is a major loss of globalprosperity.

Where we are: the distribution of global economic activity in thesecond decade of the twenty first century .2

The world economy is still suffering from the legacies of the unsustainabledebt accumulation that took place in advanced countries in the decadeleading up to the Great Recession of 2008/09. This recession wasprecipitated by a resounding housing market crash and an intense financialcrisis in the United States. It was propagated broadly through financial andreal economy channels. In the time since, outside of the immediate reboundphase where large fiscal and monetary stimulus policies were able to pullconfidence out of its spectacular downdraft, the world economy has beenkept off balance by rolling financial and sovereign debt crises in Europe.

Against this backdrop emerging markets, including those in Asia, have seentheir growth rates lowered. The first challenge for these countries in therecovery phase was to look inwards for a higher proportion of activity. Thesecond was to wean themselves off the stimulus policies enacted in selfdefence in 2008/09. In the face of these challenges, the economicperformance of the major emerging economies has been respectable in

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absolute terms, and highly creditworthy in relative terms, ensuring that astrong rate of catch-up has been maintained.

As of 2012, the IMF estimates that in purchasing power parity (PPP) terms

the USA and the combined economies of Developed Europe are a similarsize, each representing roughly one quarter of activity in our sample. Chinais about one fifth of the total. Japan and India each represent around 7%

while Russia and Brazil are each about 4%. The combined weight of themajor ASEAN economies sums to something close to 5%, almost 2percentage points of which is represented by Indonesia; South Korea andCanada are a little over 2% each, with the former having a slight edge; while

Australia comes in at 1.5%.

By 2017, which is the end point of the IMF projection, China has surpassedboth the USA and Developed Europe, India has left Japan far behind andKorea is edging away from Canada, who has been surpassed by Indonesia inthe meantime. So, the short period between this year and the end of theIMF projections, which we take as the jumping off point for our scenarios,is expected to see some important changes in relative rankings at the topand in the middle ranks.

The IMF estimates are taken as a neutral jumping off point for the scenariosto take any of the authors own biases out of the equation. However, theauthor and many others have described the IMF forecasts, particularly in theshorter term regarding Europe, as tilted towards the optimistic end of theplausible range. That may be a function of the organisations conservativebias, and the indirect influence of the governments that comprise itsstakeholders, which tends to produce trend-like, uncontroversial forecaststhat are not too far from the assumptions embedded in national budgetdocuments. Of course, the IMF does critique its own forecasts in a detailedsemi-annual narrative. This discussion of the potential risks that mayintercede and prevent trend-like growth from eventuating is a valuablecheck on the raw numbers. At present, the IMF clearly sees the balance ofrisks for world growth as skewed to the downside, which is entirelyappropriate.

The scenarios: compilation and description


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The method used to compile the scenarios is extremely simple. First, theUnited Nations medium fertility demographic projections are taken asgiven. Second, each scenario is underpinned by a projection of US economicgrowth, which defines the per capita frontier. Third, convergenceassumptions for all other economies are chosen consistent with the tone ofeach scenario. In other words, each economy is assigned an ultimate targetlevel of GDP per capita relative to the US, which may be reached before,after or at 2100 depending upon its historical performance level and theIMF defined starting point. Fourth, the size of national economies and theannual rate of growth are defined by back solving from the known variables(or more correctly, hard keyed assumptions) of population and the GDP percapita level relative to the frontier.

The five scenarios prepared have both a number and a name. They are

1. Blue Sky. In this scenario the economies of emerging Asia smoothlyconverge towards the living standards of a still expanding West,

without interruption, over the full course of the twenty-first century.2. China bull, Asia bear. In this scenario, China smoothly converges

towards the living standards of a still expanding West, withoutinterruption, over the course of the twenty-first century. However,

the other economies of emerging Asia, including India, stall at middleincome levels.

3. China bear, Asia bull. In this scenario, China stalls at middleincome level, while the rest of emerging Asia, including India,smoothly converges towards the living standards of a still expanding

West, without interruption, over the full course of the twenty-firstcentury.

4. Emerging Asia bear. In this scenario, emerging Asia stalls at a

middle income level en masse . There are no exceptions. The Westexpands on the trajectory defined for it in the Blue Sky scenario.5. Grey skies for the West. In this scenario the economies of emerging

Asia smoothly converge towards the living standards of a struggling West. In other words, emerging Asia catches up in a relative sense,but the bar is substantially lower than in the first four scenarios.

