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Australian Economic Policies Essay, Research Paper

Australian Economic Policies

Despite it s relatively small population, Australia can be considered one of the important trading nations of the world. In 1991 alone the value of Australia s exports of goods and services amounted to $51955 million from a total GDP of $377 114 million, which accounts to 14% of the total GDP.

From our earliest days as a prison farm, when the number of convicts sent to Botany Bay was the key influence on our economic health, through to the present, when forthcoming speeches by the Governor of the US Federal Reserve can send our markets into spasm of paranoia, what happens outside Australia has had profound effect on the hip pocket nerves of all Australians. But is Australia simply in the hands of international banksters and agencies, which pull the strings to make us dance? Or, are many of our problems associated to the fact that we try to ignore developments in the world economy and do not undertake appropriate actions?

Democratic governments such as in Australia function in the interest of their electors, and therefore are inclined to implement policies, which will ensure their political survival. The characteristics of these polices have to benefit the economy by offering protection of business interests and securing domestic industries from foreign competition. Usually these policies are aimed at dealing with economically advanced nations and therefore restrict the expansion opportunities of less-developed countries through high protection barriers such as for example high tariffs. To understand this conflict more clearly, we must comprehend what are protection policies, how are they used and which ones apply to the Australian economy.

Protection is any policy implemented by the government to provide domestic producers with artificial advantage over foreign competitors. Free trade is based on purely market forces without any intervention by governments.

In the real world, international trade blueprints are far different from those proposed by the notion of free trade. Markets of countries are commonly disfigured by the protective manners of governments, which execute numerous measures to certify that domestic industries endure in opposition to foreign competition and even compete in global markets.

Tariffs are the central protection feature. A tariff is an indirect tax imposed on a given imported commodity when it enters a country. Although tariffs generate revenue for the nation s government they also amplify the price of imports in attempt to persuade consumers to purchase locally manufactured goods.

Another protective instrument used in addition to tariffs are import quotas, which in the recent years have become popular by the Australian Government. They are imposed on imports for which there is inadequate demand.

Therefore, consumers who consistently purchase imported goods are paying the landed cost of the item in addition to the tariff imposed by the government. Ironically, those who buy local produce are obligated to pay a price, which is higher than what it would be under free-trade conditions. Overall outcome is that all consumers wind up paying more regardless whether the commodity was locally produced or imported.

A quota specifies in what amounts a product can be imported. For example, a motor vehicle importer may be allocated a quota of 140 units per month. If they exceed the allocated quantity, the additional vehicles are seized in bond by the custom authorities until the importer is entitled for the next period s quota. In the mean time, the importer will sustain penalties that are intended to discourage such practises.

Import licensing is a popular protective measure also, and is closely related to the use of quotas. For a car dealer to import vehicles into the country, they must posses an import licence. The availability of licenses is determined by the extent to which imports pose threat to locally produced goods. Again these costs have to be passed onto the consumers that choose to purchase these imported commodities.

A subsidy is a grant paid to a producer by the government to offset production costs. This allows the product to be sold at a lower price margin. In Australia, where many industries are found to suffer a cost disability relative to their foreign counterparts, governments have often chosen to subsidise production costs to allow such industries to survive against foreign competition. Subsidiaries are paid from general government revenue, which means that all taxpayers share the cost burden providing this protective device.

An embargo is a complete ban on the import or export of a certain type of good. An example of an export embargo was the ban on the export of live merino sheep from Australia. This ban dated back to 1929 when it was taken advantage of the fact that Australia had developed a breed of sheep that produced what it was believed finest wool in the world. To monopolise merino wool production, the embargo was imposed. It was due to the fear that if export of live sheep was permitted, our industry would be threatened by wool production elsewhere in the world. In 1978 however, the Australian government permitted the export of small flock of merino rams to China.

Quarantine regulations are intended to immobilize the spread of disease. Trade involving livestock and perishable commodities, such as meat and cheese is often restricted by such regulations offering local producers an advantage. A recent example of this would be the outbreak of the foot and mouth disease, where exceptionally severe quarantine regulations would have been imposed against many perishable goods from the United Kingdom.

Technical specifications are also a strong protective device. For instance, Australian motor vehicles are right-hand drive compared to the

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