A larger Australia

By Bates Gill, chief executive of the US Studies Centre at the University of Sydney, and Tom Switzer, a research associate at the US Studies Centre.

In his press club address earlier this month, Michael Fullilove warned that President Obama is pivoting away from the much-touted US 'pivot' towards the Asia Pacific. Both politically and militarily, we were told, the 'pivot' has 'gone off the boil.' America's heart, he lamented, is not in it.

But while it is true that the Middle East remains an important part of US foreign policy deliberations, it is also true that America is likely to remain the predominant power in the Asia Pacific across key indicators of national power. Indeed, the Washington consensus is that the national interest still demands America's deep engagement in the region, which is supported by its steadfast commitment to a forward military presence. 

Perhaps nothing better demonstrates the long-term US commitment to Asia than its enhanced security relationships with Indo-Pacific allies. We all know about Australia's enhanced security relations with what Menzies called 'our great and powerful friend', but we are hardly alone in looking to America. A few months ago, Washington sent six new P-8As (pictured; 'the most advanced long-range anti-submarine and anti-surface warfare aircraft in the world,' according to the Pentagon) to Japan on their first overseas deployment.  In another first, numerous American Global Hawk surveillance drones will be operated out of Japan and elsewhere in the region. Add to this the landmark US-Japan defence agreements last October and it is clear that America remains strongly committed to the region.

But that commitment is more than an enhanced diplomatic and military profile. Take, for example, the US-led recovery effort in the Philippines after Typhoon Haiyan in November. Not only did the Obama Administration send an aircraft carrier and hundreds of Marines to distribute food and water to remote areas, it also pledged $22 million in assistance. (The Chinese government, by contrast, pledged only $100,000 before increasing its total contributions to a measly $1.5 million.) 

In another example of diplomatic heavy-lifting only Washington can do, President Obama, in a remarkable display of trilateral solidarity, sat down with the leaders of Japan and South Korea this week so the two of them, along with the US, could focus on the strategic interests which bind them together.  [fold]

Fullilove says 'the economic element of the rebalance is in trouble.' He assumes the 'pivot' is doomed without the Trans-Pacific Partnership trade deal. But the 'pivot' does not equate simply to the TPP. US trade and investment with the region is deepening: US foreign direct investment in Asia has increased by more than 170% since 2001, and Asian investment in the US has jumped by more than 130% in the same period. Meanwhile, Washington has signed several bilateral regional trade deals in the past decade and is in negotiation for a bilateral investment treaty with Beijing. 

Besides, even if the President fails to get Trade Promotion Authority from congressional Democrats in a mid-term election year, there is always next year: a new congress, with more pro-trade Republicans, is more than likely to pass fast-track authority, which would still give Obama leverage to sign and ratify the TPP. 

Historians since Thucydides have observed that the rise of a new power is often accompanied by regional uncertainty and sometimes conflict. China's rise will remain a central question for the region and for US foreign policy. But it is not inevitable that a China with 'plenty of puff', as Fullilove suggests, will become a hegemonic force that will impose its will across the region. In the event of a severe economic downturn, something China has not experienced in its 30-year bull run, it is at least as likely, if not more so, that Beijing's leaders would remain largely consumed with dealing with economic challenges at home rather than slaying dragons abroad. This, moreover, at a time when China is surrounded by more than a dozen neighbours, few of which are truly friendly toward Beijing. 

It is also widely believed China will grow old before it grows rich. But even if Beijing can sort out its long-term demographic problems, other big challenges, namely political and environmental, loom. 

Meanwhile, notwithstanding its own problems at home, the US will continue as the predominant power, not just in education and innovation but also energy self-sufficiency. Demographic trends, including moderately high immigration and fertility levels, also work to America's advantage. All of this is good reason to believe that, far from pivoting away, the US is intensifying its engagement in the region.

Photo by Flickr user Official US Navy page.

There's a big, a big hard sun

Beating on the big people

In a big hard world

– Eddie Vedder, 'Hard Sun'

Lowy Institute Executive Director Michael Fullilove is to be commended for calling for a 'larger Australia'. However, the old adage of 'quality not quantity' also applies. It is not clear to me that our Department of Foreign Affairs & Trade (DFAT), the would-be tip of the 'larger Australia' spear, has the skills or imagination to make its own approach to diplomacy larger, such that Australia's official presence in international relations could be enlarged.

