Australia’s Economy Essay
Australia became a commonwealth of the British Empire in 1901. It was able to take advantage of its natural resources to rapidly develop its agricultural and manufacturing industries and to make a major contribution to the British effort in World Wars I and II. Now, Australia has a prosperous Western-style capitalist economy, with a per capita GDP at the level of the four dominant West European economies. Rich in natural resources, Australia is a major exporter of agricultural products, minerals, metals, and fossil fuels.
Commodities account for 57% of the value of total exports, so that a downturn in world commodity prices can have a big impact on the economy. The government is pushing for increased exports of manufactured goods, but competition in international markets continues to be severe.
While Australia has suffered from the low growth and high unemployment characterizing the OECD countries in the early 1990s and during the recent financial problems in East Asia, the economy has expanded at a solid 4% annual growth pace in the last five years. Canberra’s emphasis on reforms is a key factor behind the economy’s resilience to the regional crisis and its stronger than expected growth rate. Growth in 2000 will depend on key international commodity prices, the extent of recovery in nearby Asian economies, and the strength of US and European markets.
Australia’s economy is basically free-enterprise in structure, and its largest components are finance, manufacturing, services, and trade. The gross national product (GNP) is increasing more rapidly than the population, and the GNP per capita is comparable to those of other industrialized countries.
Agriculture produces 4 percent of the gross domestic product (GDP) and occupies an almost equal proportion of the labour force. Arable land totals approximately 6 percent of the total area; of that, about one-third requires irrigation. Wheat and sugarcane are the leading crops, followed by barley, oats, rice, potatoes, cotton, sunflower seeds, and tomatoes. Fruits include grapes, primarily for wine, and oranges, apples, pineapples, and bananas.
Rangeland and pastures occupy about 55 percent of the total land area; on this are raised the world’s largest number of sheep, producing more wool than any other country. Other livestock include cattle, about one-twelfth for dairying, and pigs. Beef and cattle hides are important products.
Australia is almost self-sufficient in lumber production. Most of roundwood production is broadleaved, and timber plantations account for about one-fifth of the lumber output. Most fishing in Australia is marine, three-fifths from the Indian Ocean and two-fifths from the Pacific Ocean.
More than two-thirds of the annual catch consists of crustaceans; tuna is also important. Mining and quarrying account for about 4 percent of the GDP and employ about 1 percent of the labour force. Bituminous and lignite coal are the leading energy minerals, followed by petroleum and natural gas. Australia leads the world in the production of bauxite, industrial diamond, and lead; other metallic minerals include iron ore, manganese ore, titanium oxide, zinc, copper, nickel, tin, silver, gold, platinum, cobalt, cadmium, antimony, zircon, bismuth, and tungsten. The principal nonmetallic minerals include limestone, sand and gravel, brick clay, shale, salt, and sulfur.
Manufacturing is well diversified and comprises more than 17 percent of the GDP; it employs about 15 percent of the labour force. The principal manufactures include cement, crude steel, pig iron, metal manufactured products, refined-petroleum products, chemicals, wheat flour, plastics, newsprint, beef and mutton, and textiles.
More than four-fifths of electrical production is from thermal power plants, the rest from hydroelectric plants. Tourist attractions include beaches and deep-sea fishing, diving along the Great Barrier Reef, and winter sports in the mountains. Australia’s labour force was a little less than half of the population in the late 20th century. Unemployment rose to 7 percent in the late 1980s, but some industries reported a shortage of skilled labour. Most unions, organized by industry, are affiliated to the Australian Council of Trade Unions.
Except for part of the railway system, industry is privately owned; many of Australia’s large companies are subsidiaries of multinational corporations. The government regulates the economy mainly through monetary policy and taxation. Government spending cuts achieved a balanced budget in 1981 after deficits throughout the 1970s, and surplus budgets were achieved in the late 1980s.
The principal revenue sources are income taxes, excise and sales taxes, corporate taxes, and nontax revenue. The principal expenditures are for social security and welfare, state-government transfers, health, interest on the public debt, and defense.
The Reserve Bank of Australia, located in Sydney, is the central bank, with a separate department for commodity-market finance. The Commonwealth Banking Corporation controls its member development, savings, and trading banks. There are branch banks throughout Australia. The Australian Stock Exchange, located in Sydney, has member exchanges in the six state capitals.
The Australian National Railways Commission incorporates the Commonwealth railways and the South Australian (nonmetropolitan) and Tasmanian state railways; other railways are operated by the state governments. About two-fifths of the road network is paved. Major port facilities are located in Adelaide, Brisbane, Darwin, Fremantle, Gladstone, Gove (Melville Bay), Launceston, Melbourne, Newcastle, Sydney, Townsville, and Westernport.
Most of the nation’s inland waterways are accessible only to small, shallow-draft vessels. The busiest international airports are at Sydney, Melbourne, Brisbane, and Adelaide. Australia achieved a foreign-trade balance or slight surplus annually from the late 1970s to the mid-1980s. In the late 1980s the country experienced a small foreign-trade deficit annually.
Major exports are metal ores and scrap, wheat, coal, meat, and wool, principally to Japan and the United States. Major imports are machinery, miscellaneous manufactured products (textiles, paper, and nonferrous metals), transport equipment, and crude petroleum, primarily from the United States, Japan, the United Kingdom, and Germany.
In the past, the Australian economy has revealed itself as moody, rugged, rebellious and magnanimous, in keeping with the way many Australians see themselves. Amid financial market turmoil and the economic ruin and civil strife of neighbors, a bold Australian economy has surged ahead. Again and again, it has defied all odds. By 1998, Despite 8% unemployment, Australian consumers continued to shop, build houses and buy cheaper Asian cars. The stock market hit new highs, enticing more than a million Australians to buy shares for the first time.
“The secret of this economic magic is productivity growth, which has been more rapid and sustained than at any time in the last two decades,” says John Edwards, chief economist at investment bank HSBC in Sydney. Australia’s economy was once exposed to capricious markets and climate, relying on tariffs to keep foreigners at bay.
It is now more robust, flexible and export-oriented. The country of almost 19 million people, with a medium-sized economy (comparable to Mexico, South Korea and the Netherlands), can now better withstand shocks such as a currency crisis or trade slump.
But, after such a powerhouse fundraiser such as the 2000 Olympics in Sydney, Australia need not worry. Australia and it’s government has experienced much. It has suffered and triumphed, and has stood the test of time.