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:
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...ly be quite effective at pushing the Australian dollar down by selling the currency, it is very limited in pushing it up. The RBA only has its limited foreign reserves to buy the Australian dollar. The value of Australia's foreign reserves fell from $22billion US in December 1999 to $16billion US in September 2000. The amount of Australian dollars traded in one day in Australia's foreign exchange market exceeds its total foreign reserves. As was seen in the Asian crisis in 1997 in Thailand, running down foreign reserves will not always halt a currency decline. The US Federal Reserve is probably the only central bank that can strongly influence the decisions of fund managers.
The financial traders and dealers seek a low inflation, low interest rate, low current account deficit, high growth, budget surpluses and small public sector. If the Government does not achieve these policies, the markets will punish it. If they do achieve them, the markets may still punish them. Any way you look at it, Australia is integrated into the globalised world economy and is dependent on the activities and policies of globalisation. Australia’s future will move with the ebb and flow of globalisation.
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