This Strategy report provides an indepth Australian perspective on the global financial crisis (GFC) and its consequences. How China and the US behave as they come out of the financial crisis will have global ramifications, but in few places are the stakes higher than in Australia.

The author, Professor Garrett, advises that Australia will have to come to grips with the prospect of substantial Chinese foreign investment and that it will come out of the GFC in much better shape than most advanced economies, but the China–US balancing act on which Australia’s security and prosperity depends will be both more important and harder to perform.

Australia will be challenged by China’s need for foreign raw materials and by the US’s rising expectations of its allies, but it can also foster better Sino-American interactions in international forums, particularly the G-20 group.

Professor Garrett is founding Chief Executive Officer of the United States Studies Centre and Professor of Political Science at the University of Sydney.