Structural Change and Australian Economy
Structural change is the change in the pattern of production in an
economy as certain products, processes of production and industries
disappear and are replaced by others. The past century has seen the
relative decline of agricultural and manufacturing industries, and the
rise of services and new technology sectors. Structural change can be
caused by a wide range of economic influences including changes in the
pattern of consumer demand and technological change. The speed of
structural change depends on the ability of an economy or industry to
adjust quickly. People's natural resistance to change and government
regulation often impedes the process of structural adjustment.
Past Macroeconomic policies have been largely ineffective in bringing
about structural change. For example Australia's past trade deficits
can be blamed on structural problems that failed to react to
government macroeconomic policies. To solve economic problems such as
high inflation and high unemployment governments are shifting away
from macroeconomic policies to microeconomic policies.
Microeconomic policy or Microeconomic reform is action taken by the
government to improve resource allocation between industries in order
to maximise output and promote structural change. It is considered
that microeconomic reform will be effective in dealing with long term
problems such as international competitiveness, high foreign debt and
high structural unemployment. The shift towards microeconomic reform
includes a change of focus from influencing demand towards influencing
supply. This is called supply side economics which has ...
... middle of paper ...
...ale sales tax and the introduction of a broad
based goods and services tax created a fairer taxation system which
does not rely on taxing particular products. Australia has been a
strong advocate for free trade with other countries. This will allow
Australia access to new international markets on fair terms at a time
where microeconomic reforms in the agricultural sector were resulting
in greater competitiveness for Australian products.
Through the use of microeconomic policy, promoting structural change,
the Australian government has been able to rid the economy of
technical inefficiencies which inhibit economic growth and prosperity
and which aren't in the public's interest. Through precise
microeconomic policy the government has been able to target specific
areas and improve efficiency in the larger scale as well.
Since the 1960s, there has been a large shift from the other two industry sectors to the Tertiary Sector in the UK. The other two industry sectors Primary and secondary sectors have either moved abroad where it is cheaper for goods to be manufactured or completely shut down because of consumer trends.
Neoliberalism is an economic approach that promotes a laissez-faire model of trade (Edmonds-Poli & Shirk, 253). This economic model, widely supported by many Western economists, is based on three main principles: stabilization, structural adjustment, and trade liberalization. (Edmonds-Poli & Shirk, 254) Neoliberalism is a method to restructure the economy and the first step is to stabilize the fiscal supply. This happens through decreased government spending, leading to an overall decrease in employment, public services, and access to credit, while simultaneously increasing interest rates and the cost of imports (Edmonds-Poli & Shirk, 254). The next element of neoliberalism is structural adjustment which focuses on the shift from the public to the private sector. This shift is meant to minimize government involvement, which in turn stimulates competition in an open market economy to create a more efficient private sector (Edmonds-Poli & Shirk, 254). Finally, trade liberalization works to increase foreign investment and exports by lowering trade restrictions, such as tarif...
The labour party is the federal party which was run by Paul Keating at the time. The first Labour government originated in the 1890’s, they are currently the biggest party in Australia.
...rall due to the level of consensus there is relatively little difference between the way the economy has panned out between the conservatives period in charge end the dominance that the Labour party currently are enjoying. On the whole the economy has become relatively depoliticised since the Thatcher years as politicians have less control over this increasingly globalised and privatised aspect of the agenda. Now with Brown’s decision to give the Bank of England the power to set the level of interest rates the economy has become less prone to state intervention then ever especially with a clear end to the grip that Trade Unions once had over the Labour party. Overall state intervention over this period has decreased and barring a crisis it is likely that this will remain the case unless the Liberal Democrats manage to gain power, even through a coalition government.
Interest rates, also known as cash flow influences many aspects of the economy, this aspect of the economy controls the worth of a currency. The interest rate of the Australian economy is controlled by the RBA (Reserve Bank of Australia), all decisions that are made follow the monetary policy which is a set of objectives that encourage healthy, stable and steady growth of the Australian economy.