The Blue Sky scenario is the province of the optimist. Here emerging Asiatransits the middle income phase of their development without disruption,

inexorably closing in on a living standard three quarters of that enjoyed bythe USA. Once that point is reached in each jurisdiction, their catch-up


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phase concludes and they move forward at the same rate as the globalfrontier can be pushed out. Under these very generous assumptions, manyof the major economies of emerging Asia will reach 75% of US income percapita before the end of this century (China in 2068; South Korea in 2019;Indonesia and Malaysia in 2100) while many others (India, Vietnam and

Thailand) have that target within their grasp in the early part of the twenty-second century.

The China bull, Asia bear scenario describes a world where the mostmyopic Sinophiles are justified in their present optimism. The Chineseeconomy follows the same path mapped out for it in the Blue Sky scenario,

whereas its regional neighbours find themselves unable to advance beyondmiddle income levels. Under these parameters, China is the largest economy

in the world from 2016 onwards. Its share of activity will peak around onethird at mid century and it will still comprise around 27% at 2100, despite itsdemographic challenges. The USA finishes the century with a slightly largereconomy than India under these conditions. It is also worthy of note thatthe action of restraining growth in emerging Asia (but not in the non-Asianemerging markets) pushes Indonesia outside the top five economies in 2100.

This is the only scenario in this study where that is the case.

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1994 2004 2014 2024 2034 2044 2054 2064 2074 2084 2094

% of output % of outputJapan AU/CA/NZ Russia

Brazil South Korea Other ASEAN

Indonesia

Sources: IMF, aut hor calcula tions.

China

Developed Europe

USA

India

Scenario 1: blue sky


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The China bear, Asia bull scenario is one for the myopic China scepticsand the demographically inclined bulls. China is prevented from ascendingbeyond middle income levels in this scenario, with its catch-up impetushalted around two-fifths of US levels, which means it will cease to growfaster than the US from approximately 2030. The other emerging Asianeconomies are left free to trace the paths laid out in the Blue Sky scenario.

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1994 2004 2014 2024 2034 2044 2054 2064 2074 2084 2094



Indonesia

Sources: IMF, author calculations.

China

Developed Europe

USA

India

Scenario 2: China bull, Asia bear

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Indonesia


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Developed Europe

USA India

Scenario 3: China bear, Asia bull


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The scale arithmetic here is simple and is particularly potent in the thirdquarter of the century: emerging Asia ex China grows swiftly in per capitaterms while still enjoying a growing population. Simultaneously, Chinagrows like a mature economy while absorbing the negative scale factor of adeclining population of working age. That means a massive shift in the shareof global activity that is conducted in these jurisdictions. Earth-shatteringfact: under this set of conditions, Indias economy would be three times aslarge as Chinas in 2100.

The emerging Asia bear scenario takes the trajectory for Chineseeconomic growth from scenario 3 ( China bear ) and the trajectory for otheremerging Asian economies from scenario 2 ( Asia bear ). All emerging Asianeconomies will see their catch-up efforts stall at living standards between

one quarter and one half of that enjoyed by the USA in 2100. The US shareof global activity traces a flattened U shape over the course of the century,bottoming in the 2040s and rebounding close to its current share by 2100.Chinas abruptly halted catch-up allows the tortoise of Developed Europeto pass the Chinese hare in the last decade of the century. So a poorperformance by the East would be sufficient to allow the West to reboundto a reasonably close facsimile of its current relative position in the long run.

The Grey Skies for the West scenario holds back the growth in developed

country living standards while simultaneously allowing Emerging Asia to

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1994 2004 2014 2024 2034 2044 2054 2064 2074 2084 2094

% of output % of output

Japan AU/CA/NZ RussiaBrazil South Korea Other ASEAN

Indonesia


China

Developed Europe

USAIndia

Scenario 4: Emerging Asia bear


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catch up on a relative trajectory not far removed from the Blue Sky scenario. This is of course a lesser feat than if the West was flourishing and is thusassociated with lower absolute living standards for all. This scenario isprobably most attractive to those who see the present problems of privateand public indebtedness in the West as a major impediment to futureprosperity. Those who see an end to the exorbitant privilege associated

with the US role as the provider of the global reserve currency and thebenchmark risk free asset; and a messy outcome (from an economicperspective at least) for the European project, should take particular noteof the outcomes of this scenario. It is far from a worst possible case ofcourse, but it does represent a century of diminishing expectations for those

who did so well in the three that preceded it.

