G7 or BRICS? An important question for Australia

PublishedAustraliaInstituteGeopolitics
Written By MSMF

Executive Summary

The 16th BRICS Summit in Kazan marked a pivotal moment in global economic discussions, highlighting the growing influence of BRICS nations and their divergence from G7 policies. For Australia, a resource-rich nation with deep economic ties to both organisations, navigating these shifts presents both challenges and opportunities. The War in Russia and Ukraine, as well as the on-going conflict between Israel and Palestine, poses important questions to nations like Australia who is caught in the rift of choosing who choose as the strategic partner.

This report examines the macroeconomic implications, industry-specific impacts, and societal considerations for Australia as it evaluates potential alignment with BRICS or G7 strategies, as well as the policy of each organisation, incorporating economic policies and long-term benefits. It provides an in-depth comparison of the policy frameworks of both blocs and strategic recommendations to maximize Australia’s economic resilience and global competitiveness.

It is broken down into 3 sections;

  1. Macro-Economic Analysis

  2. Industry Impacts

  3. Societal Considerations

Followed by a conclusion and my personal recommendation on what the next steps are for Australia.

Introduction

Background

The global economic landscape is increasingly characterised by the rising influence of BRICS (Brazil, Russia, India, China, South Africa) and the sustained dominance of the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States). BRICS nations, representing emerging markets, are focused on creating alternative financial and trade systems to counterbalance the traditional Western-centric frameworks championed by the G7. This includes and is not limited to replacing the preferred global currency & smaller/weaker nations choice of strategic partner. Each organisation presents distinct economic philosophies and policy priorities, creating opportunities and tensions in international trade, investment, and diplomacy.

Relevance to Australia

At first hand it may be be obvious to consider Australia’s open economy and reliance on international trade as a G7 candidate, however that is far from the case, as of publishing this paper Australia is only part of the G20, and not involved in diplomatic organisations such as NATO. The uncertainty in where Australia’s key alliance would lie in the years ahead makes it particularly sensitive to shifts in global economic power. Decisions regarding alignment with BRICS or G7 will profoundly impact the nation's economic policies, industries, and societal outcomes. As a nation deeply integrated into the global market, Australia must carefully navigate its geopolitical and economic relationships to maintain stability while fostering growth. This report provides a comprehensive analysis to inform policymakers and stakeholders of the potential risks, benefits, and strategic pathways.

Section 1: Macro-Economic Analysis

Comparative Overview of BRICS and G7 Economic Policies

BRICS:

Growing Countries Cooperation: BRICS nations emphasise collaboration among developing countries to address shared challenges such as infrastructure deficits, poverty reduction, and limited access to global capital markets. Initiatives such as the BRICS Interbank Cooperation Mechanism aim to streamline financial support for member nations.The BRICS Interbank Cooperation Mechanism is an initiative established among the development banks of BRICS nations to foster deeper financial collaboration and support developmental objectives within member states.

BRICS is for the fairies until China and India get serious." - Jim O’Neill, former chairman of Goldman Sachs Asset Management. Creator of “BRICS” Acronym

The key features of this organisation are:

  1. Coordinated Financial Support:

    • It facilitates mutual financing and co-financing of projects, particularly in infrastructure, renewable energy, and technology development.

    • Focused on supporting sustainable growth and reducing reliance on Western financial institutions.

  2. Promoting Local Currencies:

    • Encourages the use of local currencies in trade and investment to minimize dependency on the US dollar.

    • Contributes to stabilising member states' economies by reducing foreign exchange risk.

  3. Link with New Development Bank (NDB):

    • Often works in alignment with the NDB, a multilateral development bank created by BRICS, to fund infrastructure and sustainable development projects.

    • Plays a complementary role by mobilising additional resources at the interbank level.

