Australian Economics:

Rapid Rise to Economic Power

Jennifer Stephenson

Economics 4100
Professor Tindall
3 May 2011

Australia is considered a modern Market economy with a current GDP at over one
trillion. Growth of the Australian economy has been phenomenal and the country is now
considered amongst the top five developed countries in the world. I feel that a major reason
behind Australias growth is due to its stable government and politics, its large pool of natural
resources and growing field of knowledge based industries, a newer yet major contribution.
Australia has also experienced significant population and economic growths since its creation
which have contributed to the countrys rapid development. Careful planning along with luck
allowed Australia to propel itself into a position of great power with one of the most
successful economic systems and one of the highest standards of living in the world. It is
difficult to understand a countrys present without first looking at how the country came to be
in the first place.
Looking first at Australias history we can see that significant economic growth began
in the middle 19th century thanks to the wool industry and the Gold Rush, which also played a
part in the population growth at this time. A second economic boom began during WWII and
continued until about 1970. The culmination of industrial and technological growth along
with a secure and happy people has propelled Australia into being one of the top economic
countries in the world. Though Australia today is a country that is flocked to by many and is
regarded as a great power, Australia actually started with a rough beginning. Aboriginals
originally occupied the land until around 1606 when The Dutch East India Company explored
the western coast of Cape York Peninsula. The English then explored New Holland, what
would become Australia, in 1688, but did not stake ownership until 1770. The first British
colony was formed at Sydney and was a penal institution during its first years, later surviving
on its agricultural development. By 1817 the Bank of New South Wales, Australias first

bank, opened in Macquarie Place Sydney, later changing its name to Westpac in 1982. By
1829 all of Australia had been claimed as a British colony.
Six colonies were eventually formed between 1788 and 1891, when they began
forming a constitution to eventually become the Commonwealth of Australia in 1901. The
original settlements had a heavy impact on the original Aboriginals. Their land and resources
were overrun by the new settlers pushing the Aboriginals out. The children of Aboriginals
were later removed from their families by State Government agencies to better integrate them
into the civilized society. It wasnt until the discovery of Gold in 1851 did the economy begin
to change. The Gold rush led to an increase in immigration; however it also put a strain on
the gold supply leading to a slight weakening of the currency. Australia later participated in
both World Wars leading to the signing of its first international treaty, the Treaty of Versailles,
earning the country a spot as a leading power. After World War II Australia became a
founding member of the European Union and a large immigration trend began that lasted until
1970.

The increases in income due to the Gold Rush, when paired with Agricultural

Industries, led to increased economic stability especially in the manufacturing and

construction sectors.
Financially at this time, an investment boom began between the 1880s and 90s
despite the fact that the returns on investments were actually less than the initial investment.
By the end of the decade overseas investors became concerned and began pulling out. Wool
remained the center of economic activity until the industrial revolution and informational
technology industries replaced it in later years. There are four main components attributed to
Australias modern economic system, trade, manufacturing, services and finances. Other
components such as industrialization, private enterprises, large scale productions, high

technology, natural resources and small businesses, also contribute to Australias economic
system. At the start of the new millennium new tax systems were developed, and some major
business sectors were also partially privatized. As of 2000 labor productivity growth has
moved past the United States and economic growth is about 3.3% per year in 2010. The PPP,
or Purchasing Power Parity, is one of the highest in the world and according to figures was
$30,700 in 2004.
International trade, imports as well as exports, have also contributed a great deal to the
development of the country. The ASX, or Australian Securities Exchange, is also an integral
part to the economic system of Australia. The Australian Securities Exchange changed its
name from the Australian Stock Exchange in 2006. Australian trade moved focus from
Europe and North America to Japan and other East Asian markets in the latter half of the
twentieth century. Australia is largely dependent on its agricultural industries being one of
the primary sources of income for many Australian people. Agriculture accounted for 80% of
exported goods at one time but has dropped to 3% in recent years being replaced by mining
goods. The mining industries have contributed to the growth of the population especially
during the time of the gold rush.
Australia has many industries that contribute to its phenomenal growth in economic
status, the most important ones being that of the ship building, and information and
technology industries. One could equate the recent boom of Australias information and
technology industries to the dot com boom of the United States in the 90s. Australias
imports consist primarily of machinery, transportation equipment, computers, office machines,
telecommunication equipment and parts. Crude oil and petroleum products are also included
in Australias imports.

