Australian Economic History - Essay Example

Australian Economic History Name Institution Date Manufacturing The evolution of manufacturing sector in Australia in the 19th century received a boost when the government introduced the industry policy aimed at enhancing the establishment and growth of the same. During this period, the capital got from gold was used to establish manufacturing in the country. Although protected by distance and benefited by tariff protection, the sector was still operated on a small-scale. The contribution of manufacturing to the economy’s GDP was 12% in 1900. The expansion of the sector led to increase in the GDP to 26% in 1945. However, in 1980, the contribution of manufacturing to GDP reduced by 9%. In 2012, its contribution to the GDP was only 10%. Tariff protection was introduced in manufacturing to stimulate growth and create more jobs in the country. It was also the means through which the government would reduce imports and focus on local production. Further protection was enforced in 1905, whereby minimum conditions for workers were introduced in the workplace. In addition, employees were to be paid a fairly reasonable wage as a result of industry protection. The setting up of BHP in Newcastle in 1915 in the period of WWI encouraged manufacturing further. The period of WWII resulted to expansion in industralisation in the country. Also, quotas and import licenses were introduced in the same period, and were meant to protect manufacturing. In 1921, the Tariff Board that lasted for fifty years was formed to advise the government in issues related to tariffs. Following the Ottawa Agreement 1932, Australia imported manufactured goods from Britain at reduced tariff rates, while it exported agricultural products to Britain free from tariffs. However, when Whitlan government was sworn in 1972, tariffs reduced by 25%, a situation that resulted to appreciation of dollar. Thus, imports became expensive, there was high inflation, and manufacturing sector was exposed to international competition. In 1980’s, the manufacturing industry experienced numerous deregulation and restructuring. During the Hawke’s governance, the industry was to accept reductions in tariffs, and the government adjusted IR as well as laws affecting the industry. In addition, unions were introduced to facilitate increase in productivity in the workplace. In 1991, the government aimed at reducing all tariffs, a part from TCF and Auto industry, to 5% by the beginning of 1996. Generally, all sectors of the economy underwent microeconomic reform in 1989, when the Commission in the industry replaced IAC. From 1990’s to the present, Australian economy went through rationalisation. However, despite corporatising, privatising, and deregulating GBEs, the TCF and auto industry remained protected. Although, the productivity Commission aimed at reducing all tariffs to 5% by 2001, it never achieved the goal. Currently, the TCF HAS 10% tariffs, while the motor industry is subsidized, with a tariff rate of 5%. Globalisation The participation of Australia in the global economy can be traced since the 19th century when the country started to import and export goods and services. At the time, the main exports and imports included capital and labour. This is also the period when the imperial preference by the British Empire was instituted in the trade between the two nations. The time of WWI was marked as the period of international crisis, and Australia was among the nations highly affected by the war. The war led to destruction of both manufacturing and agricultural centres in Russia and Europe. This resulted to increase in supply of manufacturing and agricultural products in Australia, being an emerging economy in the industry. Therefore, Australia began to embrace protectionism in all sectors of its economy. Eventually, the great depression led to the fall of international trade, and also intensified protectionism. During the post-WWII, the Keynesian economics emphasised the need to reinforce both the domestic and international institutions, as well as modify trade cycles aimed at preventing the second depression. This helped Australia to gain its momentum on the international scene. The Bretton Woods Conference held in 1944 was meant to discuss and plan world economy, while the San Francisco Conference led to creation of United Nations. In addition, the Post-WWII resulted to the formation of three main worlds; capitalist west, communist west, and post-colonial nations. The disintegration of Communist west between 1989 and 1991 was followed by USA’s attempt to build bilateral trade such as AUSFTA. Although, Australia continues to look to America in other areas, it conducts trade with Asia. Among the achievements of Bretton Woods Agreement was the establishment of the IMF in 1947, with the aim to create financial and exchange rate stability, as well as a safe global payments systems among others. Since this period up to 1971, the US$ was tied to gold while other currencies remained fixed but adjustable. However, between 1947 and 1967, Australian currency remained fixed to British pounds. Later, it became fixed to US$ until 1976, when its devaluation took place. By 1983, Australian currency was floated, with the intervention from Reserve Bank, to soften fluctuations. Still, in 1947, Bretton woods agreement created the International Bank for Reconstruction and Development that was meant, among other functions, to issue low interest loans, credit and grants. Australia used this opportunity to borrow funds from the Bank to finance the Snowy Mountains Scheme. All in all, Australia’s economic growth on the global scene is seen to increase closely to Asia. Rural Sector The rural sector has continued to contribute to Australia’s economic growth since 1820s, although in a small proportion. Between 1820s and 1830s, wool production in rural sector was the main contributor to economic growth. It continued to maintain importance during the 19th century. However, the contribution of rural sector to GDP and employment has continued to decline since 1900s. In 1900, the sector’s contribution to GDP stood at 20%, while contribution to employment in 1901 was 25%. In 2012, the contribution of rural sector to both GDP and employment was only 3%. The decline in employment and GDP was a result of growth in tertiary and manufacturing sectors in the country. Also, rural sector’s contribution to the export earnings has reduced. In 1950s, the sector’s contribution to the export earnings was 87%, but this has relatively declined, as it only contributed 12% to export earnings in 2012. Nevertheless, a part from earning foreign revenue, rural exports protect balance of payments. The government uses various strategies to support rural sector in stabilising farmers’ income. For instance, the government uses import quotas, production quotas, tax concessions, and subsidies on farm inputs to encourage investment in rural sector. Despite government support in rural sector, international trade regulation in rural products continues to affect the sector. Since 2001, the Doha Round of WTO negotiations have failed to eliminate tariffs and subsidies on products from agricultural sector. In addition, AUSFTA 2004 fails to incorporate all agricultural products in its scheme. Since 1920s, various federal and state marketing authorities were established to control export and domestic wool markets respectively. From the time when Australian Wool Corporation (AWC) was established in 1973 up to when it was abolished in 2001, the minimum reserve price was four million for every 200kg bakes of wool in stockpile. When Australia Wool Service replaced AWC, it encouraged research and development, and marketing to improve rural sector. The rural sector in Australia is also characterised by wheat production and marketing. The Wheat Board was established in 1948, and helped to stabalise prices for wheat and streamlined marketing as well as selling process. In 1984, the government introduced Wheat Industry Fund and deregulated domestic cattle feed for wheat to encourage production. Later, in 1999, Australia Wheat Board Limited was established that led to grower-owned and controlled production of wheat in the country. Eventually, the single desk system for exports was abolished in 2008, and in 2010, there was a merger of Grain Corporation and AWB. By 2012, twenty five companies in Australia started to export wheat to foreign countries. Read More