TimRiley

Director
TimRileyPublicationsPtyLtd
and
EconomicLiteracyCentre
TheNatureofStructuralChange
Changeinthestructureoftheeconomy
Areallocationofresourcesincludingland,labour,
capitalandenterprise
Primary,secondaryandtertiaryindustries
Changingsharesofoutput,employment,exportsand
investment
SourcesofStructuralChange
Marketinduced:changesinconsumpti0npatterns
Governmentinduced:tariffandquotareductions
Domesticinfluences:changesinindustrysectors
Globalinfluences:changesintechnology,trade
patternsandtheexchangerate
StructuralChangesinAustralia
Theincreasingimportanceofservices
Thegrowthoftheminingindustry
FastergrowthofresourcerichstateslikeQldandWA
Technologicalchangessuchasdiffusionofdigital
technology
SectorsoftheEconomy
Primary,SecondaryandTertiary
Agriculture
Mining
Manufacturing
Services
IndustrySharesofOutput
IndustrySharesofOutput
Agriculture3% smalloutputsharebutlargeexports
Mining7% smalloutputsharebuthugeexports
Manufacturing12% decliningbutstillexporting
Services78% dominantsharereflecting
consumptionpatternsandspecialisation
IndustrySharesofEmployment
IndustrySharesofEmployment
Agriculture4% capitalintensive
Mining1% capitalintensive
Manufacturing11% capitalintensity/lossof
competitiveness
Services84% labourintensiveandhighlyspecialised
IndustrySharesofInvestment
IndustrySharesofInvestment
Agriculture4% agribusiness
Mining13% ironore,coal,LNGandmetals
Manufacturing11% investmentinminingrelated
activities
Services72% retailcentres,finance,banking,
insurance,healthandeducation
IndustrySharesofExports
IndustrySharesofExports
Agriculture18% foodandrawmaterials
Mining42% ironore,coal,LNGandmetals
Manufacturing17% transportequipment,building
materials,wineandbeer
Services23% tourism,transportandeducation
TrendsinActivitybyState
Output:NSW(35%),Vic(25%)Qld(18%)WA(12%)
Employment:NSW(35%),Vic(25%)Qld(20%)WA(10%)
Investment:NSW(32%),Vic(24%)Qld(21%)WA(14%)
TheRateofStructuralChange
Measuredbyindicesofstructuralchangeovertime
Changesinoutputandemploymentbydifferent
industriesovertime
Ratesofstructuralchangeriseduringinvestment
boomssuchastheminingboom
FactorsDrivingStructuralChange
Thedemandforservicesandpopulationageing
TheindustrialisationofEastAsiaincludingChina
Changesingovernmenteconomicpolicy
Therateoftechnologicalchange
Changesintheexchangerate:realappreciation/real
depreciation
AdaptingtoStructuralChange
AssistancetoIndustry
newtechnology
increasedexports
closedownandleavetheindustrye.g.steelandcars
AssistancetoLabourandCommunities
incomesupport,retraining/reskillingandrelocation
regionalemploymentprogrammes
SectionIIIRubric
Inyouransweryouwillbeassessedonhowwellyou:
Demonstrateknowledgeandunderstandingrelevant
tothequestion
Usetheinformationprovided
Applyrelevanteconomicterms,concepts,
relationshipsandtheory
Presentasustained,logicalandcohesiveresponse
Question26 2012
Analyse theimpactofchangesintheglobaleconomy
onthestructureofindustryintheAustralian
economy.Inyourresponse,youshouldrefertothe
economicinformationprovided.
Question26 Introduction
Definekeytermssuchastheglobaleconomy andthe
structureofindustry.Perhapsintroducetheconceptof
structuralchange.
Analysethemainchangesintheglobaleconomythathave
impactedonthestructureofAustralianindustry:
Chinascontinuinggrowthanddevelopmentanddemandfor
resourcesalongwiththeriseofEastAsia
TheminingboomandstrongglobaldemandforAustralian
commodities
Theappreciationoftheexchangerateandcontinuinginflows
offoreigncapital
AnalysetheimpactofchangesintheglobaleconomyonthestructureofindustryintheAustralianeconomyin
termsofthesharesofGDP,employment,exportsandinvestmentaccountedforbyagriculture,mining,
manufacturingandservices.
