Yeh what timmii has said is exactly what the markers are looking for. You'll be wanting to cover those 4 points he mentioned (they're straight from the syllabus too).
You could also cover the effect on the economic indicators such as globalisations effect on growth, unemployment etc.
Yeh if you wanted me to cover this meh..
Effect on growth: The deregulation of Australia's financial markets and capital markets has left Australia's growth rates more susceptible to the effects of economic problems in other countries. Because of the increased integration, Austarlia has become more vulnerable to it's trade partners' economic downturns and recessions.
An example is in 1996-1997, during the Asian financial crisis. During 1998, most asian economies such as Thailand (a major trading partner at the time) went into recession. The effect of this recession on Australia had a delayed effect but it was there in the December 1998 economic downturn when economic growth fell below 1%. This effect can be explained as the severe downturns in the Asian economies forced them to protect their vulnerable markets through tariffs, local content rules, quotas and subsidies to ensure the viability of their own markets. In effect, Australia lost many of its export markets in the process, this resulted in a lower productive capacity of Australia which in effect caused the stagnation of growth for Australia's economy.
Effect on unemployment: Since 1980, there has been a clear correlation between the reduction of tariffs and the unemployment rate. From 1990-1998, average tariffs were dropped from 7% to 5% and this saw the amount of goods exported rise from 50,000 units to 85,000 units from 1990 to 1998. This increase in production resulted in employment rising as more labour was required by Austrlaian producers.
However, in the short term, reucing protection will result in short term unemployment in inefficient industries. This comes as a result of inefficient Australian industries being exposed to competitive more efficient products of the world market. This causes demand for inefficient Austrlaian industries products to fall and causes them to go out of business.
This is a weak argument however, as we will only see short term unemployment fall. In the longer term, resources will be redirected to more efficient industries where a comparitive advantage is evident, resulting in more efficient industries and therefore more unemployment.
Effect of globalisation on Government policy: I've already stated that in 1990, the units of goods imported rose from 50,000 to 85,000 in 1998. Well this massive increase in the amount of goods exported, coupled with the floating of the exchange rate in 1983 led the Australian government to adopt the policies set out in the Washington concensus. In 1983, the Keating government adopted the following policies: fiscal discipline (moving from deficit to surplus), trade liberalisation, privatisation of government owned enterprises to increase their efficiency, selling of the national bank, deregulation of the financial system (fancy way of saying they floated the exchange rate in '83).
Effect on the distribution of wealth and income: in 1968, the average tariffs were at 36% and at this time the gini coefficient (index that gives an indication to the level of income distribution inequality) was 0.66. In 1997, the average tariff rate was 4.4% and the gini coefficient had drastically fallen to 0.47 so clearly the effect of globalisation in freeing up protection on trade resulted in this decline of the gini coefficient from 0.66 to 0.47.
Hope this helps you out.