The chart illustrated above shows countries by income, the ideal nations the Interbank Cooperation Mechanism will provide support to are Low income- Lower middle income nations (illustrated in Orange and Red)

Implications for Global Finance:

Challenging Western Dominance: The mechanism represents an alternative to traditional Western-dominated systems like the IMF and World Bank, by doing so BRICS are able to focus Strengthening Emerging Markets Cooperation by providing financial support to these growing nations, it provides a higher level of financial resilience among emerging markets and fosters closer economic ties between BRICS nations. This over time would then create an Alternative Trade Mechanisms, with The New Development Bank (NDB) and BRICS Pay playing a pivotal in reducing reliance on Western financial institutions and the US dollar. These mechanisms are designed to foster trade in local currencies, creating economic resilience against global market fluctuations. Overtime, we would see large scale financing /Development-Focused Policies such as China’s Belt and Road Initiative (BRI) integrate developmental goals with economic expansion, offering member nations and partners increased connectivity and trade opportunities, whilst being financed by the NDB

G7:

  • Free-Market Principles: The G7’s emphasis on market liberalisation underpins its economic strategies. This includes promoting cross-border investments, reducing trade barriers, and upholding international legal frameworks to facilitate global commerce. Whilst also in tangent providing a stable bedrock of democratic and liberal thoughts in market practices, society and human rights. These free-market principles can be seen as a strong advantage in opening more markets and accessing greater opportunities through the promotion of innovation and discovery, all the while promoting a flexible job market were structural unemployment is reduced with the frequent retrain and upskill of human capital. Despite these strong points, it does need to rely on US Dollar Dominance, the centrality of the US dollar in global trade transactions ensures liquidity and predictability in international markets. This system reinforces the dominance of established financial institutions like the IMF and World Bank. Although there is a strong reliance on the IMF and World Bank, G7 nations are mostly more advanced and deploy more resources towards Climate and Sustainability Initiatives, as G7 members lead in advocating for green technologies, renewable energy, and carbon reduction strategies. Significant investments are directed toward fostering a transition to a low-carbon global economy. This is with the exception of the U.S as Donald Trump Challenged the Paris Agreement, and with his second term commencing, there may be a change/shift in G7’s climate policies.


"G7 leadership in climate action is more vital than ever." - Professor Nicholas Stern, Economist and Chair of the Grantham Research Institute

Implications for Australia

We can see from the above analyse, that if Australia were to join BRICS there would be significant Trade Diversification gained- Engaging with BRICS provides Australia the opportunity to diversify export markets, particularly in Asia, Africa, and South America, reducing reliance on traditional partners like the U.S. and EU. Enhanced economic ties could position Australia as a major exporter of resources, agricultural products, and renewable energy technologies. The recent developments in China and Nvidia’s decision to invest and start-up AI Research and Development Center shows that Asian countries are poised to have opportunities of Technological Exchange, the BRICS partnerships offer access to emerging technological ecosystems in AI, fintech, and renewable energy. It is also worth to mention that Infrastructure Development is expected to benefits Australia with Participation in BRICS-led initiatives like the Belt and Road Initiative could provide Australia with access to funding and partnerships for large-scale infrastructure projects, fostering economic growth in underdeveloped regions. This is proven by the decision in 2018 when Victorian Premier Daniel Andrews signed a Memorandum of Understanding (MoU) with China to participate in the Belt and Road Initiative (BRI). This decision aimed to enhance Victoria's economic growth by attracting foreign direct investment and creating job opportunities. Andrews emphasized that the agreement would provide Victorian businesses with access to new trade and investment prospects, particularly in infrastructure development. 

Risks to be addressed and mitigated:

  • Diplomatic Tensions: Strengthening ties with BRICS could strain relationships with traditional G7 allies, particularly the U.S. and Europe. Such tensions might affect trade agreements and defense collaborations critical to Australia’s strategic interests. These include- ANZUS Treaty (1951) which is a mutual defense treaty between Australia, New Zealand and U.S. The treaty ensures mutual support in case of armed conflict, ensuring regional security to the Pacific region. On the economic side, it may affect the Free Trade Agreement (AUSFTA, 2005) which is a bilateral trade agreement between Australia and the U.S

    Key Features:

    • Removal of tariffs on most goods and services.

    • Enhanced access to U.S. markets for Australian agricultural products.