I was an economist with DFAT for five years, working in the Economic Analytical Unit and on Japan Trade & Economic matters.

Japan is a good case of where bilateral cooperation and coordination between two governments work well. Despite the perennial irritants of whaling and Southern bluefin tuna, our relationship with Japan across an impressively wide range of portfolios is well established and open. We should aspire to reproduce the strength of our relationship with Japan with other countries across the Asia Pacific, albeit that Japan is a special case in having the institutional strength by which to work with Australia in many different areas.

The core business of managing strategic relationships, trade negotiations and consular affairs are what every foreign ministry deals in, but there is also, without doubt, a need to broaden the conception of what modern diplomacy must address. There is, in DFAT, a paucity of long-term planning and analysis of economic and environmental trends of critical importance to Australia's national interests, issues that are domestic and international in their manifestation.

Understanding the breadth of climate change or the borderless worlds of energy policy and financial crises (to take three 21st century 'big issues') requires the application of knowledge and skills DFAT does not have. Nor does the department attempt with any real conviction to recruit people who do have the technical expertise to augment critical policy areas. [fold]

For instance, in my experience, much of the substantive work in the Japan-Australia FTA was handled by the respective agriculture ministries; DFAT added an overall framework for the formal negotiations. DFAT insists it is the lead agency for most international negotiations, yet without adding to the content of many sector- or issue-specific negotiations.

Listening to Dr Fullilove's address to the National Press Club, I was not sure if he was making the case for a larger Australia or merely a bigger Canberra. There seemed to me to be an emphasis on the quantity of Australia's diplomacy, as if by adding more overseas posts, it naturally becomes larger. I do not think that by adding posts around the world, or getting that next big seat at the big table of international affairs, will make for a larger Australia. What we have to say when we get there matters as much as being there.

Diplomacy and embassies are not ends in themselves. They are the means by which outcomes are achieved. The problem with DFAT, and part of why I left, was that I felt its own conception of its work was out of date and the department did not have the analytical base from which to widen its appeal or even to see its own limitations as a problem. We don't need a foreign service made up of technocrats but, if we do want to see an Australia with a larger presence in international affairs, we need a foreign service with more specialist knowledge and a stronger skill set than it currently deploys.

Photo by Flickr user Dion Hinchcliffe.

I have been inspired to add my twenty cents worth in favour of well-balanced, strong population growth by the recent contributions of Michael Fullilove and Andrew Leigh who, in different ways, have refreshed the national discussion on Australia's population growth.

There is also inspiration in a negative sense. We need as many voices as possible to move the population debate well clear of the unedifying spectacle we saw last year when migration became entangled in refugee policy. As Andrew Leigh pointed out, it is clearly important to separate the two debates. 

For Fullilove, a larger population is seen as one element in Australia becoming bigger in a number of senses: via our economy, our demography, our influence, and in our approach to the world. After his careful weighing of many of the arguments about the economic impacts of immigration, Leigh came down on the plus side while questioning many of the arguments on both sides of the debate.

In this contribution, I suggest that some of the major benefits to Australia from strong immigration arise because it makes us more dynamic.

Immigration means we renew our workforce, our entrepreneurship, our talents, our diversity and our capital stock more rapidly than we would otherwise. This brings important benefits – both economic and non-economic. I want to emphasise that to derive the full benefits of stronger immigration, and indeed to help overcome some major sources of domestic dissatisfaction with immigration, we need to stop under-investing in education, skills development and infrastructure.

Somewhat more than half of our current population growth comes from net migration. Indeed, given that our total fertility rate has been well below replacement levels for almost four decades, in the absence of immigration we would be looking to join the likes of Japan, Germany and Russia as countries with declining populations. [fold]

One of the impacts of strong immigration is that it injects additional mobility into our labour market. Most immigrants come with a keen eye for job opportunities. Many come with an eye on a specific job and some with a promise of a position that has not attracted local candidates. New immigrants are demonstrably more footloose than the resident population and they travel more readily to where the jobs are. This helps reduce the impact of the traditional frictions that operate in labour markets; frictions that in Australia are magnified by our vast internal distances. In the absence of this additional labour mobility, we would be less responsive to shifting opportunities.

