Factors that Have Given Rise to the Globalization of the World Economy in Australia for the Last Decade - Case Study Example

Globalization Student’s Name Professor Subject University/institution 9th May, 2012. Factors that have given Rise to the Globalization of the World Economy in Australia for the Last Decade Introduction Globalization refers to the increased integration of people from different cultures across the globe on social economic and political levels, though economic integration takes centre stage when it comes to globalization. Palmer (2002) defines globalization as "the diminution or elimination of state-enforced restrictions on exchanges across borders and the increasingly integrated and complex global systems of production and exchange that has emerged as a result." Globalization of the economy impacts heavily on the world as we know it today as it has an underlying effect on the economic, political, cultural, environmental and health aspects of our lives however small, directly or indirectly. A closer look at the globalization of the world economy in Australia will reveal the reasons behind this driving force especially over the past one decade. Globalization is one among the most recent driving forces that is inevitably reshaping the world; actions that happen millions of miles away shape the lives of Australians as if to disregard the impacts of space and time. The decisions that individuals, the government and the various companies make are the ones that shape the path that globalization in Australia takes. Australia is now so much intertwined with the global markets such that products from all over the world are accessible to them as well as Australian products and brands serving as viable export products to other countries. This has been aided by the deregulation of trade and the formation of strategic trading partnerships as well as the growth and expansion of multinational companies into the Australian market. The service market offered by the increased expansion of the world-wide web means that automation in the service sector is now a viable source of income for Australians as well as it being a source of unemployment (Griffin & Pustay, 2009). The increased speed at which information exchange and communication takes place, comes the increased pace at which trade occurs. Australians are able to purchase products manufactured in remote places through e-commerce as well as market their products. There is also a noted shift of power and control that the Australian government has over trade and decision making due to the rise of international bodies such as the IMF and WTO that fund the international economy. Due to the vast amount of resources that international bodies posses, they can impose sanctions and embargoes on countries that fail to comply with the rules that promote global economic integration, Australia included. Globalization takes centre stage through various economic avenues such as trade, investment, technology, finance and labor. The control and movement of these avenues on the world economic stage dictate the path that globalization takes and as such the case of globalization in Australia can be analyzed by taking a closer look at these factors which can be said to be the drivers of globalization in Australia. Trade in Australia Australian domestic industries have experienced competition in the global market since the turn of the century and all signs show that they are coping better than predicted from the reduced protection from the government and increased exposure to the world market. There were concerns that reduced protection would lead to unemployment though these has not been the case. The growth of Australian export industry has been marked by Australia becoming a major exporter of mineral products as well as services to markets in Asia such as Japan and China. Education services and tourism are the major services that the Australian economy exports. The major export destinations for Australian products are all Asian countries. China leads the way with 26% of all exports while other countries such as Japan, Korea, India and Taiwan following closely behind. Australia’s major exports are iron ore concentrates, coal, gold, crude petroleum and natural gas. The export industry in merchandise trade was valued at A$245 billion while that of export services was valued at A$50 billion (DFAT, 2011). The results of this growth have been phenomenal as Australia was least affected by the global economic recession due to high demand of its exports from these markets in East Asia. BHP Billiton is an example of a company that has benefited from global trade. The company has operations in over 30 countries worldwide and has diverse operations in the mining industry such as aluminum, coal, iron ore, titanium among many others. The operation management and running of BHP Billiton is diversified and equally modern so as to maintain the high standards that the company’s reputation has established. International trade has further been made easier by formation of strategic partnerships and trading bloc’s such as the OECD which consists of 14 countries majorly based in south Asia and Eastern Europe. Countries from South America continue to join, most recent one being Chile, owing to the benefits that such economic partnerships accrue to member nations. In addition, when the countries trade as a bloc, they influence international trade at ease for they can bargain and trade as a bloc in the international scene as opposed to when a country is trading alone in the international market. Other strategic partnerships include the Asia Pacific Economic Cooperation (APEC) and the Association of South East Asian Nations that aim at increasing international market access for Australian export commodities. Formation of bilateral trading associations with the major trading partners has helped ease trade through and further promote the participation of Australia in international trade (Griffin & Pustay, 2009). As well as being a major exporter, Australia’s import industry is growing by the day. It serves as an import destination for countries such as China, the United States of America, Japan and Singapore. China leads the supply of imports at 19%. The major imports into Australia are Crude petroleum, passenger motor vehicles, refined petroleum, medical supplements and telecommunication equipment and devices with the import industry being valued at A$214 billion. The Australian economy is also reliant on imports in the services sector which are valued at A$57 billion (DFAT, 2011). The government also plays a role through Austrade whereby the government has organized a network connecting Australia with regions like America, NEA (North East Asia), Middle Africa South East Asia and the Middle East among others and hence facilitates globalization and the growth of the Australian economy through trade. Hence, Australia through the government engages in international trade. Australia is thus a significant