Impact of Globalisation on Australia

What is globalisation?

The growing integration of national economies through trade, finance, investment, technology and labour.

What are the facilitators of globalisation (TFFIT)?

(1) Trade flows (2) Financial flows (3) FDI and TNCs (4) International division of labour (5) Technology, transport and communication

What are the impacts of globalisation on Australia (essay structure)?

(1) Economic growth: trade flows, financial flows, division of labour, contagion (2) Unemployment / structural change (3) Inflation (4) Inequality (5) Environment

Growth via trade flows: theory and stats?

Specialisation raises TE and AE, shifting AS right; 28 years without recession (1991–2020), a record among advanced economies; unemployment ~11% (1992–93) → ~5% (2019)

Growth via financial flows: theory and stats?

Foreign capital funds the S–I gap; mining investment peaked ~8% of GDP (2012–13) in MBII, largely foreign-funded; new LNG and iron ore capacity helped deliver a record $41.5b quarterly BOGS surplus (June 2022), though NPY outflows rose

Growth via international division of labour: theory and stats?

Skilled migration fills shortages and raises AS; net overseas migration record ~536,000 (2022–23); unemployment ~3.5% (2022); but added to housing and infrastructure pressure

Contagion: theory and stats?

Integration transmits downturns through trade, finance and confidence; GFC: GDP fell in only one quarter (Dec 2008), unemployment peaked ~5.9% (2009), softened by stimulus, a falling AUD and Chinese demand; COVID: GDP −6.3% y/y (June qtr 2020), first recession since 1991

Structural change and unemployment: theory and stats?

Import competition shrinks uncompetitive sectors (structural unemployment, hysteresis risk); manufacturing ~25% of GDP (1960s) → ~5–6%; services over 70% of activity†; car closures ~50,000 jobs (2016–17)†

Inflation: theory and stats?

Cheap Asian imports and competition hold prices down; inflation ~10% (early 1980s) → ~2.5% average (1993–2019)† (inflation targeting also credited); but globalisation imports inflation too: 7.8% (2022), 4.0% (2026)

Inequality: theory and stats?

Gains flow to capital owners and skilled workers; top 1% income share ~4.5% (early 1980s) → ~9% (mid-2000s) (Atkinson and Leigh, 2007)†; top 20% hold ~63% of wealth (ABS, 2017–18)

Environment: theory and stats?

Global resource demand raises emissions; Environmental Kuznets Curve (Kuznets, 1955) predicts eventual decoupling; Australia top 3 LNG and top 2 coal exporter; domestic emissions only 25% below 2005 (yr to Mar 2026)