Of course, theoretically the analysis need not end with the discreteoutcomes outlined above. By assigning probabilities to each of the basicscenarios, any number of composite scenarios can be calculated from theraw materials as a weighted average. However, the scenarios have not beendesigned with a view to their being manipulated in this fashion. At this pointin time the author would not recommend going too far down that path,although it may yet be a possible future avenue for developing the conceptfrom the general to the bespoke.

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China

Developed Europe

USA

India

Scenario 5: Grey skies for the West


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consistency one should not be bullish on emerging Asian economicgrowth in the long run and simultaneously a believer that an evenlybalanced multi-polar structure will emerge.

4. Developed Europe finishes the century as the worlds third or fourthlargest economy in each scenario, indicating that it will remaineconomically relevant even in the face of the Asian ascent. Thechallenges presently facing the European economy are gigantic. Butso is the regions current global footprint, and even consistent growthunder-performance relative to the US in the coming decades will addconsiderable increments to global output each and every year. Andthe demographics of the total region 3 make interesting reading, withthe drag on the working age population from ageing beginning to

moderate from mid century, and turning back to growth by centurysend. Many may wish to simplify matters in the Asian Century by

writing off the European economy as a unit of relevance. The datasays that would be a dangerous abstraction. For instance, based onthe scenarios presented here, it is the Japanese yen and the GreatBritish Pound that will be removed from the IMFs SDR (specialdrawing rights) currency basket4 to eventually make way for theChinese yuan and the Indian rupee not the euro. Nor would the

euro be asked to give way to the Russian rouble5

, the Indonesianrupiah or the Brazilian real.

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5. While the Japanese will remain a wealthy people, their economys sizeis surpassed in all scenarios by Indonesia, in most scenarios by Braziland Russia, and on a single occasion each by Canada and thePhilippines. The Japanese economy surpassed West Germany in thelate 1960s and the USSR in the 1980s to become the worlds secondlargest national economy. It ceded that mantle to China in the firstdecade of the twenty first century, and it ceded the number threeposition to India soon after. It will not re-ascend such heights again.

6. No economy outside the top four will comprise more than 6.1% of world output (a relative position equivalent to China circa 1996) inany scenario. What is notable outside the top four is that Indonesiafinishes the century as number five in every scenario but one, arguing

that the widely used BRIC grouping of countries is not a particularlyuseful unit for long run analysis. Its window of relevance will provequite short. These scenarios highlight that not only are China andIndia in a very different league to Brazil and Russia, but also thatIndonesia will be a bigger economic factor than either of the lattertwo powers. Given Indonesias proximity to Australia, and itsguarded relationship with both the US and China, this is of course aparticularly relevant point for any considered discussion of the

Alliance. 7. The scenarios draw out the stark differences in demographics profiles

as projected by the United Nations - across the major economies.Older societies (Japan, South Korea, Developed Europe, Russia,China) with contracting working age populations in the second halfof the century fall away appreciably in relative economic scale. Youngsocieties (India, Indonesia, the Philippines) with growing working agepopulations in the second half of the century forge ahead.

Demographics are not destiny of course and overt reliance on themto drive dynamic analyses is a dangerous occupation. However, in acentury where the demographic trajectories of groups of majorpowers are going to be opposite in sign, the implications foreconomic scale should not be under-estimated.

8. Weak growth in the advanced countries, particular for the frontierdefining US, would be very damaging for absolute global livingstandards in the long run. Weak growth in the emerging world wouldkeep the West in the game from a scale perspective throughout thecentury, but the trade off is a major loss of global prosperity. That


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could serve to destabilise nations internally, precipitatingunpredictable political responses. As a wealthy economy, Australiahas a larger vested interest in the global productivity frontier beingextended continually than an emerging economy with decades ofcatch-up ahead of it. In terms of absolute global living standards,scenarios 4 and 5 produce similar low lying outcomes. Relative to theblue sky scenario, some $240 trillion of potential purchasing power isforegone at the global level in 2100 (circa 60% of scenario 4 and 5average 2100 GDP), which equates to a loss of $22,000 per head.

Narrowing these results down still further, the major Alliance relevantoutcomes are

1. India is the most likely nation to conclude the century as theunchallenged number one in terms of economic scale. If India is not#1, that position will be taken by either China or the US, aninconveniently ambiguous result.

