A helping hand for Indonesia

The Morrison government’s provision of a $1.37bn standby loan to Indonesia sends a strong signal that despite our own economic challenges, Australia remains firmly committed to helping neighbours in need. Under pandemic pressure, there is a natural tendency of nations to turn inward. But a modest contribution to stability in the Asia-Pacific makes good humanitarian, economic and strategic sense.

The region’s biggest economy is battling a surge in the number of COVID-19 cases. Last week, it went into its first recession in 22 years after its economy contracted 3.49 per cent in the September quarter, following a 5.32 per cent slump in the three months to June. There could hardly be a better or more timely demonstration of Australian goodwill and the closeness of our bilateral ties than the provision of the loan facility.

It is also, as Ben Packham reports on Tuesday, a reflection of the closeness of the strong personal relationship between Scott Morrison and President Joko Widodo. Australia’s agreement to the loan follows a $1.37bn loan to Indonesia by the Chinese government-backed Asian Infrastructure Investment Bank and a $660m loan from Japan, both intended to help Jakarta deal with the pandemic’s impact. According to a Lowy Institute report, Indonesia faces one of the most difficult outlooks in Asia. With 438,000 COVID-19 cases so far and almost 14,540 deaths, its battle against the virus is uncertain. Its reliance on foreign financing has left it exposed to capital flight and “struggling to fund the fiscal response needed to keep its economy (and society) afloat”. “Without enough fiscal support,” the report warns, “the economic damage from the virus will be far deeper and longer lasting — setting back its economic rise, leaving more people in poverty and weakening its foundations for ongoing stability.”

Australia previously provided emergency financing to Indonesia during the 1996 Asian financial crisis, the 2008 global financial crisis and the 2013 “taper tantrum” panic that swept global markets after the US Federal Reserve announced it would wind back its policy of quantitative easing. It is right that we should again offer a helping hand to a neighbour whose stability and continued economic growth is vital to our own strategic interests. Indonesia should not be left with no alternative but further exposure to the risks that come with more money from Beijing.