CHAPTER TWO Economics_Notes_me

CHAPTER TWO Economics_Notes_me - Australia's place in the...

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Australia’s place in the global economy Australia’s economy (by size) ranks 15 th in the world - middle rank of advanced economies Australia is a small open economy producing only 2% of global economic output Trade has always played a significant role in Australia’s economy because Australia needs trade to obtain new technology items and because of the small size of our domestic market Annual foreign trade adds up to almost half of Australia’s economic output - I.e. trade is central to Australian economy - thus Australian economy does not have influence over the global economy but are significantly affected by global economic developments Direction of Australia’s trade has shifted from UK and European countries in 1950s to Japan, North East Asia and ASEAN countries o UK joined the EU in the 1960s so it was forced to impose barriers to trade with Australia thus forcing Australia to seek a new export destination. By this time Japan was sustaining rapid economic growth - Australian exporters found a new market. As Japan’s economy began to slow in the 80’s Australia shifted focus to other Asian economies who were sustaining the highest growth rates in the world o Japan is still Australia’s largest export destination followed by ASEAN and EU o Import wise - EU, USA, ASEAN Australia does not sell a high proportion of exports to advanced economies but buys substantial amounts of imports from them Traditional focus for Australia’s exporting industries has been primary industry where Australia has the greatest comparative advantage o Traditional commodities include wheat, wool, beef, and minerals such as coal, iron ore, gold and alumina o Agricultural and minerals products still remain the largest exports Australia has been less competitive in manufacturing trade hand has lagged behind high income countries who developed substantial manufacturing trade during the second half of the 20 th century. Australia remains reliant on primary exports while importing large quantities of capital goods, transport equipment, industrial supplies and manufactured consumer goods. Mineral exports have become Australia’s largest export earning category - but earnings from mineral exports fluctuate significantly in response to changes in World economic growth, which influence both price and volume of demand Manufactured exports have also grown over the last decade although still remains only a small proportion of Australia’s export Recent focus has been on the importance of service exports - tourism is now the single larges export earning industry in Australia The growth in financial flows have been substantially greater than the growth in trade flows o Financial flows began a rapid growth after the decentralisation of financial markets and floating of the currency + technological advances o Result of international businesses buying Australian assets and investing in Australian businesses and vice versa
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This note was uploaded on 08/19/2009 for the course ECON 1001 taught by Professor - during the Three '07 term at University of Sydney.

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CHAPTER TWO Economics_Notes_me - Australia's place in the...

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