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Businesses wrong on Asia strategy: Henry


Australia's future with China does not lie in mining and businesses focused on cutting costs to compete in Asia do not have a sustainable strategy, Asian Century White Paper leader Dr Ken Henry says.

Dr Henry is a special adviser to Prime Minister Julia Gillard and a former Treasury secretary.

He said on Friday that Australian businesses needed to change their thinking on engagement with Asia.

"The growth in Australia's future commercial relationship with China is not actually going to be in the resources sector," Dr Henry told the Australian Sustainability Conference in Sydney.

Dr Henry led the review panel that created the Australia in the Asian Century White Paper, which was released by the federal government in October.

He said the opportunities in Asia would be in the provision of technology and expertise that would help in securing food, energy and water supplies - areas in which Australia had strong capabilities.

By 2030 there will be more of the world's middle class in Asia than in America and Europe, and those people will have much higher demands for energy and protein.

Asian nations also valued Australian businesses' transparency and good governance.

"What is valued in the region is expertise, quality and reliability and above all else trust associated with reliability," he said.

"Why have Australian businesses been so slow in taking up these opportunities?"

Dr Henry said if Australia wanted to guard against the food, water, energy and security risks that would confront the region and capitalise on opportunities then "the Australian mindset is going to have to change".

"Businesses are going to have to look to the region instead of looking to the internal bits of their business in Australia and asking themselves, wringing their hands ... (and) saying 'we need to get higher productivity in order to compete because the Australian dollar is so strong. What do we do? We've got to start cutting costs'," he said.

"This is not a sustainable business strategy."

Businesses having difficulty selling their products competitively had to accept that Australia is a high-wage country like Germany, Switzerland or Japan and seek opportunities like successful firms from those nations had done.

Successful businesses had to find where they could add value in regional or global supply chains, he said.

Dr Ken Henry also said the government must be held accountable on delivering on key regional food, energy and water security objectives set out in the Asian Century White Paper.

The paper identifies 25 objectives for the year 2025 that cover opportunities and responsibilities for Australia that will affect sustainability issues such as water, energy and food security and included commitment to supporting carbon trading.

"This is a big agenda," Dr Henry said.

"The government has said this is what has to happen.

"Government has to be held accountable to deliver it."