Australia in the International Economy

Abstract

At the start of the twentieth century, Australia was arguably the highest-income country in the world. By 1950 it was ranked third; by 1970 it was eighth; and by 1999 it was twenty-sixth, according to the World Bank Atlas method of measuring GNP per capita (or twentieth using the World Bank's Purchasing Power Parity method)--not counting several rich countries with less than one million people. By that standard at least, the long-term performance of Australia's economy has been relatively poor over the past century. Over the decade of the 1990s, by contrast, Australia has, according to that same World Bank source, 1 out-performed all other advanced economies other than Ireland and Norway in terms of GDP per capita growth. This difference between the economy's recent and earlier performances is arguably due in no small part to the economic policy reforms of the past two decades and in particular the belated opening of the Australian economy to the rest of the world. Having been more protectionist towards manufacturing than all other OECD countries except New Zealand for most of the century, and having stood aside from the industrial trade policy reforms agreed to by other Contracting Parties to the General Agreement on Tariffs and Trade (GATT) in the first seven rounds of multilateral trade negotiations (1947 to 1979), Australia has undergone remarkable reforms in the late 20th century. The present chapter first explores the extent to which the Australian economy has become more integrated into international markets in the past two decades, not just absolutely but also relative to the rest of the world. It then focuses on how the structure of our trade has changed and on the extent to which markets abroad for Australian export products have opened up, this being another potential contributor to the internationalisation of our economy. A third contributor is the reduction in non-governmental barriers to trade, most notably via the information technology revolution. The chapter concludes by examining opportunities and challenges ahead for Australian businesses and governments assuming the recent frenetic pace of globalization continues.