The social structure of Australia has developed into one that many people find
appealing and that has set the country above many others, in a relatively short period of time.
Australias unemployment rate contributes in part to its developing economy coming down
from 11% in 1992 to 5% today a drastic cut and the lowest its been since 1970. Employment
within the country is not limited only to Australians, and is considered a major draw for
citizens of other countries. The major job arenas are within the fields of accounting, finance,
IT and technology, health care, logistics and transportation, construction, management, retail,
manufacturing and operations, knowledge based technologies and engineering. The newest
industry of knowledge based technologies has grown significantly in the past few years.
Currently there are around twenty five thousand technology, information and communication
companies in Australia.
Another major draw is that employers offer incentives, health and safety policies and
awards, and a proper family friendly workplace. Many employers seek out employees online
and there are five different employments in Australia such as Full-time or regular employees,
casual employees, probationary employees, fixed-term employees and part time employees.
Australias government has taken great strides to ensure that the indigenous Australians are
offered enough job opportunities offering incentives to employers who offer jobs to the
indigenous peoples.

The work standards and incentives offered to employees aids in the

happiness of the Australian people but also encourages citizens of other countries to join the
workforce.
Another draw for foreigners is Australias high standard of living which is
comparatively higher than much of the world. In 1995 the World Bank acknowledged
Australia to be one of the wealthiest countries in the world with one of the most prosperous

economies. There is a disparity amongst Australian citizens and Aboriginals in terms of their
standards of living, as well as between city and rural dwellers despite being one of the
wealthiest nations in the world. Australia can be considered an unstable society in which the
rich are getting richer and the poor are getting poorer. A countrys resources, well being of
the population, and standard of living, are the three factors used in determining a countrys
standard of living.

The Organization for Economic Cooperation and Development

organization claims that Australias growth of standard of living has been phenomenal in the
last fifteen years. Australia also invests heavily in the social and health infrastructure and
therefore has one of the best educational and health service industries in the world.
Taxes play a large role in most developed countries; Australia being one of these
countries introduced a new system of taxation in the new millennium proving favorable to
both the individual as well as the businesses. There are two parts to Australias taxation,
federal and state taxation. Taxation is not uniform throughout the country but the two most
important forms of taxation are income and business taxes. Taxes vary based on the different
needs, populations, economics and budgetary positions of each state of Australia.
The government of Australia has had an interesting formation since its beginning but
all in all it has not been very turbulent. Today Australia is also known as the Commonwealth
of Australia and is a federal constitutional monarchy under a parliamentary democracy. The
Commonwealth was formed in 1901, after the six self-governing British colonies came to an
agreement and formed the six states of Australia. An Australian Constitution was formed at
the Constitutional Convention, which outlined the terms of the agreement and was then
ratified by the people. A separation of power is established in the structure of the Constitution
in which it breaks down the branches of government into separate chapters. For all citizens it

is required after the age of eighteen to vote in both the federal and state elections at the risk of
a fine or prosecution with the failure to do so.
A democratic legislature, consisting of the bicameral Parliament of Australia, being
the Queen and two houses, the House of Representatives and the Senate, was created from the
Australian Constitution to govern the Federal Government. Each state also has its own
Constitution, leaving with Australia with a total of seven sovereign Parliaments. The different
Parliaments are unable to encroach on the functions and duties of any other. Powers can be
transferred from one to another by passing legislative agreement between all states involved.
The House of Representatives is elected to reflect the differing populations of the six
states, yet there is equality in Senate in the sense that each state elects twelve Senators
regardless of the population.

There are three different divisions, or branches, to the

government, the Legislature or the Commonwealth Parliament, the Executive consisting of

the Sovereign whose power is exercisable by the Governor-General, the Prime Minister,
Ministers and their Departments and the Judiciary or the High Court of Australia and
subsidiary Federal courts. The Governor-General is appointed by the Sovereign on the advice
of the Prime Minister, and represents the Queen.
The Legislature proposes laws in the form of Bills, and lays the legislative framework
for the operations of the Executive and Judiciary branches. Though the Sovereign is formally
a part of Parliament she does not take an active role in these matters. The Executive branchs
role involves enacting the laws by Royal Assent, carrying out tasks assigned by the legislation
and administering the laws. The Judiciary branch uses both statute law and common law
when hearing cases brought about by the administering of the law. Working together there is
a clear separation of powers that is visible.

After looking at the history of the country we can come to some conclusions as to how
Australia has become the country it is today.

Its modern market economy approach

contributes to the countrys continuing success. By allowing the market to essentially flow
from the theory of the free hand yet regulating some areas of operation Australia has created a
system which has made it a country envied by many. In Summary there are many factors that
led to the economic success of the Australian government. The attractiveness of the country
through the Gold Rush, government system, standard of living and overall appeal has turned
Australia into a virtual melting pot. With so much diversity through all the different types of
peoples, Australia will continue to thrive throughout the years.

The stability of the

government and political structure trumps many others in the industrial world allowing for
change suited not only to the government but to the people. Through Australias free market,
market economy approach with some governance over regulation their economy is set up for
success for a long time to come.