player in the international market place whose effects on globalization are phenomenal. Finance in Australia The major financial institutions in Australia are banks and insurance companies which have control in the major financial markets such as the Australian securities exchange which is Australia’s largest stock exchange market and the payments to international trade. The majority of currency trade occurs through the stock exchange with only a small part of it going to international trade. The Australian dollar has been a strong performer in the international trade, a trend that has been made possible by the relative higher interest rates in Australia and this translates to a favorable environment for investment both for locals and international investors (AFMA, 2011). There is a growing demand for Australian exports from the energy and minerals sector, and the export trade occurs in Australian dollars hence a growing demand for them. This translates to a stronger performance of the Australian dollar against major world currencies. Assessed from; http://www.tradingeconomics.com/chart.png?s=rbatctr&d1=20090101&d2=20120509 The movement of the Australian dollar is largely dependent on the price of such commodities as gold iron ore coal and other commodities from the mining industry. As such companies in the mining industry stand to benefit the most from a high performing Australian dollar .Companies such as Santos reported increased gains at times when the Australian dollar has reported all time highs. The tourism sector also stands to benefit from a strong Australian dollar as this propels Australians to feeling wealthier and thus driving the need to spend on vacations to destinations where the Australian dollar represents a higher value when exchanged for the local currency. However the export market suffers equally from high performing Australian dollar with prices of commodities abroad becoming more expensive. Meat processing industry in Australia that serves the export market such as JBS Australia experienced a weak demand for the export commodities due to the appreciating dollar. The increased exposure to global markets that lack protection from the government is pushing companies towards enhanced performance through competition. Advent of Technology in Australia Technological advancements are amongst the major drivers of globalization not only in Australia but the world in general for through technology, many radical changes are being felt (Bryan & Rafferty, 1999). At the click of a computer button that is connected to the internet, one can work, trade and hold meetings all over the world and this has worked towards enhancing the speed at which globalization is taking place. Through internet, emails, communication networks, the media, social media sites and mobile phones, consumers in Australia have a greater autonomy over the products that they buy in the market place and the same applies to other people from other nations who can chose to buy products and services from Australia. Like previously discussed in the introduction section, globalization as the integration of people from different cultures across the globe on social, economic and political levels; technology has enabled Australia to connect with the rest of the world. People can now school in Australia (online programs), trade in Australia, through the internet among other activities that are connects Australia to the rest of the world. Taking a closer look at Australia and technology, it is undisputable that the country has embraced technology for according to 1999 OECD publication, Australia was rated the best amongst the 27 nations of OECD in ICT and has continued to be the best through gaining expending large amounts of money in ICT expenditure (Stokes, 2000), for instance through programs that encourage use of technology in schools, Aussies having more personal computers to stay connected to the whole world as it was reported by the ABS that homes which had internet connectivity had increased in 2012 reports among other ways that Australia ensures that the country remain relevant in the era of technology and which includes; Increases in internet hosts per 1000 population Reduction internet access costs therefore enabling more people to assess the internet and be connected Provision of secure web services for e commerce which ensures that even the small businesses are protected from unfaithful online dealers In addition, many Australians are embracing the use of technology in their daily lives which is reflected through the use of internet in the payment of bills, shopping in online stores with the most commodities being bought over the internet being travelling tickets, books, DVDs and surfing in social networking sites among other activities that continues to serve as indicators that Aussies are embracing technology and are therefore able to conduct business internationally due to technology. In more recent studies, more households in Australia are connected to the internet with the ABS reporting that 2010 – 2011; around 6.7 million households had internet access. Source: Australian Bureau of Statistics Assessed from; http://www.abs.gov.au/AUSSTATS/abs@.nsf/Latestproducts/54661878D9CD5335CA25796600152C0F?opendocument, assessed on 9th May, 2012. Examples of Australian companies utilizing technology in their operations includes, The Australian Rail Track Corporation whereby, the company made installations of remote cameras which were attached to motion sensors on some sections of the tracks so that the company could watch or monitor when rock fell. Another remarkable example of a company that has taken the advantage of the advent of technology in Australia is the RMTek Pty Ltd, through creating a RMCam, which is a cost effective solution that allows businesses and people to monitor their property anywhere in Australia through the enabling technology of telemetry in all places where that has a Telstra Next G coverage in network. Labor Population increase in the world has created a shortage of labor and this has resulted to people moving from one country to another in search of job opportunities. The world in the spirit of globalization has become a global village to the extent that people are trespassing nationals’ boundaries with ease and getting employed in other countries. In addition, organizations continue to search for cheaper labor and import it from developed countries and hence geographical mobility of labor (Bryan & Rafferty, 1999). The WWW (World Wide Web) has also made it possible for Australians to apply for jobs in other countries. In addition, job postings in newspapers for instance, Australian, Sydney Morning Herald and hence Australian can get jobs in other countries and at the same time, people immigrating into Australia can also get jobs in Australia. Therefore, globalization has brought changes in Australia in the way labor is deployed, the mode of labor needed in the country, employer to employee’s relationships and even