For the purposes of this consideration, Asia consists of three regions: Northeast Asia, which is China, Japan and the Koreas; Southeast Asia; and India.

The story of India's integration into the broader East Asian region is a fundamental dynamic reshaping global trade and geo-politics. This broadly defined Asian region is, with the US, the driving engine of the global economy and increasingly a force for political and even security integration.

With the exception of the Middle East's oil, every portent of the future points to this Asia.

China is the world's fastest-growing economy. Its growth will slow eventually, but there are still some hundreds of millions of Chinese to integrate into modern economic life, so the potential for sustained high growth is there for at least another decade.

India is the world's second-fastest-growing substantial economy. It is growing slightly more slowly than China, but will probably continue to grow fast for longer. This is because India's population -- more than one billion people -- is substantially younger than China's. Half of it is under 25.

The terrorist bombings on the commuter rail network of India's financial capital, Mumbai, were an attack on India's emergence into rapid economic growth and modernisation. But the Indian people have reacted with a courageous calm that augurs well for future growth.

India-China trade is absolutely booming and likely to hit $US20 billion next year.

Japan, the world's second-largest economy, has also emerged decisively from its long period of stagnation following the bursting of the bubble economy of the 1980s.

This was evident in the Bank of Japan's decision to raise interest rates for the first time in six years. Japan looks set for a period of reasonable growth, with low unemployment and the workforce actually increasing, even though the population has begun to decline. This is because economic opportunity has lured more Japanese back into productive participation.

As Junichiro Koizumi's prime ministership comes to an end in September, it is likely he will be seen as a pivotal figure in modern Japanese history.

Japan's strategic emergence under Koizumi has been at least as important as its economic recovery. Japan has embarked on a journey to become a "normal nation", which can participate in collective security arrangements and make a more meaningful contribution to global and regional security.

Under Koizumi, the relationship with the US has been redefined so that it is now a reciprocal alliance. Japan can help the US with security tasks beyond passively hosting American bases.

Beijing has been furiously opposed to Japan's strategic emergence, opposed to its alliance with the US and its efforts to become a permanent member of the UN Security Council.

Beijing also opposed India's efforts to join the Security Council as a permanent member. Clearly, China's leadership believes that Japanese and Indian power will provide a constraint, or at least a balance, to Chinese power in the region.

China was also powerless to prevent its most troublesome ally, North Korea, from launching a Taepodong ballistic missile and several shorter-range missiles in early July.

However, in a worrying sign for Pyongyang, Beijing did eventually agree to allow a UN Security Council resolution condemning North Korea to be passed.

South Korea has a strained relationship with Japan and an undeveloped relationship with India and has gone through a difficult patch in its alliance with the US, while its trade with China has boomed.

Nonetheless, North Korea's reckless actions have shocked South Koreans and driven them to a more realistic assessment of their northern cousins.

Canberra has done a shrewd job of concentrating on the positives with all the big Asian powers: trade with China; security and trade with Japan; booming new exports to India.

The relationship of all the big Asian powers with Southeast Asia is almost wholly positive, though not without competition.

Overall, China has tended to win over Japan in the competition for diplomatic influence in Southeast Asia, but this should not be exaggerated. Like the big powers in Northeast Asia and India, the Southeast Asians are adept at pulling in outsiders, especially the US, to help provide a regional balance.

As a recent report by the economic analytical unit of the Department of Foreign Affairs and Trade points out, the 10 economies of the Association of Southeast Asian Nations have been growing more slowly than either China or India.

Similarly, China in particular is attracting the lion's share of foreign direct investment going into Asia, although the figures for India have also been undergoing an upturn.

Nonetheless, Southeast Asia has been experiencing solid economic growth, the best in the developing world after China and India. It has fully recovered from the savage economic crisis of 1997 and its recent growth has not been knocked off path by the challenge of Islamic terrorism, especially in Indonesia and the southern Philippines.

Australia has free-trade agreements with Thailand and Singapore and is negotiating a similar deal with Malaysia and with ASEAN as a whole.

The attempt by ASEAN to integrate itself economically is especially challenging given ASEAN's internal diversity, from super-rich Singapore to Burma, Cambodia and Laos, among the world's least-developed nations.

However, the DFAT report argues that such integration would help ASEAN greatly in its competition for investment funds, particularly in the race to host production networks, with China and India.

Few Australians realise the economic importance of ASEAN to Australia. Total ASEAN-Australia trade is bigger than our trade with any one nation in the world, whether it be Japan, China or the US.

Similarly, with close to 600 million people and an economy worth nearly $1 trillion, ASEAN is in absolute terms a bigger economy than India. In 2005, two-way trade between ASEAN and Australia was valued at $55 billion, about 15 per cent of our total trade.

As the DFAT report makes clear, there is a great deal of natural complementarity between the ASEAN economies and Australia.

ASEAN countries are particularly strong consumers of Australian primary products. However, in recent years there has also been enormous growth in the sale of Australian services to the ASEAN countries.

This is especially so in areas such as education.

It is in the area of two-way investment that the story is weakest, with ASEAN accounting for a minuscule proportion of Australian investment.

Given that ASEAN continues to record an economic growth rate well above the global average, this reflects poorly on the confidence and expertise of Australian business operating in what should be their front yard.

Overall there is plenty of work ahead for Australia in the most dynamic region in the world.

• Greg Sheridan is The Australian's foreign editor