The business cycle is the short-run alternation between economic downturns and economic upturns (Investopedia n.d.). A recession is an economic downturn and happens in every country and some recessions are worse than others and the output of GDP and employment are falling farther and faster. The great depression lasted from 1929-1933 and was a deep prolonged downturn in the business cycle before a recovery/expansion of the business cycle occurred and GDP and employment started to rise (Krugman & Wells. 2012). The next recession lasted from 1981-1982 and was comparatively smaller than the first (Krugman & Wells. 2012). More recently in 2001 a slump in the economy was noted and was followed by the great rescission of 2007-2009 (Krugman & Wells. 2012). Recession is defined as a “period of at least two consecutive quarters (a quarter is three months) during which the total output of the economy shrinks” (Krugman & Wells. 2012). In the United States the National Bureau of Economic Research (NBER) is assigning the task of determining when a recession begins and the NBER looks at a variety of economic indicators such as employment and production (Krugman & Wells. 2012). Every business cycle recession has a negative impact on the economy the recession’s deferrer on the strength of the impact on the country. Consider the two charts for Figure 21-5 of the more recent recessions of 2001 and 2007. The Recession of 2001 did not last as long as the recession of 2007 and did not have as much of an economical hardship on the business cycle and as shown 2007 dipped greatly in industrial production. In the second chart it demonstrates a recession at the point the economy turns from expansion to recession or the business-cycle peak. Then in the char...
In the middle of the nineteenth century, an economic transformation occurred in the United States. Historians refer to this event as the market revolution. Americans integrated technologies of the Industrial Revolution into a new profitable market economy. Steam power moved steamboats and railroads, fueled the rise of American industry by powering mills and sparking new national transportation networks. Alexis de Tocqueville said on his first visit to America: ”No sooner do you set foot on American soil and you will see how everything is on the move around you.” This is considered a bold term that conjures up images of radical transformation within the American economy. However, not everybody enthusiastically participated in the new market
This economic growth continued to increase through ‘98 and ‘99, partly being attributed to the weakening Australian dollar that allowed for the opening up and increasing market shares held by Australian exports on world markets. This was the case, as the reduction in the Australian dollar’s value, triggered decreases in the prices of our exports for foreign buyers, thereby increasing demand for our products and increasing the amount of money and investments coming into Australia. This therefore resulting in the aforementioned increases economic growth when combined with the high levels of employment and consumer confidence.
One of the main factors that caused globalisation in Australia was a reduction in protection, the act of National trade barriers being removed. A reduction in protection of international trade is done by governments who work together to develop agreements with each other to reduce trade barriers and allow tariffs on imported goods to be reduced. Australian governments have been involved with countries such as Singapore and Malaysia in an effort to help reduce the tariffs and quotas on imported goods, resulting in free trade agreements between other countries. For example, when National trade barriers are removed, opportunities are opened up to Australian business to import goods at a cheaper price and then export other goods to new markets in other countries. Evidence of this was recently reported on the ABC news program, the reporter quoted that ‘our government should not sign any free trade agreements with Japan, until the tariffs on Australian beef and dairy products are reduced.’ This news report showed local Australian farmers who are trying to convince our Prime Minist...
In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).
The Founding Fathers supported limited government intervention and economic self-regulation for America. They believed that the job of the government was to protect and uphold the rights of the people to participate in a free market economy. These rights include property rights and free markets, “property rights: the legal right to own and use property in land and other goods; the right to sell or give property to others on terms of one’s own choosing (market freedom); and government support of sound money” (West, 2010). The United States government has accumulated a massive amount of public debt, which is a danger to the preservation of liberty. Since the Federal Reserve’s creation on December 23rd 1913 it has been increasing our money supply
The United States and New Zealand established close ties in 1942, when the U.S. provided security for New Zealand during World War II, and have remained close ever since. However, in 1984, the Labour party came into power in New Zealand, with intentions to bar nuclear-armed and nuclear-powered warships from New Zealand ports. Implementation of this anti-nuclear policy was incompatible with U.S. policy and disrupted the alliance under the Australian, New Zealand, and United States (ANZUS) security treaty of 1951. After unsuccessful attempts to remedy the issue, the United States suspended its ANZUS security obligation to New Zealand in 1986.
The two economic theories that will mainly be looked at and examined are the “Classical Keynesian Theory” and the Import Substitution Industrialization Theory”. It will argue that these theories do not work well independently of one another. For instance, Malaysia (a country that has its own unique way of using import tariffs to help their economy grow) will serve as a case study to help discuss how import tariffs can help the welfare of a county.
Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1).
The disparities between the two views of the economy lead to very different policies that have produced contradictory results. The Keynesian theory presents the rational of structuralism as the basis of economic decisions and provides support for government involvement to maintain high levels of employment. The argument runs that people make decisions based on their environments and when investment falls due to structural change, the economy suffers from a recession. The government must act against this movement and increase the level of employment by fiscal injections and training of the labour force. In fact, the government should itself increase hiring in crown corporations. In contrast the Neoliberal theory attributes the self-interest of individuals as the determinant of the level of employment.