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Tim Harcourt
Chief Economist
Australian Trade Commission
Email: tim.harcourt@austrade.gov.au
3 March 2006
Economists always warn against "picking winners" in terms of industry sectors but they do make a lot of noise about which countries should invest their hard-earned in. There is perpetual talk about emerging economies and which market is going to be the 'next big thing'.
However, in recent times, the debate has become less confined to one ‘next big thing’ but instead about several 'next big things' - that is, a group of economies rather than just one (although China watchers would disagree). For example, in a famous paper by Goldman Sachs, it was mooted that the BRICs – that is, Brazil, Russia, India and China – will be the places to watch in terms of their growth rates, and eventual shares of world output and global trade. Goldman Sachs regarded 'the BRICs' as the new growth engines of the global economy.
Of course, many predictions assume that countries will simply replicate economic growth patterns for long periods of time which is difficult to assume given the nature of external shocks and institutional reform. But if Goldman Sachs is proved correct (and this is a huge if) how would Australia fare? It seems from the data, quite well. Whilst the BRICs account for 7 per cent of world exports (and 9 per cent of imports) they account for 15 per cent of Australian merchandise exports. The resources boom accounts for much of this story – particularly with China, and India in recent times, whilst Russia and Brazil have a bit of a way to go. According to research by Austrade and the ABS, there are 3245 Australia exporters selling to China, 1463 selling to India with 444 to Brazil and 241 to Russia.
In short, we don’t know whether the BRICs hypothesis has legs. But one thing for sure – it has created a new acronym in the economists' lexicon, and on that note, but I am really glad that Turkey, Uzbekistan, Romania and Denmark have few economic characteristics in common.
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