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Globalisation On Australia

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Category: Social Issues

Autor: anton 30 April 2011

Words: 2194 | Pages: 9

What has been the impact of globalisation on Australia? What are the future implications of globalisation on Australia?

Globalisation is not a new thing but has been around for the last 500 years. Globalisation has had quite a positive impact on Australia. Globalisation has brought Australia Growth and has increased domestic efficiency. Australia has been involved in the revolution of globalisation and it has affected Australia in many ways. Its main impact was on International convergence, economic Growth, development and quality of life, trade, investment and Transnational corporations, distribution of income, environment, financial markets, international business cycle and implications for government economic policies.

Globalisation has enabled Australian markets to be open to foreigners. As a result of this, international convergence has increased as other countries will rely on Australia to provide goods to be traded with another nation. International convergence is the tendency of economic systems to become similar in different ways. There is an increased significance of international trade and the trade dependency is increased. By Australia opening domestic markets to international investors, has increased trade between Australia and other nations. Many economies are converging in economic performance as a result of this. During 1997/98, the Asian Financial Crisis occurred in Asia but affected the Australian economy. This was because of the international convergence that had taken place linking Australian strongly to that of Asia’s. If one major economy in the world does badly, the global economy is affected. This was shown on September 11 2001. Because the terrorist attacks affected America so greatly, any economy linked to America (almost all economy) in respect to trade, agreements or some other way, were affected.

High income and newly industrialised countries have had the most advantage of globalisation by gaining large, faster amounts of economic growth and an increased trade and investment flows. Some areas have not gained as much out of globalisation and have been pushed into the global economy particularly developing and poor nations. The Quality of life in Australia has dramatically increased as the domestic market has been opened to foreign investors. By decreasing protection on domestic markets, local firms have become more efficient and because of this, standards of living have improved. With technological changes in transportation and communications are helping globalisation trends around the world. The main change in transport has been the falling costs and time of delivery over long distances. Improved transportation also permits increased contact with foreigners through tourism and increased awareness of cultures around the world including new idea and innovations. These innovations can help the economy become more efficient. Australia has experienced large amounts of growth in the IT industry due to the revolution of the sector in the last 10 years. This has resulted in a more rapid and sustainable growth rate at about 2-3 % per annum. Since 1992/93, Australia has experienced 9 years of growth above 2.5%. During 1999, telecommunications sector increased their output greatly as internet data transmission was getting faster, cheaper and more accessible to people. As a result of this, the manufacturing industry recorded real output of 1.9% of GDP. In a recent OECD publication, Australia was rated highly against 17 OECD nations for its involvement in the communications and IT sector. It was ranked; 3rd highest in ECT expenditure (as a % of GDP), 6th highest in personal computer access, 8th highest in internet hosts per 1000 people, and 3rd best internet access costs. Internet shopping has increased by 66% from 1999 to 2000 where over 1.3 million Australians purchased goods or services over the internet. As more technology is being used, the efficiency of firms will increase because cost of production will reduce. The main impact that computers and communications technology has had is an easier access to information in foreign markets, improved access to overseas FOP such as call centres and technical support ( because they are cheaper) and increased access to foreign media and cultures. It is evident that Australia has experienced growth even in the last 10 years where it was averaged out to be 4.2% of GDP.

Globalisation has impacted on trade and investment in Australia. Since the 1980’s, Australia’s trade policies have been used to keep domestic markets open to the global markets. The level of world trade has grown twice as fast as the growth of global world product. The Structural change in Australia has been to move the private sector to more competition from both domestic and international markets. Since the 1950’s, Australia has experienced high levels of protection in the CFT and motor vehicle sectors. Even though protection would reduce employment, during the 1970’s and 1980’s, during periods of heavy protection unemployment rates raised and were not efficient to compete with international markets. Ever since the late 1960’s, effective rates of protection have been on the decline. As protection decreased, imports increased and so have exports due increased efficiency in the domestic markets. The value of export and imports has risen 16% between 1975 and 2000 showing the impact that its had on the Australian economy. Globalisation has also change the structure of trade in Australia. There has been quite a significant amount of growth in the manufacturing and services industry where growth of 12.5 % in annual exports was recorded between 1986 to 1996. This change shows a change in the worlds demand and domestic structural reforms. Transnational corporations have played an important role in trade and investment flows.

Transnational corporations have had quite a significant impact on the world economy. They have changed global tastes and trends and are vital for the progress of an economy. Companies such as BHP and Ford have entered and shaped the international market.