    • Strengthened intellectual property protections and investment flows.


      It is therefore evident that any impact to this Agreement will heavily impact Australia’s position on the world stage the the economic prosperity of the nation (U.S third largest trading partner)


"Engaging with emerging economies, such as those in the BRICS alliance, is crucial for diversifying our trade relationships and ensuring sustainable growth."

"We are committed to strengthening our relationships with key global partners, including those in the G7, to promote economic stability and security."

-Quotes by Hon Anthony Albanese MP


  • Environmental Challenges: Collaborations with BRICS nations, which prioritize industrial growth, may conflict with Australia’s environmental commitments, requiring careful negotiation to balance economic and climate priorities. Australia should exercise caution when considering partnerships with BRICS due to the high CO₂ emissions of its member states, including China, India, Russia, and Brazil (illustrated below), which collectively account for a significant share of global emissions. Aligning with BRICS could undermine Australia’s climate commitments, such as achieving net-zero emissions by 2050, and pose reputational risks given the group’s reliance on coal, fossil fuels, and carbon-intensive industries. Additionally, partnerships may misalign with Australia’s growing renewable energy sector and global decarbonisation goals. To mitigate these risks, Australia should advocate for stronger environmental policies within BRICS, prioritise collaboration on green technologies, and ensure that any agreements support its sustainability objectives.


Section 2: Industry Impacts

Mining and Resources

BRICS:

Growing Demand & Supply: Industrial growth in BRICS countries, particularly China and India, has sustained demand for Australian commodities. Long-term contracts with these nations could stabilize export revenues. The UAE and Saudi Arabia joining BRICS informally also incorporates natural resources such as Crude Petroleum and Crude Oil into the other member states as a strategic partner, Australia will also benefit from this by being able to lower the current average petrol prices for Australian consumers upon a successful trade agreement. Joining the BRICS will be a stepping stone in achieving this as negotiations conducted between members states (Saudi Arabia and becomes less hostile, despite still needing to address and bypass certain OPEC policies and barriers. On the other hand, countries like Brazil (iron ore) and South Africa (gold and platinum) are direct competitors in the resource export market. This competition could drive down global commodity prices, affecting Australia’s profit margins. New partnership formed by BRICS states benefit natural resources industry however would need to consider the geo-political and perception of partnerships which may be looked down upon by other nations. In January 2023, the Xinjiang Central Asia Petroleum and Gas Company (CAPEIC) signed a 25-year contract with the Taliban administration to extract oil from the Amu Darya basin in northern Afghanistan (Amu Darya Oil Extraction) The agreement involves an investment of over $540 million, marking the first major public commodities extraction deal since the Taliban's return to power. On the one hand, this may be looked at to increase the supply of natural resources which was historically available from OPEC countries, however the partnership may raise concerns towards the deal due to Afghanistans’s long standing human rights issues and poor reputation on the world stage.

Afghanistan's acting minister of mines and petroleum Shahabuddin Dilawar, sitting left, its acting first deputy prime minister Abdul Ghani Baradar, second left, and China's ambassador to Afghanistan Zhao Xing

G7:

The focus on Green Energy Transition by reducing reliance on fossil fuels aligns with Australia’s shift toward renewable energy sources, further collaboration in hydrogen energy could position Australia as a leader in green energy supply chains. G7 hydrogen initiatives create significant opportunities for Australia to invest on green hydrogen production and export, Australia's abundant renewable energy resources (solar and wind) position it as a preferred partner for hydrogen imports to G7 countries. By aligning with these nations' hydrogen strategies, Australia can secure investments, advance technology transfers, and establish itself as a global leader in green energy supply chains. However, it is also important to consider the Export Constraints that would arise after G7 partnership, as Increasing pressure from G7 environmental policies could result in reduced coal exports, necessitating a transition to sustainable resource industries, this may impact key Australian companies such as BHP Group, Rio Tinto, Fortesque Metals Group.

Australia's coal industry is predominantly concentrated in two states: Queensland and New South Wales (NSW).