Immigration also assists us to more rapidly replenish our workforce skills. Particularly as a result of employee-sponsored immigration, migration assists us overcome not only geographic mismatches between employees and job opportunities but also the mismatches between the skills of the resident workforce and these opportunities. Again, immigration makes us more responsive to emerging opportunities.

I don't think I need to dwell on how immigration adds to our national talent pool. Whether in the arts, business, science, sport or indeed in any area you care to nominate, we find a healthy share of migrants, and the sons or daughters of migrants, among the leading ranks. This is not simply a matter of migrants coming and excelling in areas where Australia has traditional strengths; it is also a matter of migrants breaking new ground and creating new areas of Australian excellence. There is something of a filtering process at work here, with the act of migration adding disproportionately to the adventurous and the ambitious.

Similarly, there is little need to dwell on the way migration replenishes our diversity. We are not among the most multilingual countries in the globe because of anything we do to encourage teaching and learning of languages. This, as with other manifestations of our diversity, rests almost entirely on the strength of our migration program and the efforts of recent arrivals and their children to maintain fluency in their native languages. And diversity is not just a nice-to-have; it is a material factor in our ability to engage globally and to derive the benefits of this engagement.

The final area I want to touch on under the heading of dynamism relates to the capital stock. This may seem strange because the standard approach is to think that faster population growth would tend to dilute rather than add to the capital stock and we would require additional investment just to keep pace. But this reasoning owes more to the over-simplicity of economic models than to real world experience. In the real world, the quality of the available capital stock is itself constantly changing; there is a concerted global research and development effort directed precisely at this outcome. So, far from investing more rapidly just to keep up, when we invest we upgrade as a matter of course. With a strong immigration program we upgrade more rapidly and we accelerate improvements in the efficiency of our capital stock.

These benefits are typically left out of formal modelling of the impacts of immigration, and their absence contributes to a systematic under-statement of its material and cultural benefits.

Without any question, realising the full value of these benefits requires steps other than keeping the migration tap running. We need also to ensure that we add to our dynamism by attending to a range of other policy areas. In particular, we need to stop under-investing in infrastructure and in education and skills development.

This will help lift the pace of productivity growth (and if done properly will more than recover the costs of the additional investment), and will also address two of the major factors in contemporary Australian opposition to immigration: the sense that our cities are becoming over-crowded, congested and less liveable; and the argument that immigration allows us to get away with under-investment in our kids' education and in up-skilling the existing workforce.

Maintaining a healthy migration program and investing adequately and judiciously in infrastructure, education and skills development will go a long way to ensuring that we retain our reputation as a young, dynamic country that is open to new ideas and open to the world.

Photo by Flickr user Jules Le Moal.

Australia's founding governor, Arthur Philip, expected the settlement he led would in time become 'the Empire of the East'.

In his important and timely National Press Club address, Michael Fullilove is more modest but he makes a powerful case for a national conversation on whether Australia should seek to become a much larger country – a big, confident country with a bigger tool chest, including an extensive diplomatic network and a stronger military, and eventually 'an ability to influence the balance of power in Asia'. Fullilove supports his view with cogent strategic, political and economic argument.

There is good reason for believing that within the new government there is the confidence to be receptive to this longer term thinking. Senior ministers such as Julie Bishop, Malcolm Turnbull and Andrew Robb seem to support Australia's potential for strong growth. Treasurer Joe Hockey seems well disposed, as are leading members of generation next, Greg Hunt and Josh Frydenburg.

