Recently, the first quarter inflation data released by the Australian Bureau of Statistics has once again aroused concerns from all walks of life - after fighting hyperinflation for more than a year, inflation has not only not fallen back to the RBA's target range (2~3%), but has rebounded more than expected, indicating that the probability of interest rate cuts within the year has been minimal.
The sharp cut in interest rate cut expectations naturally triggered a strong rally in the Australian dollar, and the valuation of fixed income assets such as government bonds also adjusted quickly. However, this asset-specific message has made the Australian government anxious that if interest rates cannot be cut before the general election in May next year, the high interest rates will inevitably cause a large number of voters to discontent, and the lost votes may become a stumbling block on the road to the general election.
But if we look beyond the local economy and look at Australia's future prospects in the Asia-Pacific region, we may find something more troublesome than interest rates, such as the new Asia-Pacific allies that Australia is betting heavily on.
Coincidentally, this ally also happens to be in the general election, but the country's general election is the largest in the world - the Indian general election.
According to the German data center Statistica, a total of 969 million voters in India participated in the six-week general election, and only 969 million people (out of a total population of about 1.41 billion) are in contention, mainly because the remaining population is not old enough to run.
50% of the population is under the age of 25 (705 million), while 65% are under the age of 35 (916 million).
Under the iron law of human economic development that "population is the dividend", maintaining friendly economic, trade and diplomatic relations with the populous countries has become the core driving force for the domestic economy.
Friends with a large country with a young population is the icing on the cake.
This is especially true for Australia, which has enjoyed China's economic explosion, especially the "iron ore boom", so under the "coercion and inducement" of the U.S. Indo-Pacific strategy, friendship with India is the top priority in the interests of Australia's economic development.
However, there is a small problem in India now: hundreds of millions of young people may face the embarrassing situation of losing their jobs after graduation, which has drawn a huge question mark over India's beautiful dream of surpassing and replacing China as the "world's factory".
According to Morgan Stanley, a U.S. investment bank, India sends 10 million graduates from higher education institutions to society every year, ready to be relocated to U.S. companies such as Apple and Tesla, and even Foxconn after leaving China.
The window of dividends brought about by such a huge migration of industrial chains is obviously coveted, but will India be able to take advantage of the enormous wealth that comes with it?
Providing venues, government tax incentives, and diplomatic facilitation are not a problem, but the biggest problem is that India's young and middle-aged labor force is almost completely incapable of industrial production.
Government data shows that only 3.8 per cent of India's total workforce has formal training. While 96% of tertiary graduates are able to read, write and do not read, they are not able to dig deep – the Indian government's Skills Report 2023 shows that the employability of the working population is only 50.3%, up from 46.2% in 2022.
Graduates of polytechnics and polytechnics and polytechnics, the two most critical categories of talent in the process of industrialization, meet the employment criteria when they are assessed for their jobs.
This set of data makes people ask: How much water is mixed in the process of mass production of graduates in India? Why is it that more than half of the young people who are supposed to be vigorous and able to hold up the country are "useless"?
This has created a dilemma where graduation is basically equal to unemployment.
To make matters worse, a large number of graduates result in a large number of unemployment.
However, there are always more ways than difficulties, and people always have to eat, so these "high-end talents" must make a living after graduation, so agriculture has become the best destination.
According to Bloomberg data, due to the global food shortage during the epidemic and other factors, the Indian government has significantly increased subsidies for agriculture in recent years, which has caused a large number of college graduates to return to the farmland.
In response, Indian professor Santosh Mehrotra, who is visiting the University of Bath in the UK, said: "It's just deadly, millions of young people are returning to the farmland...... This is completely contrary to the economic transformation that we (the Government of India) are aiming for!"
After overtaking China as the world's most populous country last year, it is embarrassing that India, which should have entered the process of industrialization quickly, has become a more stubborn agrarian society.
To add insult to injury, India's per capita income of only $2,400 is not as good as that of neighboring Bangladesh, which has been struggling with poverty.
If economies of scale cannot be formed, it is unlikely that India's production costs will fall even with more government support and diplomatic efforts.
The laws of economics will not be transformed by the will of Indian politicians, no matter how strong the internal desire to dominate the Asia-Pacific region and the external propaganda from the West.
As early as the second half of 2022, UBS data fully illustrated this concept - the average wage in India's manufacturing industry is only about 30% of China's, but even with such a clear manpower advantage, India's total production cost is only 5% lower than China's.
In addition, India, which has been trying to overtake China in the last century, has jumped from the primary industry (agriculture) to the tertiary industry (service industry), and the most critical manufacturing industry in the middle (secondary industry) is a fatal shortcoming, which also limits India's industrialization process.
The results are also very clear, in addition to the labor price is lower than China, India's logistics, transportation, warehousing and many other manufacturing links, are not up to par.
For foreign-funded enterprises, choosing to build a factory in India and have a heavy position in India is no different from venture capital.
From the perspective of the Indian people, the current situation of "guaranteeing" rural employment after graduating from colleges and universities will not only fail to increase overall income, but also fail to build a solid middle class, so it will be difficult for any prosperity to be sustainable without a solid domestic demand drive.
Therefore, whether India can quickly adjust before the dividend window for its young population disappears will be a major test of its goal of dominating the Asia-Pacific region.
For Australia, immigration and business cooperation with India must be more cautious before the emergence of a group with high quality and above the middle class to spend money.
In the past few years, we have seen the damage caused to the Australian job market by a large number of fake students from India, and if it is only because of the Indo-Pacific strategy with the United States, it will cause irreparable damage to Australia's multicultural society.
Therefore, it is expected to worry about whether interest rates can be cut before the general election in May next year to please voters, and it is better to go beyond the framework of the term of office and seek long-term benefits for Australia's future.