2. The first half of the century is Chinas: the second half is mostunlikely to be Chinas, although it is not impossible.

3. The US is not going to fade into obscurity as populous Asianeconomies rise in scale. Neither is Europe. But it will take a wholesale

stagnation in Asia a ubiquitous inability to avoid the middle incometrap - for the US to be in position to re-assert its economic primacy.

4. Indonesia Australias near neighbour is inarguably the third mostimportant emerging market behind India and China in terms of itsprojected long run strategic economic weight. Put another way,Indonesia may be the one country in the region able to graduate frommiddle power status.

5. If emerging Asian economies stall en masse at the middle income level,

then a four way balance of global economic power is the likelyoutcome, with the North Atlantic on the ascent at centurys end. Thispoint follows 3, developing the import of the Asian bear scenariofurther. It is vital to reiterate the opposite side of this observation:concepts of a multi-polar balance of power and bullish long run viewson growth in emerging Asia are not compatible with each other overthe full course of the century.

6. Japan is going to lag considerably behind both its advanced peers andits emerging neighbours. Its long run destiny may be that it becomesanother middle power, joining current examples Australia, Canada


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and South Korea, and future examples the Philippines and Vietnam.Proponents of a Chinese containment strategy would do well to thinkhard whether (or for how long) Japan would remain an effective

vertex in such an alignment.7. Energy spent considering the rise of Russia and Brazil should not

come at the expense of time considering the top five economies inthe sample. Those studying the Alliance should ignore the BRICcategorisation as a useful analytical grouping.

A risk averse reading of these results from the Australian side would arguefor a consolidation of its Alliance structure, as the US will remain a majorforce irrespective of developments elsewhere. However, moving beyondthis point, clarity on which of the five scenarios is going to be closer to thetruth will take a considerable time to emerge: certainly clarity on the shapeof the world economy in the second half of this century will post date the

working careers of mid-level diplomats and security analysts let alone thecurrent leading thinkers and decision makers. Even if Australia were toprepare now to move away from the status quo, which is clearly not itspreference, it would still not know exactly where to align itself even if thecriteria for a change of alignment were to be carefully defined in economicterms. All that can be said with certainty is that India will have to be acentral element in future strategic calculus; Indonesia will become evenmore important; the Chinese sun will dominate the heavens in the first halfof this century and it will be very difficult not to be dazzled, projectedsecond half decline notwithstanding; Japans strategic decline appearsterminal; while European decline may have been greatly exaggerated.

Considering these results from the US side, the scenarios have put forward auseful rule of thumb on relative economic weight. If either of China or

India navigates the middle income phase of its development successfully,they will surpass the US in size and will retain that advantage in scale. If theyfall into the middle income trap, the US will retain a size advantage. This isan example where a little bit of knowledge might be construed as dangerous.

Armed with this information, should the US actively work to inhibit Chineseand Indian economic growth to retain its relative position? Armed with thisinformation, how are the Chinese and Indian authorities to overcome theirsuspicion of Western advice; their perceptions of discrimination; their fear

of technological and energy blockades? One hopes that the vast amount offoregone wealth indicated by the difference between projected world


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economic activity in 2100 under the Blue Sky scenario and in the morepessimistic scenarios 4 and 5 is a sufficiently valuable hostage to preventnegative outcomes brought about by a nave reading of the results.

Appendix one: individual scenario details

The two measures that command principal attention are relative livingstandards assumptions on the progress of which define the scenarios - andrelative economic scale, which is our ultimate interest in terms of assessinglonger run security questions. These two measures are presented in tableform for each nation/region for which individual trajectories have beendefined, at various time stamps between 2012 and 2100. The upper panel isfor living standards (assumptions) and the lower panel is for relative sharesof activity (outcomes).


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Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based arereasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

