ECONOMIC DEVELOPMENT OF AUSTRALIA

  1. APPLIED FIELDS OF ECONOMICS
  2. AREAS OF ECONOMICS
  3. AUSTRALIA
  4. AUSTRALIA AND OCEANIA
  5. B) Describe the development of financial management.
  6. B) On Macro- and Microeconomics
  7. C) Explain the differences between macroeconomics and microeconomics.

Gt;

Before 1850 Australian economic development almost entirely was based on the production of wool. As more land became settled and occupied, pastoral businesses were established that became the majority of increases in economic expansion.

Gt; 1860

The discovery of gold in ' was a change in direction for the Australian economy. It marked a period of economic expansion, attributable to the gold, which eclipsed even wool production in terms of percentage of economic expansion. The discovery led to increased immigration, which put a burden on the gold supply. This in turn led to the resumption of wool as being the principle provider of increases in economic development by 1860. Actual estimates of populations of the time indicate that the population of 400,000 at the start of the decade increased to 1,000,000 by 1860.

The Australian government started a "development strategy" by issuing bonds to the London market, selling public land and using this to fund infrastructure.

1860 - 1875

Due to the increases in income attributable to the "Gold rush" manufacturing and construction sectors of the economy faired very well. However, when discussing economic expansion, the productivity increases provided by the pastoral industry in the production of wool remained its principle contributor.

1875 - 1880

As fertile land became less available to settlers, pastoral industries continued to increase their land holdings for the use of wool production. This caused a retraction in returns on investment by pastoral companies. Even when poorer land was utilized for the purpose of wool production there was continued investment both from private backers, and governments (in the form of transportation infrastructure).

1880 - 1890

An investment boom in Australia in this decade saw economic expansion increase despite the fact that the investments were providing less of a return per dollar spent on investment. This can be attributed to foreign funds becoming more and more available to Australia. By the end of this decade, overseas investors became more and more concerned with the difference between expected returns and actual returns on Australian investment and subsequently withdrew further funding. Consequently Australia saw the start of a severe depression starting in 1890.

1890 - 1900

Continued reluctance from overseas investors saw a sustained period of negligible economic expansion. It was however, not negative economic growth due, in part, to gold discoveries in Western Australia. This decade however, saw the beginning of the integration of new technologies such as refrigeration, which saw land being used in different ways; to produce meat and dairy products could now be produced and then exported overseas.

1900 - 1939

While wool-growing remained at the centre of economic activity, a variety of new goods such as wheat, dairy and other agriculturally based produce became a part of the Australian export repertoire. It was in this period that in fact the latter became more of a factor in economic productivity increases than wool production. Part of this emergence in other sources of economic expansion came from technological progress, such as disease resistant wheat and refrigerated shipping. It was also the development of this technology that renewed foreign large scale investment, both publicly and privately funded which under-pinned economic growth.

As seen before in Australia's brief economic history, this injection of foreign investment led to increases in construction, particularly in the private residential sector. The fact that this injection of foreign cash was the main contributor to economic expansion was again troublesome for Australia's economy. Returns on investments, as before, were immensely different from expected returns. By the 1920s agricultural producers were experiencing profitability troubles and governments, who invested heavily on transportation infrastructure, were not getting the returns they expected. Cutbacks in borrowing, government and private expenditure in the late 1920s led to a recession. The recession itself became worse as internationally nations fell into depressions which not only cut back on foreign investments to Australia, but also led to a lower demand for Australian exports. This culminated into the biggest recession in Australia's history which peaked in 1931-1932.

However, the recession was not felt as badly in Australia compared to their international counter-parts, the cause of which was almost primarily from the increases in productivity from the manufacturing sector. [In terms of sinclair's model, this is where we moved from the old model to the new model.] Trade protection, particularly from tariffs implemented by governments at the time were instrumental in the prosperity of the manufacturing sector.

1939 - 1974

In the beginning of the Second world war till the 1970s, Australia was locked in a period of high maintained economic expansion which is now known as the "long boom". This period is marked by large increases in the Australian population (by 80%), and little if any economic fluctuations. Despite the huge increases in the Australian population, economic growth, defined by increase in GDP per head, was still growing. It is statistically significant that in this period, the standard of living as representational of increases of GDP per capita, literally doubled. As mentioned earlier, the 1920s started an increase in manufacturing as a more and more important factor in Australian economic expansion. The Second World War gave a significant boost to this sector.

The highest growth in the manufacturing sector was however, found in the period after the end of the Second World War. Import restrictions implemented by the government of the time led to increased profits to the manufacturing industry, which encompassed a wide range of industries including motor vehicles, metal processing, textiles, clothing, footwear and chemicals. The impetus for the most part, was U.S. investment in Australia. The manufacturing industry however, was bolstered only to serve the domestic market, led by a strategy implemented by economic policy makers which could be dubbed "import replacement" strategies. This was afforded by both continuing increases in productivity and economic protection.

In the 1950s and 1960s, Australian manufacturers which were nurtured by government policy failed to increase productivity. This is highlighted by the increases in the productivity of overseas manufacturing who did not have the same level of protection as Australian producers. Foreign investors noticed this difference, or lack of competitiveness and consequently, investment declined in the manufacturing sector.

Economic growth however was not hampered by this, as the development of mining initiatives to exploit Australia's natural advantage in resource production attracted foreign investment which in turn under-pinned economic expansion. This establishment of a mining industry continued the high level of economic growth in the post-war period and beyond by more than which would have been possible by manufacturing sectors alone.

1 974 was the year which is described as the end of the 'long boom'. It is also interesting to note that while these years were denoted as being the "golden years" in Australian economic development, they primarily had an artificial basis through the use of tariffs and other protectionism implementations, the growth itself, because of this, led to an unsustainable level of economic growth.




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