*The following outline of Australia’s economic trends is an addition to Systemdestroyer’s analysis of Australian economic performance. Hopefully the data/analysis provided will be useful to readers*
Systemdestroyer’s article can be found here-
Australia’s annually adjusted growth in Gross Domestic product (GDP) since 1990 has been relatively stable. Despite negative growth in 1991, the economy has been growing steadily reaching a climax of 5% in 1999. This robust growth expedited by the Freemarketeer reforms implemented by the Hawke-Keating government has been accompanied by rising income inequalities however.
The value of the gini coeficient (a common measurement of income inequality) has risen from 0.28 in 1990 to 0.33 as of 2013. Many Keynesian and progressive economists have blamed Free market ideology for such income differentials, but the general consensus is that the rise is a natural result of globalisation, which introduces more Labour market competition and labour replacing capital, undermining the wealth share of the lower classes.
Services and commodities have accounted for an increasingly large share of GDP and employment in the domestic economy since the sweeping economic rationalist reforms of the Hawke-Keating era eliminated the protection previously given to manufacturing. Although the initial devaluation of the Australian dollar following its float in 1983 initially helped exporting manufacturing sectors grow more quickly than their tertiary industry counterparts, their market share has fallen at an accelerating rate, reflecting more efficient use of organisational capital relative to wages in Asia (specifically China), and an appreciated currency. The effect on GDP of the declining manufacturing sector however has been minimal, since Asia’s shift towards manufacturing has precipitated an increase in Australian commodity exports, where there is a strong comparative advantage. As a result, the shift away from manufacturing represents a major structural adjustment in Australia’s economy in favour of sectors where our comparative advantage in human capital and natural resources is more apparent. This structural adjustment has become one of the factors contributing to Australia’s stable growth rates despite fluctuating global trade conditions.
Australia’s current account deficit since these structural reforms has been in a healthy condition. After the credit dry up of 2007, and subsequent bust after 15, September 2008 with the collapse of Lehman bros, Australia fared well relative to other OECD countries, with the lowest public debt rates and sturdy economic growth despite a single quarter of contraction in 2009. The maintenance of employment and healthy terms of trade is largely attributed to the ascent of bilateral and multilateral trade agreements alongside the reforms mentioned with the Asia-Pacific region which has experienced sturdy growth using the export subsidy growth strategy, and through protectionism, shifted production away from commodities and low-demand-elasticity industries towards manufacturing. Trade with China for example has grown from $113 million dollars in 1973 to over $85 billion dollars in 2009 (despite sluggish growth conditions), reflecting an enormous increase in trade with the region facilitated by trade agreements and structural reform. This represents an ongoing long-term geopolitical-economic shift towards the region, and away from debt laden developed markets.
An interesting anomaly in Australian economic trends is a reversal of the prediction of Wagner’s law. This economic law states that government spending as a percentage of GDP is inclined to rise as a result of increasingly dangerous technological monopoly, and public demands. Following the ascent of Milton Friedman’s monetarism and Reaganist ideology, both the Liberal and Labor parties have extensively privatised existing public enterprises such as QANTAS and TELSTRA, and any R & D investment is usually open to usage by private enterprise (as seen by the implementation of the National Broadband Network). This privatisation under third-way ideology has consequently led to a lot less government regulation of sectors deemed important, and competition has flourished under the laissez-faire growth model. Cuts in subsidisation have also strengthened the government’s revenue base despite remnants of protectionist subsidisation aimed at low skill manufacturing under pressure from an appreciated currency.
All of these trends have been driven by the general economic and philosophical structure of the world since the 1970s. Such “Megatrends” (as referred to by the UK political commentator Anatole Kaletsky), have encompassed economic thinking and been practiced widely. Multilateral trade agreements, domestic and foreign structure, open market policies, and income equities have all been changed in the Australian economy since 1990 within the paradigm of the free market fundamentalists. Whether these changes will finish in flourishing growth and competition, or disaster is still to be seen.