You are on page 1of 4

Globalisation *is* huge, and as i've advocated before, splitting it up a bit makes it a lot more

manageable. For instance, look at how trade, investment, technology, finance and labour have
changes in the past 20 years as a result of the global economy, and then refer to different
government strategies that have been implemented.

e.g Trade: increased flows ---> reduction in tariffs, competition policy, ACCC, seeking free trade
agreements (singapore, thailand, us, ANZCERTA).

Investment: floating of the australian dollar has increased capital inflows, and allowed a lot more
speculation ---> much more fluctuations in the currency and more dependent on the global
economy for our own growth rates.

technology: improved communications and technology and a hight take up rate by households
and businesses have imporved productivty (which in turn increases growth). technology has also
changed the structure of our economy, in terms of it being more service based, and more capital
intensive. Improved communication and 24hr link ups with the rest of the world has allowed our
rather isolated nation to become much more apart of the global business network (even if it
means 3am business conferences). Has allowed 24hr trading in financial markets. Makes it easier
for our exports to be marketed and sold throughout the world via the internet. Lower inflation
levels and lower consumer prices since there is a lot more import competition (e.g u can buy
something off amazon if its cheaper than ur local bookstore), and although computers may stay
relatively the same price, every 9 months they're actually doubling in their performance
capabilities...

Finance: better and easier access to finance ---> growth. Derivatives, hedging etc has created
another financial subsector, service industry. Again much more interdependent on global
economic developments (e.g exchange rate, interest rates). Govt has increased competition with
teh introduction of non-banking financial institutions, the difference between mortgage rates and
the cash rate has dropped dramatically --> increased borrowing by households.

Labour: the least altered of all teh factors. But we have a lot more expats because of greater
labour movement ---> incomes remitted to aus have increased. Similarly we're getting a lot more
skilled labour from asia etc, which is helping to improve the quality of our labourforce and
relationships with foreign businesses which ultimately raises our level of weath. Number of
migrants accepted has jumped in recent years under howard govt, with a point policy based on
which industry they are in ---> so as better to balance demand/supply for skills.

The effects of this on our inflation, growth, exchange rate etc should be analysed and the general
use of monetary/fiscal policy as well.
resignation tendered
You could also cover the effect on the economic indicators such as globalisations effect on
growth, unemployment etc.


Effect on growth: The deregulation of Australia's financial markets and capital markets has left
Australia's growth rates more susceptible to the effects of economic problems in other countries.
Because of the increased integration, Austarlia has become more vulnerable to it's trade partners'
economic downturns and recessions.

An example is in 1996-1997, during the Asian financial crisis. During 1998, most asian
economies such as Thailand (a major trading partner at the time) went into recession. The effect
of this recession on Australia had a delayed effect but it was there in the December 1998
economic downturn when economic growth fell below 1%. This effect can be explained as the
severe downturns in the Asian economies forced them to protect their vulnerable markets
through tariffs, local content rules, quotas and subsidies to ensure the viability of their own
markets. In effect, Australia lost many of its export markets in the process, this resulted in a
lower productive capacity of Australia which in effect caused the stagnation of growth for
Australia's economy.

Effect on unemployment: Since 1980, there has been a clear correlation between the reduction
of tariffs and the unemployment rate. From 1990-1998, average tariffs were dropped from 7% to
5% and this saw the amount of goods exported rise from 50,000 units to 85,000 units from 1990
to 1998. This increase in production resulted in employment rising as more labour was required
by Austrlaian producers.

However, in the short term, reucing protection will result in short term unemployment in
inefficient industries. This comes as a result of inefficient Australian industries being exposed to
competitive more efficient products of the world market. This causes demand for inefficient
Austrlaian industries products to fall and causes them to go out of business.

This is a weak argument however, as we will only see short term unemployment fall. In the
longer term, resources will be redirected to more efficient industries where a comparitive
advantage is evident, resulting in more efficient industries and therefore more unemployment.

Effect of globalisation on Government policy: I've already stated that in 1990, the units of
goods imported rose from 50,000 to 85,000 in 1998. Well this massive increase in the amount of
goods exported, coupled with the floating of the exchange rate in 1983 led the Australian
government to adopt the policies set out in the Washington concensus. In 1983, the Keating
government adopted the following policies: fiscal discipline (moving from deficit to surplus),
trade liberalisation, privatisation of government owned enterprises to increase their efficiency,
selling of the national bank, deregulation of the financial system (fancy way of saying they
floated the exchange rate in '83).

Effect on the distribution of wealth and income: in 1968, the average tariffs were at 36% and
at this time the gini coefficient (index that gives an indication to the level of income distribution
inequality) was 0.66. In 1997, the average tariff rate was 4.4% and the gini coefficient had
drastically fallen to 0.47 so clearly the effect of globalisation in freeing up protection on trade
resulted in this decline of the gini coefficient from 0.66 to 0.47.

Globalisation
Affect on the Economy
An understanding of the pressure that
globalisation brings to bear on the
Australian Economy is fundamental to an
understanding of Industrial Relations.
Competitiveness in the
Global Marketplace
Australias economy is very much
dependent on the global economy.
Australia must export goods and
commodities to other countries so that it
can earn money to pay for the goods and
commodities it imports. In short,
Australia must export coal, gold, and
wheat so that we can import televisions,
clothing and cars.
How much Australia can export is dependant on how competitive our prices are in the global
market. If wages and salaries are too high, and if workplaces are inefficient, then the cost of
production will be higher, and Australia will be less competitive in the global marketplace.
Industrial Relations and Competitiveness
The remuneration of workers, the conditions of employment and the efficiency of the workplace
are all important aspects of Industrial Relations.
In order to ensure that Australia remains competitive in the global economy, the Australian
Government through its Industrial Relations Policy puts downward pressure on wages and
salaries, and upward pressure on productivity in the workplace. A failure to ensure Australias
competitiveness in the global economy over a significant period of time would likely result in the
loss of jobs, more unemployment, more business failures and a contraction of the economy. In
such circumstances the lifestyle in Australia would go backwards.
Emerging Economies and Globalisation
New emerging industrial giants such as China and India exemplify both the benefits and the
problems caused by globalisation. In these countries, workers are paid only a small fraction of
what Australia workers are paid. This makes China and India very competitive in the global
marketplace. Cars, clothing and electronic goods can be made in these countries far more
cheaply than in Australia. The effect of this is that Australian Jobs are lost overseas.
Australia has a choice. Put downward pressure on wages and salaries to make Australia more
competitive or face a greater disaster become uncompetitive and see unemployment begin to
rise to potentially dangerous levels. The Workplace Relations Act 1996 was a landmark reform
of the Howard government but somewhat unpopular. It was perhaps a lesser of two evils.
Hence, with downward pressure on wages and salaries and upward pressure on productivity,
there should be no surprise that Australians now work longer that they did 30 years ago, and
most families now rely on two income earners rather than just one.
If the global economy expands Australias economy tends to follow suit. If the global economy
contracts, so does Australia's.

You might also like