Changesintheglobaleconomysuchastheglobalresourcesboombetween2003and2007ledtorising
commoditypricesandliftedthetermsoftradetorecordhighs.Thisresultedinasignificantappreciationofthe
Australiandollarincurrencymarkets.Themorerecentsecondphaseoftheresourcesboomhasledtorecord
levelsofcapitalinflowmainlyconsistingofdirectandportfolioinvestmentintheminingandresourcessector
oftheeconomy.ThishasunderpinnedstrongforeigninvestmentandledtoappreciationoftheAustralian
dollartorecordhighs.
ThesharesofGDPchangeddramaticallyforagriculture(3.2%to2.8%),manufacturing(15%to9.5%)and
mining(5%to9.5%)between1991and2011.Thisreflectedaloss ofcompetitivenessofagriculturaland
manufacturedexportsduetothehighexchangerate,andthestrongdemandforminingexportssourcedfrom
fastgrowingeconomiessuchasChina,India,theNIEsandASEAN.
Intermsofexports theimpactofthesechangesintheglobaleconomyhavebeenjustasprofoundwithmining
accountingfor54.4%ofexportsin2011comparedtoafallintheexportshareofmanufacturingfrom16.5%in
200506to13.0%in200910.Employment shareshavenotchangedasdramaticallyalthoughmanufacturingnow
accountsforonly8.5%ofthetotal,andservicesamassive86.4%.Mostofthegrowthinemploymenthas
occurredinservicesattheexpenseofmanufacturingwhichhaslostemploymentduetotheincreased
competitivenessoflowcostoverseasproducerssuchasChinaand India.Structuralchangehasoccurredinthe
Australianeconomywithlabourandcapitalresourcesbeingreallocatedfromnonminingstatestomining
states.
Themajorchangesintheglobaleconomythathaveimpactedonthestructureof
industryintheAustralianeconomyhavebeen:
ChinasgrowthandtheglobalresourcesboomshaveseenanincreasedshareofGDP,
employment,exportsandinvestmentaccountedforbytheminingsector
Theappreciationoftheexchangeratehasreducedthecompetitivenessofsome
manufactured(cars,clothesandsteel)andserviceexports(tourismandeducation)
Continuingforeigndirectandportfolioinvestmentintheresourcessectorandmining
industryinparticular
Therehasbeenareallocationofresourcesincludinglabourand capitalawayfromnon
miningstatestominingstates
NotesfromtheMarking
Centre
Inbetterresponses,candidateswrotecomprehensivelyontherelationshipbetweenthe
changesintheglobaleconomyanditsimpactonthestructureof industryinthe
Australianeconomy.Inbetterresponses,candidatesalsointegratedeconomictheory
withboththestimulusmaterialandtheirowndata,andconsideredthefourmain
sectorsoftheAustralianeconomy,agriculture,mining,manufacturingandservicesin
somedetail.Inaddition,betterresponseswerewellstructuredandsustained;they
oftenincludedkeydefinitionsandcorrectlyexplaineddiagrams.Thesecandidates
madeclearlinksinaspecificmannerratherthaninageneralisedway.
Inweakerresponses,candidatestendedtobemoredescriptiveandgeneralinnature.
Theyfocusedondescribingtheimpactofsomechangesintheglobaleconomy,but
withminimallinkagetotheireffectsonthestructureofindustryintheAustralian
economy.Theseresponsestypicallyincludedsomepoorlydrawndiagrams(tariffs;
subsidies,exchangerates,etc)thatwerenotlinkedcorrectlytothequestion.Inweaker
responses,candidatescommonlymadelimiteduseofstatistics,eitherfromthe
stimulusortheirownknowledge.Theyalsoprovidedlimitedexamplesthatdirectly
linkedtheimpactofchangesintheglobaleconomyonthestructureoftheAustralian
economy.Inmanyinstances,candidatessimplychosetorewriteorcopyoutpartsof
thestimuluswithoutdemonstratinganyclearunderstandingoftherelationships
involved.