Income per head, % of US 2012 2020 2030 2040 2050 2070 2100

United States 100 100 100 100 100 100 100

Japan 71 68 68 69 70 72 75

Developed Europe 73 71 71 72 74 76 79

China 19 31 52 68 73 75 75

India 8 11 19 29 41 64 75

Russia 36 40 50 60 67 73 75

Brazil 25 30 41 52 62 72 75

South Korea 70 76 84 85 85 85 85Indonesia 10 14 21 30 39 58 71

Thailand 20 24 33 40 47 62 73

Malaysia 34 39 49 54 60 71 75

Philippines 9 11 16 23 30 45 56

Vietnam 7 11 18 27 38 59 71

Canada 84 81 80 82 84 88 94

Australia 85 85 87 88 89 91 94

New Zealand 59 58 59 62 66 73 79

Share of output, % of world 2012 2020 2030 2040 2050 2070 2100

United States 23.6 20.6 17.2 15.2 14.0 13.1 13.7

Japan 6.9 5.5 4.3 3.4 2.9 2.3 2.1

Developed Europe 24.6 20.2 16.2 13.9 12.5 10.8 10.7

China 19.0 26.1 32.1 33.1 31.3 25.7 20.3

India 7.4 9.5 12.5 16.2 20.6 28.2 31.2

Russia 3.8 3.5 3.0 2.8 2.7 2.5 2.3

Brazil 3.7 3.8 4.0 4.1 4.3 4.3 3.9

0.0 0.0 0.0 0.0 0.0 0.0 0.0

South Korea 2.5 2.3 1.9 1.6 1.4 1.1 0.9

Indonesia 1.8 2.2 2.6 3.0 3.4 4.2 5.5

Thailand 1.0 1.0 1.1 1.0 1.0 1.1 1.2

Malaysia 0.7 0.8 0.8 0.8 0.8 0.9 1.0

Philippines 0.6 0.7 0.9 1.1 1.4 1.9 2.9

Vietnam 0.5 0.6 0.8 1.0 1.2 1.5 1.7

Canada 2.2 1.9 1.5 1.4 1.3 1.2 1.3

Australia 1.5 1.3 1.2 1.0 1.0 0.9 1.0

New Zealand 0.2 0.2 0.1 0.1 0.1 0.1 0.1

Scenario 1: Blue sky

Source: Author calculations except for 2012, which are IMF estimates.


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United States 100 100 100 100 100 100 100

Japan 71 68 70 71 72 74 77


China 19 31 50 63 70 75 75

India 8 11 18 25 28 29 30

Russia 36 40 47 55 62 71 75

Brazil 25 30 39 48 56 69 75


Thailand 20 24 31 36 38 39 39

Malaysia 34 39 46 49 50 50 50

Philippines 9 11 15 20 22 23 24

Vietnam 7 11 17 24 26 28 30

Canada 84 81 80 82 84 88 94

Australia 85 85 87 88 89 91 94

New Zealand 59 58 59 62 66 73 79


United States 23.6 20.6 17.2 15.4 15.0 15.9 18.4

Japan 6.9 5.5 4.3 3.4 3.1 2.8 2.8


China 19.0 26.1 32.1 33.5 33.4 31.2 27.2

India 7.4 9.5 12.5 15.6 16.7 17.5 17.2

Russia 3.8 3.5 3.0 2.9 2.9 3.0 3.1

Brazil 3.7 3.8 4.0 4.2 4.6 5.3 5.2

South Korea 2.5 2.3 1.9 1.6 1.5 1.3 1.2

Indonesia 1.8 2.2 2.6 3.0 3.1 3.1 2.9

Thailand 1.0 1.0 1.1 1.0 1.0 0.9 0.9

Malaysia 0.7 0.8 0.8 0.8 0.8 0.8 0.9

Philippines 0.6 0.7 0.9 1.1 1.2 1.4 1.6

Vietnam 0.5 0.6 0.8 1.0 1.0 1.0 1.0

Canada 2.2 1.9 1.5 1.4 1.4 1.5 1.8

Australia 1.5 1.3 1.2 1.1 1.0 1.1 1.3

New Zealand 0.2 0.2 0.1 0.1 0.1 0.2 0.2

Scenario 2: China bull, Asia bear



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United States 100 100 100 100 100 100 100

