The Impact of Globalisation on the Australian Economy
Globalisation is not new. Australia has been involved in trade, investment, financial flows, technology transfers and the migration of labour since its foundation as a colony. What has changed is the size, direction and influence of these transfers, especially since 1980. There are a number of factors that have aided this transformation. They include:
The expansion of new markets foreign exchange and capital markets are linked globally. They operate 24 hours a day with dealings any where in the world possible in real time. Financial deregulation and the floating of the Australian dollar since 1983 intensified the impact of globalisation on the Australian economy.
New technology and the tools of globalisation the internet, email, mobile phones, media and communication networks have all sped up the process of globalisation. They have increased the spread and speed of knowledge transfer and communication. Australian consumers can buy products from any nation in the world, transfer funds between accounts or purchase shares in any major market. Australian businesses can market their products at a fraction of the cost and be exposed to a global market place of competition. This potentially is the closest we will ever come to the perfect market.
New institutional players The World Trade Organisation (WTO) has growing authority over national governments, as does the IMF with its restrictions and controls it can impose on nations requiring assistance. Multinational corporations have more economic power than many nations. Hedge funds and financial dealers are able to manipulate financial flows and subsequently exchange rates, leaving nations helpless in their wake. This in turn renders traditional economic policy tools virtually useless.
New rules and restrictions Multilateral agreements on trade, services and intellectual property rights, backed by strong enforcement mechanisms, reduce the scope for national governments to develop their own economic policies.
What is Globalisation?
Globalisation is the growing economic interdependence among nations as reflected in increasing actual movement across nations of:
and the capacity to move and the potential movement across nations of those 5 elements.
The Impact of Globalisation on Australia's Trade
Australia's trade policies, since the middle of the 1980's, have been geared to opening domestic industries to the global market (Graph 1). A prime focus of structural reform has been to subject the private sector in Australia to more competition from both domestic and international sources' (Treasury, 1999). Australia has traditionally had high levels of protection, since the 1950's in areas like textiles, clothing and footwear and motor vehicles. In the early eighties the effective rate of protection in the TCF industries was in excess of 200% and 57.5% for passenger motor vehicles. While some people would argue that cutting protection will reduce employment. Most industries that were heavily protected during the 1970's and 1980's still suffered losses of employment and were not efficient enough to compete in export markets.
Graph 1: Effective Rates of Protection in Australia
Source: Productivity Commission
Cuts in protection have increased imports but the increased efficiency has led to a comparable rise in exports. The value of exports plus imports of goods and services has risen from 32% of GDP in 1975 to 48% of GDP in 2000 (ABS), reflecting the growing influence of globalisation on the Australian economy. Table 1 shows the effect of cutting protection in manufacturing industry in Australia from 15% in 1989/90 to 6% in 1996/97. It led to an effective reduction of the net subsidy equivalent, ie. the amount of subsidy that would have to be paid to have the same effect, as the current level of protection. This fell from...
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