Australia warned to brace for prolonged trade war fallout

AUSTRALIA needs to brace for a prolonged trade war between the US and China that will play out “over decades”, the nation’s top public servant has warned.

Martin Parkinson, who is secretary of the Department of Prime Minister and Cabinet, said yesterday that the Us-china trade war “is having a significant impact on the economies of the region”.

“It will likely play out over decades to come,” he said.

“This is not something that is with us for a year or two, (it) is something that is with us for decades and decades.”

The great power struggle between China and the US could “easily disrupt” growth in Australia’s region, he said.

“Our regional economies are particularly interlinked,” Dr Parkinson said.

The economic success of countries in the Asian region had been based on having a stable, open international trading regime where goods were manufactured using supplies from other countries, he said.

China has been a particularly voracious consumer of iron ore from Australia.

Mr Parkinson said that with USChina trade tensions growing, there was now “great uncertainty” over long trade-supply lines.

“The growth model which underpinned (economic development in Asia) is dependent on those long supply lines,” he said, speaking at an Asia Society event in Sydney.

He expected China’s economic growth rate, which has fallen from levels of more than 10 per cent mid last decade to just over 6 per cent now, would continue to fall as that nation’s economy matured.

Dr Parkinson said Australia had much to lose if there was to be a decoupling of economic ties between US and Chinese economies — even more than the damage that would be done to the two superpowers themselves.

He said there was a need to strengthen the international trading regime, including reforming the operation of the World Trade Organisation.

“The rules-based order is in need of urgent repair,” he said.

Reforms should be aimed at making sure the global trading order was based on rules and what was “right”, and not on the economic power of individual countries, he said.

Dr Parkinson said confidence in the economic rules-based trading order had “already been damaged”.

This was already affecting global economic growth as companies held back on investing because of economic and political uncertainties, he said.