It is argued that globalisation has brought greater inequality. It has widened the gap between the rich and poor nations. The process of globalisation has placed pressure on economies to keep their labour markets competitive and to keep wages low so they are able to attract foreign investment. Globalisation has caused corporations to become more competitive. For them to do this, try and minimise cost of production by outsourcing to countries where labour is much cheaper. This by some people sees transnationals corporations exploiting developing nations. On the other hand, people argue that people of that nation are being employed and have a source of income. If you take a child who is poverty stricken in Zimbabwe and the family doesn’t have a source of income and is asked to work for a Multi-national corporation for $1 a day, that child will have very few choices and will take the offer for the prime purpose of survival. The product that this child makes could be around $100 and the child is getting 1% of the price of the final good. This shows how transnationals corporations are exploiting people in third world countries. Inequality in Australia is also increasing as shown by the Lorenz Curve. The distribution of income in the past 20 years, have been becoming more and more uneven as other households are receiving a smaller share of their income. Another way to calculate the level of inequality in an economy is the Gini Index. Since the early 1980’s this index has been rising from 0.39 to 0.45 in 2000. There are several reasons for this increase: an increase in unemployment, ageing population relying on lower income from welfare payments, greater inequality in wages and a reduction in welfare payments. Globalisation has caused a trend towards global markets which has been done by greater competition in product markets. If tariff protection was to be lowered, there would be more pressure on domestic firms to reduce their selling prices. The only way in which they are able to do this is by becoming more efficient by lowering their costs of production. 26% of the world population is currently in absolute poverty which means that a person earns less than $US1 a day.

Environmental impacts can be a big problem for an economy. Globalisation can possible have environmental impacts if economic growth and levels of development increase. Some environmental impacts for developing nations could be the breaking down of the ozone layer, photochemical smog, increased carbon dioxide emissions, acid rain and hazardous waste. In poorer nations, environmental problems can be blamed for health and productivity of people such as the cleanliness of people, safe water supplies, indoor pollution from cooking fires and other problems. Increased economic growth rates will lead to an increase in pollution, depletion of non renewable energy resources and other environmental damage. Australia and other high income economies have the highest green house gas emissions and figures are only growing. Some people argue that the World Trade Organisation contribute the damage of the environment as they prevent countries restricting imports from countries that have bad environmental practices.

Less developed countries are facing more environmental problems than those of developed. Countries bordering other countries have been affected by man made environmental disasters in many ways. An example of this is he Impact of fires with vegetation clearing in Indonesia on Malaysia and Singapore, Release of radiation from nuclear power plant accident in USSR affected Europe and Acid Rain affecting America and Europe.

Globalisation, however, has helped protect natural resources. An example of this is the World Bank and other agreements to protect the environment. In 1998 at the Kyoto conference, high income nations were targeted to reduce carbon dioxide emissions the atmosphere but low income nations refused to accept these environmental standards. They said that is could be simplified to high income nations are the main cause of the problem so they should fix it up and we shouldn’t get the blame.

Financial markets move large amounts of money from one country to another each day. If a financial market turns against an economy, it will do much harm to the country and will have a large impact. This has occurred in Mexico (1995), Asian financial crisis (1997/98) and in Russia (1998). It In all these countries, there was a loss of confidence in the financial markets causing them to crash and unemployment and poverty to rise. During the Asian financial crisis, poverty increased by 50%. This crisis didn’t only affect Asia but all countries linked to the Asian markets.

Some forms of financial flows are interest rates, currencies, and equity and commodity derivatives. 50 % of the FOREX markets turnover against Australian dollars includes swaps. This growth has decreased the foreign exchange rates stability. In January 2001, America’s interest rates dropped by 0.2% and in Australia, the dollar fell 2% with in a very short period of time. Generally this would increase the Australia dollar however, the FOREX traders believed that a reduction in rates would result in an increase in America’s profits and would increase the American dollar.

The global economy has become so integrated that a slight instability in one major economy would hinder all other economies linked to it. Basically, Australia’s economy relies on other economies to preform. As we have seen in later 2001, the American economy was affected by September 11 attacks, but this didn’t only affect America, it affected Europe, Australia and other economies around the world. One reason why economies are so intricate is because of trade. If America for some reason is not able to buy Australian exports, Australia would not be able to make as much money from that sector and productivity would be low because if productivity remained consistent, there would be a surplus of goods. Another incident that took place that affected the Australian economy was the Asian Financial Crisis. Foreign investors lost confidence in the Asian markets and withdrew their funds. As a result of this, the market crashed. This affected the Australian economy as most of Australia’s goods are produced in China or Indonesia where cost of production is low.

The Australian government have been trying to push the Australian economy more into the international market. As a result of globalisations growth of global financial flows, floating of FOREX market and increased pressure of international investors has all led to a greater similarity in economic policies of different countries. The Treasury prime aim was to have a more competitive private sector from both domestic and internationally sources. By doing this, prices would decrease, productivity would increase and employment would increase. By the government implementing policies on reducing protection, would increase specialisation, efficiency and in return increase growth. Some governments can be forced by the IMF to follow similar policies regarding fiscal policy, monetary policy, tax reforms, inflation and trade liberalisation. International convergence and integration has reduced the degree of which a country can manage its macroeconomic policies by themselves.

Globalisation has had a significant impact on Australia and will continue to in the future. With new trade agreements and increased trade, the Australian economy is becoming more intricate with the global economy and relies on the global economy to do well. Globalisation has helped Australia to increase economic growth and standards of living even though there is more inequality in the distribution of income. A consequence of increasing productivity can lead to a number of environmental impacts such as increased erosion, pollution and deforestation.

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