Australia's economic transition

Before the global financial crisis, the Australian economy grew for 17 consecutive years. But those years are now history. In the early 2010s, Australia's policy rate was almost halved to 2.5 percent. It may be cut to 1.5 percent during the ongoing year. Still, real GDP growth has decreased to 2.5 percent.

Over the past decade, a strong increase in export prices and a boom in mining investment supported income growth and rising living standards in Australia. But as mining investment is slowing, Australia needs to achieve higher productivity and broaden its export base to sustain that rapid improvement in prosperity. Australia has reached a new crossroads.

In politics, the erosion of growth has amplified pressures between and within both major parties. After Kevin Rudd took office as prime minister in 2007, infighting in the Labor Party caused him to lose the post to Julia Gillard in 2010 and then to reclaim his post. In the process, Abbott's Liberal/National coalition replaced the Labor government.

Before taking office, Abbott argued that Australia's "foreign policy should have a Jakarta rather than a Geneva focus."

Between China and the United States

Canberra's close ties with Washington are driven by security objectives, while its efforts to develop relationships with China and emerging Asia are fueled by economic needs.

In security, Australia's position has been shaped by its historical, though ambivalent relationship with the West. In November 2011 U.S. President Obama and Australian Prime Minister Julia Gillard announced plans for a sustained U.S. presence on Australian soil. In June 2014, the United States and Australia reached the new Force Posture Agreement, which is likely to increase the number of U.S. marines rotating through Darwin and possibly open up an Australian port for access by U.S. destroyers.

At the same time, Abbott's government has supported stronger economic relations with China, especially the FTA. In trade, Australia has hedged its bets by ensuring presence in both U.S-led Trans-Pacific Partnership (TPP) but also in China-proposed AIIB and China-inclusive trade and regional efforts.

These policy shifts have become more visible in Australian perceptions of China. According to the new 2015 Lowy Institute Poll, almost 80 percent of Australians now view China as "more of an economic partner" compared to only 15 percent who see the country as "more of a military threat."

It is this precarious balancing act between continued security cooperation with the United States and deepening economic relations with China, which could pave way to greater stability and prosperity in Asia Pacific as well.

Dr Dan Steinbock is a columnist with China.org.cn. For more information please visit: http://www.h5a3.com/opinion/DanSteinbock.htm

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