There are constraints on and risks for politicians, however supportive, about publicly articulating such grand vision unless there is significant community support, including from business, mining and agricultural interests, professional legal and medical bodies, the media, think tanks and universities, and the Australian diaspora. Legitimate and complex concerns about water, the environment more generally, infrastructure, urban comfort, integration of migrants and state government skills raise many problems. The greater problems are a failure of imagination, a failure of strategic vision and a failure by too many to appreciate just how successful, in global and national terms, Australia has been in growing from 7 to 23 million without serious disharmony. [fold]

Already Bishop's bold decision to integrate DFAT and AusAID offers the real prospect of starting the process of rebuilding Australia's diplomatic strength. The much more complex task of growing the defence budget turns on the broader question of growing the economy. Some will cavil about the possibility of 'an ability to influence the balance of power in Asia'. With around 50 million by the end of the century Australia may not be able to influence the balance of power but we will be a more decisive contributor to our national security.

Fullilove is right to call for a national conversation. For too long the 'frightened' people, to use Renouf's term, have usurped debate. Prime Minister Abbott needs to ensure that while their views are respected they do not dominate.

Photo by Flickr user Alex Proimos.

Nick Bryant is the author of the forthcoming book The Rise and Fall of Australia.

Australia requires a rhetorical rethink, for the language used to describe itself is ridiculously out of date. Take the vocabulary of isolation and peripheralism.

Old-fashioned constructs like 'the land down under' and 'the antipodes' are misleading because they grew from Australia being at the opposite end of the earth's surface to the country's one-time colonial master. The 'tyranny of distance', like 'the lucky country', comes from a book title that has long out-lived its usefulness.

Surely it is also time to ditch the language that routinely casts Australia as a country still in the throes* of adolescence, struggling to reach maturity. Please.

Part of the reason why national identity debates in Australia can be so tortuous and stale is because the vernacular and terms of self-reference have not kept pace with the country's changing place in the region and the world. Australia, for all its unique idioms and colourful turns of phrase, has not been very good at describing its new character. Instead, it typecasts itself in ways that comport with how the rest of the world mistakenly views it.

When Australia took on the revolving presidency of the UN Security Council last September it even placed a stuffed marsupial in the office alongside the chamber that goes with the temporary job. Australia is one of the most active and respected countries on the 15-member Security Council. Why the need for such self-denigrating props? Australia needs to escape this boxing-kangaroo way of thinking.

The phrase 'punching above its weight,' as Michael Fullilove pointed out during his excellent speech at the National Press Club, falls into this same category. [fold]

It has become a cliché shorn of meaning. Nowadays, Australia has a punch that it is commensurate with its commercial, economic, demographic and artistic clout: that of a beefy middleweight. Besides, I've always thought that the pull exerted on Australia from different and often competing directions – Washington, Beijing, other Asian capitals, Whitehall and Buckingham Palace — offers a more useful way of thinking about foreign affairs than the pugilistic frame.

I also agree with Michael about the danger of Australia getting punch drunk, and mistakenly concluding that 'if we're already punching above our weight, then there's no need for us to do anything more.' And I like the eye-catching title of his speech, A Larger Australia, and the sizeable thinking behind it.

The Big Australia debate is often framed as an argument about demographics and immigration quotas. But the Larger Australia debate should also be about the national and political mindset. It is important to distinguish between the two, because recently they have been at odds. During my six years covering Australia for the BBC, the political mindset became smaller, narrower, more inward-looking and closeted. In contrast, the national mindset, whether expressed by Cate Blanchett taking Sydney Theatre Company productions to New York or Macquarie Bank buying up more American infrastructure, was ever more expansive and ambitious.

In politics, the turning point — or pivot, to use the fashionable diplo-speak of the day – was the 2010 federal election, which followed the ouster of Kevin Rudd. For him, personal and national ambition were entwined, and both extended far beyond Australia's borders. Julia Gillard's aspirations were more easily accommodated at home. At the outset of the campaign, in a strategically placed story on the front page of The Sunday Telegraph, she signaled her preference for a Small Australia. This policy announcement, aimed squarely at Sydney's western suburbs, married with her comments on The 7.30 Report during her first overseas trip as prime minister, when she admitted she felt more comfortable in Australian classrooms than international summits. In distancing herself from Kevin Rudd, she distanced Australia from the rest of the world.

With the then opposition leader Tony Abbott also indicating that he preferred to be a stay-at-home prime minister, the 2010 campaign had a distinctly municipal feel. It was as if Gillard and Abbott were competing to become the mayor of a medium-sized city rather than contesting the leadership of an ever more thrusting and consequential nation.