Queensland:

  • Production: Queensland is the largest coal-producing state in Australia, with 57 operating coal mines and 69 projects in various stages of development.

  • Exports: In the fiscal year 2021–22, coal accounted for $71.8 billion, or 70% of the value of total Queensland resources exports.

New South Wales (NSW):

  • Production: As of June 30, 2024, there were 36 operating coal mines in NSW, comprising 19 open-cut and 17 underground mines.

  • Exports: In the year leading up to March 2024, NSW exported nearly 32 million tonnes of coal to China, following the resumption of trade after Beijing lifted bans on Australian coal. 

These figures highlight the significant role both states play in Australia's coal industry, contributing substantially to the nation's economy through production and exports.Policies from the G7 which significantly hinder and reduce production will impact Australia’s economy as a whole

Agriculture

BRICS:

The rising middle class in BRICS countries is driving a notable shift in dietary habits, creating opportunities for Australia’s agricultural and livestock sectors.

Changing Consumption Patterns

  • China: As one of Australia’s largest trading partners, China has experienced a rapid increase in per capita meat consumption. The middle class is demanding premium beef and lamb products, particularly for hotpot, barbecues, and Western-style dining. Australia’s Beef and Lamb produce is seen as grass fed and organic in appeal, as well as peace of mind for having higher food safety standards and risk of consumer’s eating contaminated food

  • India: While predominantly vegetarian, India’s growing urban middle class is increasing demand for dairy-based protein such as milk, cheese, and yogurt. This aligns well with Australia’s position as a high-quality dairy exporter.

  • Brazil and South Africa: Rising disposable incomes are leading to greater consumption of poultry, seafood, and other meats, sectors where Australia can compete with premium exports.

Australia’s Competitive Edge

  • Premium Quality: Australia is known for producing high-quality, grass-fed, and organic meat, appealing to health-conscious consumers.

  • Reliable Supply Chains: Strong biosecurity and efficient logistics ensure consistent supply, a key advantage for meeting growing BRICS demand.

These factors in addition to Australia’s Branding and Trust creates a “Clean and Green” Image as Australia’s products are often associated with safety, quality, and sustainability, giving it a competitive edge in health and beauty markets.

G7:

Partnering with G7 nations offers substantial benefits for Australia’s agriculture industry by providing access to high-value export markets, advanced technologies, and sustainability initiatives. G7 countries, such as Japan, the US, and the UK, are major importers of Australian agricultural products, including beef, lamb, dairy, and wine, with growing demand for organic and specialty goods. Trade agreements with G7 nations currently in place (JAEPA 2015, A-UKFTA, AU-EU FTA) reduce tariffs and enhance market access, diversifying Australia’s export destinations and mitigating geopolitical risks. Collaborations in agri-tech, research, and sustainable farming practices enable Australian farmers to improve yields, reduce costs, and adapt to climate variability, while joint efforts in carbon reduction and food security enhance global competitiveness. These partnerships also bolster rural economies, create jobs, and strengthen supply chains, positioning Australia as a leader in premium, sustainable agriculture on the global stage.

Technology and Innovation

BRICS:

Joining BRICS could significantly enhance Australia's technology and innovation landscape by fostering collaboration with fast-growing economies in areas such as artificial intelligence, renewable energy, advanced manufacturing, and biotechnology. BRICS nations like China, India, and Russia are global leaders in R&D and technological advancements, offering opportunities for joint ventures, knowledge-sharing, and investment.

China: global leader in technological innovation, particularly in AI, 5G technology, and quantum computing. Companies like Huawei and SenseTime have pioneered advancements in telecommunications and facial recognition, a partnership with Australia’s main telecommunication companies (Optus, Videophone, Telstra) could improve Australia’s current 4G/5G grid networks. The country also has the world’s largest high-speed rail network and leads in electric vehicle (EV) production with companies like BYD. Additionally, China’s launch of the quantum satellite Micius demonstrates its expertise in secure communications and quantum cryptography.

