Growing international trade and migrationwill changethe structure of economic activity in Australia. We will

specialise more in production activities in which we have

a Comparative advantage, and buy the goods and services

that we are less eicient at producing from overseas. Thismeans there will be winners and losers in the Australian

labour market.At the moment, for example, it is a good time to be a

mining engineer or construction worker, but not such a

good time to be amanufacturingworker. Overall, however,

we should expect the gains from closer integration to

outweigh the losses.Our economy and labour market will perform more

strongly for the opportunity to focus on the activities that

Australia is best suited to, an effect that will be magni ed

by our proximity to Asia.

AustraIias comparative advantage relative toAsia is in production activities that are intensivein highskilled labour, so we need a foundationfor continued specialisation in those areas.

SKILLS. SKILLS. SKILLSThe big question, 1 think, is what the Australian labour

market can do to take most advantage ofthe opportunity

that the Asian Centurypresents. This is not a new question,

and l dont believe the answer is rocket science. But the

question and answer are important and, for that reason,worth taking up again.

Our first strategy should be skills, skills, skills.Australias Comparative advantage relative to Asia is

in production activities that are intensive in high-

skilled labour, so we need a foundation for continued

specialisation in those areas.This will require us to run to stay ahead, as Asian

nations also seek to increase the skill levels oftheir work-

forces, with a recent Grattan Institute report suggesting

rapid improvement in numeracy and literacy skill levels

in Hong Kong, China and Singapore.Maintaining Australias position as a highskilled

country is largely about increasing participation in higher

education, but it is also about improving the quality of

education particularly through programs with dem~

onstrated net benefits, such as early intervention programs

to assist children from disadvantaged backgrounds.it can also be about giving new opportunities to

students from Asia. With the size of population in Asia,

and the higher education systems there still having some

way to go to allow the same rates of participation as in

Australia, it seems there is scope to attract highquality

students from Asia who are not able to gain access to

university study in their own countries.A largescale scholarship system targeted at students

from Asia for graduate level study in science and

engineering fields would be one idea for adding to theskilled workforce in both Australia and the students

home countries.

Issues in Society jvolume 350

FLEXIBILITYThe second strategy I would suggest is to fosterexibility and facilitate adjustment. in the Asian Century,

it seems that it will be increasingly important that

Australian workers can be flexible in the locations wherethey work, and with whom they work.

More particularly, closer integration is likely to mean

a higher chance of spending time working in Asia and

working with Asian co-workers. Having this flexibilitywould seem to require some proportion ofthe Australian

workforce to have Asian language skills but, probably more

importantly, an awareness of Asian cultures, as well as a

culture in Australia that values diversity in the workplace.

I have described how closer integration with Asia will

be the source of adjustment in the labour market for

example, of some job losses. Easing adjustment to these

sorts of changes is not something we have done well in

Australia in the past.Yet it could be a powerful mechanism for generating

acceptance of change. Certainly, we have a system of

welfare income support benets to provide a safety net

for those who lose their jobs as the Australian economy

adjusts to changes in patterns of international trade.

We could, however, do much more to assist those who

are disadvantaged by structural change in the economyto get back into work through serious programs for

re-skilling and providing pathways to re-employment.

[eff Borland is Professor of Economics at University of

Melbourne.

2012 Jeff Borland. Posted 20 April 2012.The Conversation | http://theconversation.edu.au

Australia's Engagement with Asia 25