The Harvard academic Niall Fergusson, who happened to be visiting Australia at the time, could scarcely believe his ears. 'It is true to say that there is a quality of Australian political debate very reminiscent of local politics in Glasgow when I was growing up,' he told the ABC's Mark Colvin. Crikey's Bernard Keane called it the 'little Australia' campaign.

The 2013 campaign was not much better. 'I don't think we should be getting above ourselves here,' said Tony Abbott during another ABC interview, when asked if Australia should support American airstrikes against the Assad regime. 'We are a significant middle power but no more.'

Gillard and Abbott, who tended to bring out the worst in each other, took the old maxim that 'all politics is local' to the point of absurdity.

It is time have a national debate of a quality, scope and ambition that is not constrained by the supposed small-mindedness of the electorate — a small-mindedness, I would argue strongly, that is overstated. Just as Australian politicians think that Australian voters are more xenophobic and racist than they truly are, they are exaggerate their insularity. This 'political parochialism' stands in the way of larger Australia thinking.

It is not just politicians who are guilty. Sections of the media are also complicit. As Michael says, it is ridiculous that the airmiles racked up by Kevin Rudd as foreign minister should merit a tabloid hatchet job. At the time of Xi Jinping's rise to power in Beijing, it was striking that an uneventful visit to Australia by Charles and Camilla was lavished with more attention on commercial television and in the tabloids. This was not only Small Australia thinking but also Old Australia thinking: British century rather than Asian century.

What also struck me about Michael's speech was that it was the kind of oration that should truly come from the prime minister. During my time in Australia I was constantly struck by the visionless rhetoric of the political class. Instead, short-termism was built into every statement, sound-bite and dreary slogan. Again, the preference is for political parochialism rather than anything more farsighted or expansive. Debate not only obsesses about the border, but also stops at the border. This is a speech, then, that the modern crop of politicians seems incapable of delivering.

Michael Fullilove says that 'a larger foreign policy is one that combines two qualities: ambition and coherence.' Alas, since the 2010 election, these are qualities rarely evident in Canberra. Australia's politicians prefer to think small.

Photo by Flickr user Andru1308.

* Thanks Mark.

I'm going to focus on one aspect of Michael Fullilove's National Press Club address, neatly summarised in his conclusion:

Australia has a choice. Do we want to be a little nation, with a small population, a restricted diplomatic network, a modest defence force, and a cramped vision of our future? Or do we want to be larger – a big, confident country with an ability to influence the balance of power in Asia, a constructive public debate, and a foreign policy that is both ambitious and coherent? Are we content to languish in the lower divisions or do we want to move up in weight?

I have voiced similar sentiments when it comes to Australia's diminishing strategic weight in a region full of rapidly growing powers. Yet we shouldn't underestimate how difficult it would be to effect a step-change in our population. Although Australians have proven accommodating and adaptable to high immigration levels, politicians know all too well that advocating for a big boost to immigration numbers can get them in trouble with the electorate.

It is a measure of the country's wariness on this question that Bob Carr, while NSW state premier and thus the leader of Australia's 'world city', could declare that 'Sydney is full'. And this was in 2000, when the world came to Sydney for the Olympics. If even a figure such as Carr — a liberal internationalist who wants an open Australian economy and strongly supports multiculturalism — cannot face the thought of a larger Australia, then we really do face a cramped vision of the future.

But as hard as it would be to move Australia to substantially higher population levels, the more difficult intellectual and policy challenge, and one that should precede any move to boost our population, is 'what for?' If a bigger population buys us a bigger economy and thus a strengthened defence and diplomatic capability, what should Australia aim to achieve with this increased power and influence? [fold]

In the conclusion to his speech, Michael refers to an 'ability to influence the balance of power in Asia'. I take it that this means more than just having strong military capabilities in the Southeast Asian context, because the opening of Michael's speech describes Australia's security environment (our 'predicament of proximity') in largely Sino-centric terms.

