2025: risks and resolutions
2024 was a pivotal year as trials and tribulations of wars, elections, technological and societal disruptions continued apace. 2025 is expected to be just as eventful. In this message to clients and colleagues, I share my thoughts on the risks for Australia and what we can do about them.
Much ink has been spilled on the trials and tribulations of 2024. It certainly felt like another pivotal year in a string of events, milestones and less visible tectonic shifts leading us to either more dramatic cataclysms and wholesale systemic change, or an equilibrium of old and new. Most likely both.
Michel Feller, Chief Strategist at Geopolitical Strategy – an organisation I was proud to join this year as a member of its board of advisors – compared 2024 to 1912, another pivotal year that marked the transition to Pax Americana and a rapid disintegration of the Ottoman Empire.
But while it felt like another year of shocks, 2024 also gave us a cause for quiet optimism. The United States and China were measured and disciplined in managing its disconnection from each other. It remains to be seen whether it’s a tactical calm before the storm of the Trump Administration, or a sign of an emerging equilibrium of “managed competition” – the case for which is most succinctly and powerfully made by an Australian - Dr Kevin Rudd in his book “The Avoidable War”. The United States economy has once again demonstrated a remarkable potential for growth. The Chinese economy – while still weak – has started showing tentative signs of dynamism and resilience. Whether President Xi can balance his sometimes contradictory economic security and revitalisation agendas is a big question for 2025. The election of Donald Trump and his commitment to end the war in Ukraine – may not be enough to create a long-lasting peace but creates conditions at the very least to stop the bloodshed and give diplomacy another chance. The regime collapse in Syria has given us hope that a change in Damascus might lead to a redrawing of the strategic map of the Middle East and creating new conditions for peace, or at least a pause in hostilities. Our understanding of Artificial Intelligence has visibly matured in 2024, as we enter the new year with more confidence of AI’s impact and awareness of its risks and limitations.
Closer to home, Australia-China stabilisation – while fragile and tentative – is paving the way for a more mature relationship with a clearer mutual understanding of boundaries, opportunities and risks. The fact that we managed the stabilisation and the removal of all the remaining trade impediments, while simultaneously pursuing further and deeper enmeshment in the US defence system and outplaying China in transactional diplomacy in the Pacific – is a sign that Australia does not need to be caught in false dichotomies and choices – at least for now.
As I have argued before - there is no alternative to Australia’s engagement with China – both positive and defensive. China continues to offer enormous economic opportunities, is an incredibly rich source of innovation– including in the industries Australia wants to develop – such as renewable energy. China will also continue to export its talent – and Australia would be well advised to benefit from it, with the right risk settings. I am very proud this year to have assisted a number of Australian companies and universities with strategies to balance China opportunities and risks through my consulting practice - Geopolitical Risks and Strategy Practice (GRASP).
I hope 2025 will see a renewed confidence among Australian policymakers, business, university and community leaders about our ability to recognise and manage risks and opportunities of engagement with China. This is one of the reasons I have joined the board of the Foundation for Australian Studies in China – which brings Australia into Chinese university classrooms and libraries.
I am less optimistic about the Australian economy, rise in protectionism and over-regulation (and corresponding decline in policy contestability), social cohesion, international education and Asia literacy and our overall preparedness for the age of geopolitical upheaval.
The Australian economy hardly grew in 2024. Its competitiveness and productivity have not improved for more than a decade, as the Business Council of Australia argues in its recent report. Our model of growth driven by commodities and immigration has started to show its limitations. It has compounded housing, innovation and international education challenges we saw on display in 2024. The wars, Trump, a weak Chinese economy, climate and technological change add another level of anxiety. As a result, in an election year, the Government is facing a community that is divided on the critical issues of immigration and social cohesion, economic opportunity and fairness, climate and energy security.
Australian economic and social policy is far behind our national security policy in responding to the age of geopolitical upheaval. Dr Heather Smith – one of Australia’s leading shapers and practitioners of both economic and security policy, has summarised this challenge brilliantly in her address to the Australian Institute of International Affairs annual conference:
“…Raising our growth and productivity performance should be just as urgent an undertaking as our defence planning. With national and economic security now inextricably linked, substantive reform to drive growth is needed to survive in this era of fragmentation”.
While it is clear how Australia intends to build its resilience in defence, homeland security, critical technologies and infrastructure, it is unclear how it plans to grow its economy, improve its capacity to innovate and compete, and manage inevitable fractures within our highly globalised, multicultural communities driven by differences in values, politics and culture. These fractures were on display on university campuses and street protests responding to the war in the Middle East, and the burning of the Melbourne synagogue. Less visible but even more sinister is the simmering backlash against a “woke” culture of diversity, gender equality and climate change awareness, playing out online and given a powerful vindication by the election of Donald Trump.
Elsewhere, Australian universities and government are at loggerheads about the future and sustainability of one of our most successful industries – international education. As I wrote in a paper for the Australian International Education Conference, I hope they will find a consensus next year that keeps our universities global and viable, while also serving our national and social obligations and interests.
At a time when Australia needs ideas and talent to navigate and drive critical geopolitical, and economic transitions, our government seems to be less open to policy scrutiny and contestability, as well as a flow of talent between government and other sectors. Peter Varghese’s review of Commonwealth funding for strategic policy work – has revealed (intentionally or coincidently) two problems with our foreign affairs ecosystem. Firstly, it is so depressingly small. And the funding pool that supports it is even smaller. The arguments about regulation and merits of individual think tanks cannot hide the fact that for a country dependent on global trade and alliances for its prosperity and security, we think and invest very little in understanding the world around us. Secondly, our ecosystem is overly regulated and dictated by the Government, and will become even more so, as the Commonwealth budget comes under pressure and national security risks eclipse the need for policy contestability and openness. I cannot see any intent in governments to change its approach, or in universities, philanthropy and corporations to invest in independently funded centres and programs.
I am even less optimistic about the state of Asia literacy and the institutions that support it. The recent studies by the Asian Studies Association of Australia and the Australian Academy of the Humanities show a structural decline in both demand and supply of Asia capability and research programs and policies. To be fair, both Labour and Liberal Governments have recently made or renewed substantial investments in institutions and programs – the New Colombo Plan, Asialink Business, National Foundation for Australia-China Relations, the Australia-ASEAN Centre and the Centre for Australia-India Relations. What’s missing is a long-term strategy that connects the dots on our Asia strategy and capability, policy consistency, and the scale and predictability of funding.
Finally, I am concerned about our overall preparedness for the scale of geopolitical change we are likely to see in this and the coming decades. Geopolitical upheaval is real, fast and consequential. As I argued in these two pieces, Australian businesses and universities need to start taking geopolitics seriously, integrate it more methodically in their strategies and drive the development of the local ecosystem of geopolitical analysis and risk management practitioners.
While the geopolitical risks facing Australian universities and companies are inherently global, our responses need to be crafted in Perth and Sydney, not New York and Singapore. I am looking forward to contributing to the development of this ecosystem through my consulting work at GRASP and as an Industry Fellow at the UTS Business School, where we are building a new executive program on geostrategy and resilience.
Despite many challenges, Australia remains in a much better place economically and strategically than most countries of the world. This is something we can celebrate, be proud of, and build on, as we enter 2025.
Image: Port Augusta, South Australia (image by the author)