The new normal after the global financial crisis includes a few important structural and fundamental changes that face both Australia and Indonesia.
These changes imply that Australia and Indonesia must find new sources of competitive advantage, and leverage the relationship to increase bilateral trade and investment flows. Four key changes are noteworthy.
First, global economic growth is expected to be on a slow trajectory for the next five years due to a decline in productivity expansion, and shifting demographics in advanced countries. The slowdown in China is expected to result in lower GDP growth of 6 per cent to 7 per cent compared with pre-crisis of 8 per cent to 9 per cent. 
Chinese demand for goods and services from other countries is also likely to slow, which is the new reality facing primary commodity exporters such as Indonesia and Australia.
Second, global trade has not only slowed because of economic conditions, but studies have shown the growth of trade has halved since the global crisis. In the 1990s, 1 per cent global economic growth led to 2.2 per cent growth in trade. In the 2000s, 1 per cent economic growth led to 1.3 per cent growth in trade. The main causes for this structural change are related to the maturation of global value chains (GVCs), especially in China, whereby more parts and components are produced domestically rather than sourced from other countries.
Furthermore, the trade slowdown is not as a result of increased protectionism but because the benefits of liberalisation from early reforms have already been achieved. Starting in the mid-1980s to early 2000, much liberalisation and reform was achieved due to unilateral actions, including World Trade Organisation processes and regional agreements such as the ASEAN Economic Community.
Average tariffs dropped from 30 per cent to less than 15 per cent in developing countries and from 10 per cent to 5 per cent in developed countries. Most intra-ASEAN trade and trade under the ASEAN-Australia-New Zealand Free Trade Area has no tariff.
The easy part of reforms, such as tariff reductions, is complete and there is a need to address other more difficult reforms.
Third, there are fundamental changes in the Asian region. China will navigate to its new normal through structural reforms that will see labour-intensive production replaced by services and innovation, which in turn will change the nature of GVCs and the role of China as a hub. Other fundamental changes are related to the ageing of the population in north-east Asia. In contrast, most of south-east Asia is expected to enjoy a demographic bonus through to 2025-2030, and still experience growing middle class buying power.
Fourth, GVCs are even more fragmented. As GVCs mature, the slowdown in growth is greater for manufactured products produced in vertically specialised industries. Technology and innovation, especially information communications technology, has also led to greater fragmentation, which involves not just goods but services. The fragmentation of GVCs lets countries - individually or jointly - identify parts or tasks within the value chain for which they have a competitive advantage. GVCs offer new opportunities for developing countries and small and medium-sized enterprises to leapfrog to higher value-added parts of the GVC.
These fundamental trends imply that countries such as Indonesia and Australia must diversify away from traditional strengths such as resources to find new competitive advantages, either on their own, or together.
Given complementarities and proximity between the two countries, serious consideration should be given to the possibilities for joint development of competitive advantage to face future challenges, and to take advantage of opportunities. This is the subject of this study and thus its recommendations could not come at a more timely moment.
Mari Pangestu is former Indonesian minister of tourism and creative economy. This is from Succeeding Together, published on Tuesday by the Australia Indonesia Centre.