But if Australia needs the military heft to influence the balance of power with China, then as ASPI's Mark Thomson has written, its not clear that growing our defence spending to 2% of GDP, as Michael suggests, would be enough:

...even if we boosted our defence spending to 2.5% or even 3% of GDP...we would remain irrelevant to the balance of power between China and the United States...Bad things may happen, very bad things. But there is nothing that we can do about them, certainly nothing that we can do by the use of armed force. Even if the government had stuck with its plans to build its so-called Force 2030, we would remain bit players amid the emerging giants of the Asia Pacific.

Then again, Hugh White has advocated 2.5% as an appropriate target, and wants that to pay for 18 submarines and up to 200 advanced fighters for the air force. If Australia had that kind of capability today it really would make a substantial contribution to the regional balance of power; in fact, it would put us in a similar weight class to Japan. But even if the political will can be mustered, it will take decades to achieve that kind of capability, at which point China will be a far more capable force too.

And don't forget that a favourable balance of power in our more immediate region is no long-term certainty. Indonesia's economy is already larger than our own, but burdened by poor governance, Indonesia has a weak state sector and thus an underfunded and corrupt military. But those are eminently fixable problems, and in fact Indonesia has made quite a show of fixing many of its political problems since Suharto fell. Yes, reform has stagnated, but who is to say we aren't on the cusp of a second wave of reforms that further strengthens Indonesia? We can't expect Indonesia's power projection capabilities to remain indefinitely weak, and when that situation changes, the need to influence the balance of power with China will start to look like a more distant concern.

There are other questions raised by the promise of a bigger defence capability: would we use it to buttress America's slowly eroding regional hegemony? If so, won't that generate the kind of friction with China we would like to avoid? Or are we developing a more independent national strategy on the premise that American security guarantees will be less reassuring than they used to be? And are we pursuing a truly defensive (or 'non-offensive') capability that merely aims to deny an adversary the ability to coerce us, or do we want the ability to 'rip an arm off' an adversary?

The attraction of a bigger, more muscular Australia is that it keeps the country in charge of its own destiny — a security maker rather than a security taker. But I worry that the population and economic growth disparities with  Asia are so large that no reasonable amount of growth in our population will overcome them. The radical step suggested by Stephen Grenville — a union with New Zealand — may have economic advantages (though I'd argue most of them could be realised without a formal union, which would be unnecessarily damaging to New Zealand's unique political and civic culture), but I doubt it would have any impact on the strategic objectives Michael outlines.

Moreover, much of what Michael wants could be achieved without higher levels of immigration. DFAT's call on the federal budget is tiny; a rounding error, really. So we don't need a bigger tax base to have a bigger diplomatic footprint (in fact, as Michael recommends, it could come out of the AusAID budget). We can even raise defence spending substantially without breaking with historical norms.

The last thing I would point out is that the forces of inertia are strong. Should successive Australian governments do nothing of what Michael recommends, and should this result in an Australia with diminished international clout, the ride down will be very smooth. As Britain and France proved in the last century, it is possible to drop a weight class (or two) in international affairs while at the same time raising your country's standard of living. Then again, Britain and France managed their relative decline in an era when the US enjoyed massive economic superiority over its great-power adversary. The US and its allies are not in such a fortunate position today.

Photo by Flickr user Bernadette M.

Stephen Grenville has provided an instant answer to Michael Fullilove's recent quest for a larger Australia: the addition of close neighbour New Zealand. This is annexation season further afield, but I am confident the Crimea option is not what Grenville has in mind. Instead, his argument potentially answers a perennial Australian question: New Zealand, just what are you good for?

But the answer is unlikely to be much extra size or heft. An extra four million people would be hardly noticeable unless they all crossed the Tasman and started demanding social payments. The two economies are already significantly (although not completely) integrated, and their Closer Economic Relations already acts as a stepping stone for broader regional cooperation (including CER-ASEAN).

And if Australia's foreign service is too small for the country's size and ambitions, as Fullilove suggests, then the addition of New Zealand's streamlined diplomatic corps would hardly overturn that numerical problem. Canberra may actually find the removal of a separate international vote for Wellington (in the Pacific Islands Forum, the East Asia Summit, and at the UN) a move backwards. Despite differences on some issues, two neighbours occasionally even find themselves in agreement. [fold]

And despite its obvious qualities, I don't think the New Zealand Defence Force is quite the answer to Fullilovian concerns that Australia is falling behind in Asia's strategic balance. We might bring some uncomfortably different views on China and the US too.

