Analyse the effects of domestic and global free trade and protection policies on the Australian economy.
Australia has had a long history of protection in the manufacturing sector where tariffs and quotas have been used to shield domestic firms from direct imports competition. Much of this protection was put in place after Federation in 1901 when Australian governments used a policy of protection from imports to develop the manufacturing sector through the creation of infant industries and domestic employment. A centralized wage fixing system was also adopted to set minimum or award wages for workers in this sector. Levels of protection were increased during the great depression in the 1930s to protect domestic employment levels, with the British preferential tariff reaching over 60%. These high levels of protection from import competition for manufacturing remained in force until the early 1970s, which the effect of raising the domestic cost structure and the price of domestic and imported manufactured goods in Australia.
In 1973 the Whitlam labor government introduced a 25% ‘across the board” cut in protection to stimulate greater industry efficiency and lower the prices of imported consumer, intermediate and capital goofs. However protection was increased in the late 1970s and 1980s as domestic industries such as passenger motor vehicles, textiles, clothing and footwear, and steel were subjected to intensified import competition. These industries lobbied the government successfully for higher levels od protection. This lobbying was referred to ‘rent seeking’ behavior as industries attempted to win favorable treatment from the federal government through the
maintenance of protective assistance or increased assistance, on the grounds of higher import penetration displaying jobs in manufacturing.
The table below shows that in
RECENT AUSTRALIAN TARIFF ASSISTANCE
Estimates of protection by the productivity commission (which replaced the industry commission in 1996) indicate that there was a significant decline in measured assistance to the manufacturing and agricultural sectors between 1970-71 and 2015-16 as shown in figure 6.3. fro example, the estimated effective assistance for manufacturing was around 35% in 1970-71, whereas in the 299w it was around 5% and fell to 4.1% in 2014-15. The decline was driven in particular by the 25% across the board tariff cut of in 1973, the abolitions f tariff quotas and the board programs of tariff reductions that commenced in the late 1980s. for agriculture, the estimated effective rate of assistance was over 25% in 1970-71 yet by 2006-2007 it was around 5% and had fallen to 2.5% in 2014-15.
FIGURE 6.3
Tariffs have direct effects on the returns received by the Australian producres. Tarfffs on imported goods increase the price which these goods are sold in Australian market allow scope for domestic producers of similar products to increase their prices. Tariffs aslo increase the price of goods that are used...
