Industry-Innovation-and-Competitiveness-Agenda

Chart 5: Overseas investment
2,500
2,000
A$billion
(2011-12)
Foreign investment in
Australia
2,500
2,000
also has an abundance of agricultural
land spanning tropical, sub tropical and
temperate farming zones, the ability to
supply northern hemisphere markets
during their off season and a reputation
for high quality, safe food products.
1,500
1,000
1,500
1,000
Australia’s success also stems from our
proud history of making the hard decisions
to reform our economy. In the early 1970s,
the Australian economy was volatile, insular
500
and inflexible. Today, thanks to the hard
Australian 500
won reforms of the decades that followed,
investment
overseas Australia’s economy is more stable, open
0
0
and flexible. Australia floated the dollar,
1984 1994 2004 2014
introduced independent monetary policy,
Note: Deflated by Consumer Price Index
Data Sources: ABS, 2014d; ABS, 2014e.
deregulated the financial and wage-setting
systems and reduced tariff and non-tariff
trade barriers. Former governments increased competition through the National Competition
Policy, privatised public assets like Telstra and the Commonwealth Bank, and reformed the tax
base through cutting company and personal tax rates and introducing the Goods and Services
Tax. These reforms enabled Australia to seize opportunities as they arose.
The triumph of Australia’s resources sector is Chart 6: Terms of trade booms and inflation
a testament to the benefits of the economic
Per cent (yoy)
reforms of the past. The expansion of the 35
1970s 2000s
sector is well known, although the scale is 30
Wages
sometimes not appreciated. In the decade 25 (yoy)
to 2012-13, non-rural commodity prices rose
20
around 120 per cent, resources investment
surged from $18 billion to $113 billion,
the resources sector workforce trebled to
over 260,000 people and export volumes
increased by more than half (ABS, 2014b;
2014d; 2014e; 2014j; RBA, 2014a). This
expansion created stresses within the
economy, particularly in trade-exposed
15
10
5
0
-5
-10
90-day bill
interest rate
(level)
CPI (yoy)
sectors, through its effects on domestic
-3 -2 -1 0 1 2 3 -3 -2 -1 0 1 2 3
costs and the exchange rate. However, other
sectors benefited from the boom. Parts
Years from terms of trade peak
Data Sources: ABS, 2014c; RBA, 2014b; RBA, 2014c.
Industry Innovation and Competitiveness Agenda
35
30
25
20
15
10
5
0
-5
-10
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In
Co
THE CASE FOR REFORM
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