New Zealand is subject to periodic bouts of doubt about its future. That's on hold for now thanks largely to strong economic growth, which has attracted a fair bit of international attention and helped improve the net migration position. But we've not seen the last of it. And when it does return I don't think people here will be swayed by the argument that we should work towards a larger New Zealand: that might be too reminiscent of a not-so-glorious part of our history. Being small and smart, nimble and quick, are the sorts of myths New Zealanders treasure.

A larger Australia might just get the place that hundreds of thousands of expatriate Kiwis already call home into trouble. It could mean a larger carbon footprint, greater demands on limited water supplies, and expanding urban areas more vulnerable to larger bush fires. Indonesia does not want a larger Australia to deal with: it wants a more sensitive one. Australia is already the largest provider of aid in the South Pacific. But a greater understanding of the challenges of smallness could help Canberra's foreign policy in its immediate region. Getting bigger won't.

Australia could be twice as large and still not escape the asymmetries with growing Asian great powers or compensate for a decline in America's regional presence. Returning Aussie defence spending to 2% of GDP is less important than tackling the reluctance to prioritise in an already large capability plan and the political dependency that goes with it. The problem with Australia's international policy is not a lack of ambition. It is a lack of precision.

Photo by Flickr user Joe Shlabotnik.

There are various possibilities for a Larger Australia. Michael Fullilove's path is to put more of our national resources into defence and diplomacy, as well as growing our population through increased migration and fertility, creating an Australia which walks taller on the world stage.

A very different path to bulking up physically would be to get together with New Zealand to make one country with 28 million people. First, let's see what this would look like and why it would be a good idea. Then the hard part: how it might happen.

Raising the population to 28 million doesn't make us stand out in world population ranking: it shifts us from around 50th place to around 45th, still smaller than Peru and Malaysia. Measured by GDP the placing sounds better, but adding New Zealand doesn't change the rankings much. Using purchasing power parity (the fashionable method) to compare countries, we currently come 17th or 18th, and adding New Zealand takes us up a place or two, around the same as Indonesia but still behind South Korea, Spain, Turkey and Canada. Still well outside G7/G8 territory.

Thus we wouldn't merge in order to elbow other countries aside with sheer physical heft. We'd mainly do it because of its intrinsic logic. Countries and economies do best with a mixture of diversity (to avoid putting all our eggs in one basket) and homogeneity (so that we don't use up too much energy getting along with each other). Putting Australia and New Zealand together would improve the mix. [fold]

Looking first at our external positions, Australia has (sensibly) followed its comparative advantage into heavy dependence on resources and on a single customer: China. New Zealand's comparative advantage is in growing grass, so it dominates the global milk trade, again with China as main customer. This specialisation creates vulnerabilities which could be reduced by aggregating our export mix.

Perhaps because New Zealand, being less well endowed, has to try harder, it often seems to make more of what it has. It produces entrepreneurs: a residual New Zealand accent is common among Australia's top businesspeople. Fonterra, the milk cooperative, has become a globally powerful national champion in a way that eludes Australia in agriculture.

This sort of entrepreneurship turned the Chinese gooseberry into the Kiwifruit and re-branded a wine-making fault (grassiness) into the eminently desirable 'herbaciousness'. It looks like the New Zealanders might even beat us to getting a decent flag.  

Again, perhaps because it has less to work with, New Zealand has often been more ready to push the boundaries on ideas and overturn old ways. With fewer checks and balances (New Zealand has a unicameral parliament, for example) it's not surprising that some of these ideas were carried too far (the Lord of the Rings trilogy is eight hours too long). When 'free markets' became the economic vogue, New Zealand switched from inward-looking socialism to open-slather 'leave it to the market' without missing a beat.

Closer exposure to this 'just do it' attitude might embolden the same sentiments in Australia, to our benefit. The extra checks and balances of a larger economy and more inertia from complex governance might keep the ideas anchored to reality. The extra scale would help both sides. Think of the talent you would draw on in selecting the national cricket and rugby teams! The America's Cup would be a Down Under perpetual monopoly.