India: India excels in information technology (IT), space exploration, and digital systems. It is home to the world’s largest biometric identification system, Aadhaar, and has revolutionized digital payments through the Unified Payments Interface (UPI). The Indian Space Research Organisation (ISRO) has achieved global recognition with missions like Chandrayaan-3, which successfully landed on the Moon’s south pole. India is also a global leader in pharmaceutical production, including affordable vaccines and generic drugs.

Russia: Russia is renowned for its advancements in space technology, nuclear energy, and defense systems. The Soyuz program is a cornerstone of global space exploration, while Rosatom leads in nuclear reactor development. Russia is also at the forefront of military technology, including hypersonic weapons and advanced fighter jets like the Sukhoi Su-57. Additionally, it has made significant contributions to blockchain technology, exemplified by Russian-born Ethereum co-creator Vitalik Buterin.



G7:

Similarly, Australia can also gain technological innovations and implementations as the US leads in AI, space exploration, and biotechnology; Japan in robotics and hydrogen technology; Germany in automotive engineering and renewable energy

United States: The global leader in technological innovation across sectors such as space exploration, information technology, and biotechnology. NASA has pioneered space technologies, including the Mars Rover missions. The US dominates AI and cloud computing, with companies like Google, Microsoft, and Amazon driving advancements. It also leads in pharmaceuticals, with breakthroughs in gene therapy and mRNA vaccines, exemplified by Moderna’s COVID-19 vaccine. Additionally, the US spearheads innovation in renewable energy and electric vehicles, with Tesla revolutionizing EVs and battery technology.

Japan: a global innovator in robotics, automation, and automotive technology. It leads in industrial robotics with companies like FANUC and advances in humanoid robots like Honda’s ASIMO. Japan is also at the forefront of electric and hybrid vehicle technologies, with Toyota’s Prius setting the standard for hybrid cars. In renewable energy, Japan excels in hydrogen technology, developing fuel cell systems for transportation and energy storage. The country’s electronics industry, led by Sony and Panasonic, continues to drive innovation in consumer technology.

Germany: known for its expertise in automotive engineering, renewable energy, and advanced manufacturing. The country is a pioneer in Industry 4.0, integrating IoT and automation into manufacturing processes. Companies like Siemens and Bosch lead in industrial technology and smart systems. Germany also excels in green energy, with significant advancements in wind and solar technologies. Its automotive industry, featuring BMW, Volkswagen, and Mercedes-Benz, is at the forefront of developing electric and autonomous vehicles.

Section 3: Societal Considerations

When choosing to partner with either the G7 or BRICS, Australia must carefully consider the societal implications that each alliance presents. These considerations span cultural, environmental, and social dimensions, influencing domestic and international perceptions.

Partnering with G7

Alignment with Democratic Values and Human Rights

G7 nations, including the US, UK, Canada, France, Germany, Italy, and Japan, strongly uphold democratic governance, the rule of law, and human rights. These principles resonate deeply with Australia's own societal values and political systems, rooted in liberal democracy and a commitment to global justice. Partnering with G7 reinforces Australia's standing as a nation dedicated to transparency, equality, and civil liberties. These are considered the Global Advocacy for Human Rights, in which strengthening ties with G7 nations positions Australia alongside countries actively advocating for human rights on the global stage. This partnership could bolster Australia's voice in addressing international issues, such as combating authoritarianism, protecting freedom of speech, and supporting marginalised groups worldwide. By doing so, Australia’s Public Perception will be positive as partnerships with democratic nations are likely to be well-received by Australian society, where values such as fairness, inclusion, and accountability are highly regarded, to the extent that citizens may view alignment with G7 as a natural extension of Australia’s existing values and its leadership role in the Asia-Pacific region. As these democratic values are embedded, there will also be a positive impact on G7 allies and Influence on Regional Governance, Collaboration with G7 could enhance Australia's ability to promote democratic principles and human rights within the Asia-Pacific, particularly in nations where governance challenges persist (Myanmar, Brunei). Partnering with G7 nations might also provide Australia with stronger leverage to support neighboring countries in implementing reforms that align with democratic ideals.