employee disposition. One of the effects of globalization is that, with multinationals entering the labor market of a country, the multinationals are able to source for cheap labor in the country and therefore this affects the manner in which employees are disposed, hired and treated. Australia is interrelated to international stipulations regarding labor and hence even national labor conditions become affected by global interrelations in a country. Owing to its multicultural diversity, Australia attracts labor from even its neighbors like Asia and this also changes the conditions of labor in the country (Austrade, 2012). Organizations for instance multinational companies move in to take advantage of the cheap plenty supply of labor from the country. In addition, the work force in Australia is a work force that is rich in cross – cultural abilities and also multilingual abilities and which as emphasized earlier is cheap. Owing to the multi cultural diversity of the Australian workforce, the workforce then becomes the most competitive and highly demanded by organization in the Asia – Pacific area (Bryan & Rafferty, 1999). In light with Australian workforce remaining relevant in the global arena is the Australian education system of which the tertiary education in Australia continues to improve through research programs that are conducted at the tertiary level to make sure that the education offered in the country is up to date with current innovations in the academics. To top it all, the workforce in Australia is drawn from different countries in the Asia – Pacific area and hence multinational organizations set up in Australia already have answers in regard to the multiculturalism found in the country. This ensures that, multinational organizations together with home organizations and the ones across the Asia – Pacific region can source for workforce in Australia. Therefore, this has steered globalization to the world economy in Australia in the last decade for such opportunities attracts organizations to be set up in Australia and in turn provide job opportunities to Aussies (Austrade, 2012). Examples of companies that have set up their base of operations in Australia owing to the country’s cheap labor and multilingual aspects are Macquarie Group Limited, Rio Tinto Limited, Telstra and Coca Cola Amatil among other multinational organizations in Australia. The organizations locate their operation in Australia despite having operations in other countries for instance, distributing their products to the global market because the country offers cheap and qualified labor. Investments Globalization pressure has made it possible for deregulation of markets and hence the increase of capital movements among nations, corporations and businesses among others. With increased capital flows, investors can now speculate the Australian economy and so can Aussies speculate the economies of other countries and hence make investments when the conditions are favorable. Capital owners on the other hand decides where to invest their money in Australia as the preferred country due to the appreciative value of the Australian dollar as a preferred destination of their investments and this therefore increases foreign direct investments in Australia. On the other hand, investments increases speculation in Australian financial market, affects the exchange rates in the domestic market, affects the prices of stocks, commodities in the country and also affects the interest rates (Stokes, 2000). The government is also committed towards making Australia the first destination for investors to consider through the establishments of agencies like the Austrade to offer information on the investment projects, investment alliances, partners and also on the process for approval of investments in the country in addition to constant updates on Australian financial news and news touching on investments in the country. With such commitment from the Australian government, (placing investments consultants all over the world) the confidence of investors is built for investors do not have to source for information from other people for instance commercial financial investor advisors and hence increase the investors cost of doing business. The information is available from agents who are appointed by the Australian government or acting as agents of the Australian government, and therefore such moves by the Australian government without a doubt works towards encouraging people to invest in the country. For instance, the IDC (Austrade International Data Comparisons) gives information relating to Australia performance with regard to indicators of finance and economies like the Australian CPI (Consumer Price Index) (Austrade, 2012)and the rates of exports and the imports among other relevant information that makes Australia attractive FDI (Foreign Direct Investments) from different countries as illustrated in the table below. Sources: ABS 5352.0 - International Investment Position, Australia: Supplementary Statistics 2009, UNCTAD World Investment Report to 2009). Adopted from, http://www.austrade.gov.au/Invest/Why-Australia/Growing-Foreign-Investment/default.aspx, on 9th May, 2011 Conclusion The wave of globalization is changing the world at a much faster rate in the last decade than it has been recorded in any other decade. Globalization cannot be reversed and therefore the impacts or the prints that it creates cannot be erased and hence the impacts of globalization creates permanent effect in the world, Australia included. Globalization also has its positive and negative effects with the positive effects superseding the negative effects and hence a necessary evil. However, there are those factors that lead to globalization for instance trade, finances, labor mobility among other factors which are propelling the wave of globalization. Owing to factors discussed in the paper, Australia is also becoming globalised at a very fast pace. It has become the first destination for investors, students, immigrants, multinational organizations among others. One thing therefore remains for sure that, Australia is not closing its doors to globalization and the effects which are associated with globalization continue to trickle into the country. References AFMA. (2011). Australian financial markets report. Retrieved 9th May 2012 from http://www.afma.com.au/afmawr/_assets/main/lib90013/2011%20afmr.pdf Austrade, (2012). Retrieved from http://www.austrade.gov.au/, Retrieved on 9th May, 2012. Bryan, D. & Rafferty, M. (1999). The Global Economy in Australia, Sydney, Allen and Unwin. DFAT (2011). Market Information and Research Section. Retrieved 9th May 2012 from http://www.dfat.gov.au/geo/fs/aust.pdf Griffin, R. & Pustay, M. (2009). International Business. 6th Ed. New York, Prentice Hall. Palmer, T. (2002). Globalization is Grrreat!. Washington dc: Cato’s letters. Stokes, A. R. (2000). 'The Nature of the Global Economy and Globalization’, Economics, Vol. 36, No 3, October. Read More