Similarities are crucial to success. To start with, successive Lowy Institute Polls show New Zealand to be by far our favourite country, with the thermometer so hot it borders on the indecent.  With a few minor tweaks, we face the outside world with the same foreign policy outlook. Again the differences on immigration are minor, and Australia is coming to share New Zealand's acceptance of heavy responsibilities in the Pacific. On economic policy, it's hard to tell the difference. New Zealand invented inflation targeting, but Australia improved it so that our now near-identical model is global best practice.

With essentially interchangeable legal systems, this would be one of the easiest amalgamations of all time. Australians shouldn't dwell on the fact that we offered New Zealanders the opportunity of inaugural membership of the Federation and for more than a century they haven't felt the need to take up our offer. The constitutional paperwork is still there, just waiting to be dusted off.

Some will argue that, as far as the economy goes, we already have seamless union through the CER Agreement . It's true that much has been done here: after a ninety-year wait, New Zealand apples have begun to infiltrate our markets. But just to give one counter-example, New Zealand's banking system is totally dominated by Australian banks, yet the difference in regulatory regimes is not just in the detail, but about the philosophy.

Of course, a union wouldn't be easy or quick. For a start, New Zealand is significantly poorer than Australia, and many Australians would fear that New Zealand would be a larger version of mendicant Tasmania. On top of this, amalgamations always produce redundancies, most notably in this case a whole parliament, though New Zealand might be content to make its Beehive the equivalent of a state parliament. 

Despite the compelling logic, neither side shows the slightest enthusiasm for union. The 2012 Lowy Institute Poll showed that most Australians are against it and almost as many New Zealanders agree with them.

The key is to see this as an evolutionary process rather than a revolution. And the way to maintain progress is to be ready when opportunity presents itself.

Here's an example: unifying the currency would be a huge step, unlikely to be taken under normal circumstances and not being recommended by anyone. But in a real crisis (the Kiwi dollar going well over parity?), it might well be seen as sensible.  In 1997, when the Reserve Bank of New Zealand handled the Asian crisis with less finesse than its Aussie counterpart, there was a strong interest among New Zealand businesses in linking the currencies. Our then Treasurer, Peter Costello, told them they could adopt the Aussie dollar but an Anzac currency was not on.  

To build a Larger Australia, why not start by declaring a contest for the new currency design, drawing on icons of shared heritage to decorate the new notes? The list is endless: Phar Lap, Russell Crowe, Crowded House and the pavlova for a start.

Photo by Flickr user South Canterbury NZ.

I've just left the National Press Club in Canberra, where Lowy Institute Executive Director Michael Fullilove delivered an address which argued that the shift in economic and strategic weight to the Asia Pacific demands a recalibration of Australia's place in  the world. Australia is already a substantial international player, he argued, but it needs to move up a weight division through a bigger population, higher spending on defence and diplomacy, and an elevated national debate.

I won't summarise the speech in detail because a transcript is up on the Lowy Institute website, though I did want to mention one aspect which might get lost in the debate about how big Australia needs to be in population and weight of military power (more on that below), and that is his stark warning about the status of the US pivot. America's heart is not in the pivot, Michael said, and the initiative has 'gone off the boil' in Washington. Most direct was his judgment that the credibility of the pivot hangs on the success of the Trans Pacific Partnership trade deal: 'if TPP fails, it will prove the pivot has run out of puff.' As Stephen Grenville has argued, failure of the TPP is a distinct possibility.

It's fair to say that things got rather animated in the Q&A session, with a couple of journalists pressing Michael on the details of his proposal for a larger Australian population, and even requesting details on which domestic programs Michael would like to see cut to pay for higher defence spending.

When a speaker recommends higher population levels, it is of course entirely legitimate to ask what those levels ought to be. But the focus on budget specifics seemed to me to crowd out bigger questions about exactly what Australia ought to do with its larger population and bigger strategic weight. I'd also like to know more about the alternatives: what would be the consequences, for instance, of doing little or nothing of what Michael recommends for Australia's population, defence and foreign policies? These are issues I'd like to explore on these pages in the coming days.

 Photo by Flickr user Matthewwu88.