Cultural Affinity and Historical Ties

Australia shares deep cultural, linguistic, and historical connections with several G7 nations, particularly the UK, US, and Canada. These ties have fostered long-standing partnerships in trade, defense, education, and migration, creating a strong foundation for further collaboration. The historical tie between Australia and the UK cannot be ignored and can still be seen in the nation’s development (Commonwealth Charter, King’s Birthday, Royal Assents) which brings many Shared Heritage and Values, having a close heritage and value, there is a stronger cultural parallel between Australia and G7 countries which contribute to easier societal integration and acceptance of closer partnerships. These nations share common values around freedom, equality, and social progress, which can enhance public support for joint initiatives. An example of this is the Educational and Public Health Collaboration:

  • Australia and the UK already have established academic exchange programs, which could be expanded to foster innovation in research and development.

  • The US and Germany's advancements in healthcare and technology could be leveraged to enhance Australia's public health and social services infrastructure.

Partnering with BRICS

Engagement with Emerging Economies is no doubt one of the highest benefits of choosing to partner with BRICS and align Australia with rapidly growing middle classes in countries like China, India, and Brazil, expanding cultural and educational exchanges. Aside from the growing Middle Class demographic, the new generation is also already deeply engaged in Australia. As of 2024, Australia continues to be a prominent destination for international students, particularly from China and India.

Chinese Students:

  • Enrolment Numbers: In 2022, there were over 116,000 Chinese students enrolled in higher education institutions across Australia. 

  • Recent Trends: By the end of March 2024, international student enrolments in Australian universities increased by 16% compared to the same period in 2019, with Chinese students contributing significantly to this growth.

The recent announcement between the Chinese and Australian Government of up to 30 days visa-free period further encourages tourism, study and foreign visits.

Indian Students:

  • Enrolment Numbers: In 2024, Australia hosted approximately 122,202 Indian students pursuing various educational programs.

  • Global Context: This figure places Australia as the fourth most popular destination for Indian students, following Canada (427,000), the USA (337,630), and the UK (185,000).

These statistics highlight Australia's significant role in global education, attracting a substantial number of students from both China and India.

However, the Diversity of Societal Values can be seen and experienced from these nations citizens as BRICS nations represent a wide range of societal values, from democratic India and Brazil to authoritarian governance models in China and Russia. Navigating this diversity could create societal tensions domestically and internationally. On top of this, there is known to be Economic Inequality and different Labor Standards BRICS partnerships may involve industries where labor standards and working conditions differ significantly from Australia's. This could challenge Australia’s reputation for high labor and ethical standards, leading to societal concerns over exploitation or unfair practices (minimum wage, hours of work, maternity leave, etc)

Conclusion and Recommendations

Australia faces a strategic crossroad in navigating the competing influences of BRICS and G7 economic policies. Both inter-governmental forums offer distinct opportunities and pose unique challenges, making it essential for Australia to adopt a nuanced and balanced approach that aligns with its long-term economic and geopolitical goals.

There is no “one partner” solution whereby either G7 or BRICS will be the sole determinant of Australia’s long-term prosperity, however there is a more preferred group to join in order to gain the most advantage and form closer relations with each groups respective member nations that will assist Australia in achieving this long-term prosperity.

Throughout this research, there were many topics and points that I wish to add however it would not be feasible as the topic at discussion is simply too broad and large scaled. This is merely a primer for anyone wanting to conduct further research on this topic and gain a general understanding of the correlation between Australia, G7 and BRICS.

In conclusion, Australia’s economic strategy must remain adaptive and forward-looking. By embracing trade diversification, technological innovation, and sustainable development, while maintaining strong diplomatic ties, Australia can secure its place as a resilient and influential player in an increasingly multipolar world. Policymakers must craft policies that not only address immediate economic realities but also anticipate long-term global shifts, ensuring Australia thrives amid the evolving dynamics of BRICS and G7.

Author

Jack QIU - Head of Institute

Jack is currently the Head of Institute at MSMF with a focus area in Private Credit, he is currently in his final year studying Bachelors of Banking and Finance at Monash University.

MSMF
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