Nations rise with investment in education
A report released by PricewaterhouseCoopers, or PwC, the multinational professional services network, says India will challenge the US for second place by 2050, while Indonesia, Mexico and Nigeria could push the UK and France out of the top 10.
The Philippines, Vietnam and Malaysia are also set to be notable risers, and Colombia and Poland will grow more strongly to 2050 than Brazil and Russia, the report states.
In its latest World in 2050 report, the company presents its economic growth projections for 32 of the largest economies in the world, accounting for around 84% of global gross domestic product, or GDP.
Although the PwC analysts predict the world economy will grow at an average of just over 3% per annum in the period 2014-2050, doubling in size by 2037 and nearly tripling by 2050, they also expect a slowdown in global growth after 2020.
This will occur as the rate of expansion in China and some other major emerging economies moderates to a more sustainable long-term rate, and as the working age population growth slows in many large economies.
Australia slipping down the ranks
The latest report takes in eight additional countries, six of which will have surpassed Australia by 2050: Bangladesh, Egypt, Iran, Pakistan, the Philippines and Thailand. As a result, Australia will slip from 19th place in 2014 to 29th of the largest economies in the world.
“Australia must focus on transitioning out of the mining economy or face falling out of the G20,” said PwC’s Australia economics partner, Jeremy Thorpe. "Business, government and community leaders must plan for the long term and prevent us slipping down the ranks."
Thorpe said Australia would have to diversify its economy by investing in highly skilled workers – as China had done – and become the knowledge nation to stop slipping out of the top 20 economies.
The report ranks each country by purchasing power parity, or PPP, and sees a broad shift in global economic power from the G7 to the E7 emerging economies.
"Australia is being trumped by countries with rapidly growing populations, increasing urbanisation and improvements in education," Thorpe said. "Leaders across business, government and the community need to understand we are on a slippery slope to global irrelevance.
“While we will remain a prosperous nation, among the highest countries in terms of GDP per capita, we risk losing the influence we have today. We need to diversify our economy, which starts with transitioning and up-skilling Australia's workforce for the jobs of the future.”
Thorpe said this would require a huge investment by government and business away from mining and into education, particularly into the science, technology, engineering and mathematics subjects. But this is not happening and, on the contrary, the federal government is cutting back on its investments in higher education and research and innovation.
“Australia has punched above its weight historically, however our fall from the G20 to the G30 will challenge our relevance within the world,” Thorpe said.
Asia’s future dominance predicted
The report notes that by 2030, four of the world's top five economies will be in Asia with only the US disturbing Asia's dominance. The rise of Indonesia through the world rankings throughout the period to 2050 is striking, rising from 9th in 2014 to 4th in 2050.
It makes clear that global trade and supply chains are being redefined as a result of the global economic power shift, while being accelerated by technology and a glut of bilateral and multilateral trade deals.
"Australia has sealed trade deals with China, Korea and Japan – we now need companies to step up and take advantage of them,” said a PwC spokesperson.
He said that the Association of Southeast Asian Nations was preparing to launch the ASEAN Economic Community at the end of this year in an effort to reduce tariffs and promote the free flow of goods, services and capital across the region.
"Businesses must immerse themselves in Asia, and build better relationships, networks and supply chains and we must invest in Asia, not simply trade with Asia, if we are to fully benefit from the region's economic growth," the spokesperson said.
“Big companies originating from countries within Asia are operating across Asia and going global, and they are coming to our markets. We are seeing new alliances formed in response to these multilateral agreements and Australian companies are not part of them.”