Japan 71 68 70 71 72 74 77


China 19 29 38 38 38 38 38

India 8 11 18 26 37 57 72

Russia 36 40 47 55 62 71 75

Brazil 25 30 39 48 56 69 75


Thailand 20 24 31 37 42 55 75

Malaysia 34 39 46 51 55 65 74

Philippines 9 11 15 21 27 39 59

Vietnam 7 10 15 23 31 49 69

Canada 84 81 80 82 84 88 94

Australia 85 85 87 88 89 91 94

New Zealand 59 58 59 62 66 73 79


United States 23.6 21.1 18.6 17.5 16.4 15.0 15.2

Japan 6.9 5.6 4.6 3.9 3.4 2.7 2.3


China 19.0 24.4 26.5 23.2 20.0 15.0 11.5

India 7.4 9.7 13.5 18.7 24.0 32.3 34.7

Russia 3.8 3.5 3.3 3.3 3.1 2.8 2.6

Brazil 3.7 3.8 4.3 4.8 5.0 5.0 4.3

South Korea 2.5 2.4 2.1 1.9 1.7 1.3 1.0

Indonesia 1.8 2.2 2.8 3.5 4.0 4.8 6.1

Thailand 1.0 1.1 1.1 1.2 1.2 1.2 1.4

Malaysia 0.7 0.8 0.9 0.9 0.9 1.0 1.1

Philippines 0.6 0.7 0.9 1.3 1.6 2.2 3.2

Vietnam 0.5 0.6 0.7 1.0 1.3 1.7 1.9

Canada 2.2 1.9 1.7 1.6 1.5 1.4 1.5

Australia 1.5 1.3 1.3 1.2 1.1 1.1 1.1New Zealand 0.2 0.2 0.2 0.2 0.2 0.2 0.2

Scenario 3: China bear, Asia bull



20/214



United States 100 100 100 100 100 100 100

Japan 71 68 70 71 72 74 77


China 19 29 38 38 38 38 38

India 8 11 18 25 28 29 30

Russia 36 40 47 48 48 48 48

Brazil 25 30 39 40 40 40 40


Thailand 20 24 31 36 38 39 39

Malaysia 34 39 46 49 50 50 50

Philippines 9 11 15 20 22 23 24

Vietnam 7 10 15 21 24 26 27

Canada 84 81 80 82 84 88 94

Australia 85 85 87 88 89 91 94

New Zealand 59 58 59 62 66 73 79


United States 23.6 21.1 18.6 18.0 18.1 19.5 22.1

Japan 6.9 5.6 4.6 4.0 3.7 3.5 3.4


China 19.0 24.4 26.5 23.8 22.1 19.4 16.7

India 7.4 9.7 13.5 18.2 20.2 21.5 20.8

Russia 3.8 3.5 3.3 2.9 2.7 2.5 2.4

Brazil 3.7 3.8 4.3 4.1 3.9 3.7 3.3

South Korea 2.5 2.4 2.1 1.9 1.8 1.6 1.4

Indonesia 1.8 2.2 2.8 3.4 3.7 3.7 3.5

Thailand 1.0 1.1 1.1 1.2 1.2 1.1 1.0

Malaysia 0.7 0.8 0.9 0.9 0.9 1.0 1.1

Philippines 0.6 0.7 0.9 1.3 1.4 1.7 1.9

Vietnam 0.5 0.6 0.7 1.0 1.1 1.1 1.1

Canada 2.2 1.9 1.7 1.6 1.7 1.8 2.1


Scenario 4: Asia bear



21/21


United States 100 100 100 100 100 100 100

Japan 71 68 68 69 70 72 75


China 19 31 52 68 73 75 75

India 8 11 19 29 41 64 75

Russia 36 40 50 60 67 73 75

Brazil 25 30 41 52 62 72 75


Thailand 20 24 33 40 47 62 73

Malaysia 34 39 49 54 60 71 75

Philippines 9 11 16 23 30 45 56

Vietnam 7 11 18 27 38 59 71

Canada 84 81 80 82 84 88 94

Australia 85 85 87 88 89 91 94

New Zealand 59 58 59 62 66 73 79


United States 23.6 20.6 16.7 14.5 13.3 12.5 13.6

Japan 6.9 5.5 4.1 3.2 2.7 2.2 2.0


China 19.0 26.1 32.9 34.0 31.2 24.6 20.2

India 7.4 9.5 12.8 17.0 22.0 30.0 32.4

Russia 3.8 3.5 3.1 2.9 2.7 2.4 2.3

Brazil 3.7 3.8 4.1 4.3 4.5 4.3 3.9

South Korea 2.5 2.3 1.9 1.6 1.4 1.1 0.9

Indonesia 1.8 2.2 2.7 3.2 3.7 4.7 5.2

Thailand 1.0 1.0 1.1 1.1 1.1 1.2 1.2

Malaysia 0.7 0.8 0.8 0.8 0.8 0.9 1.0

Philippines 0.6 0.7 0.9 1.2 1.5 2.1 2.8

Vietnam 0.5 0.6 0.8 1.0 1.3 1.7 1.7

Canada 2.2 1.9 1.5 1.3 1.2 1.2 1.3


Scenario 5: Grey skies for the West


The US-Australia Alliance in the Twenty First Century

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