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CHARLES STURT UNIVERSITYFaculty of Education
How Australias modern economy has been shaped
STUDENT: Nathan Carter
STUDENT ID: 11208789
SUBJECT: EEP440 VET in the economy and society
ASSIGNMENT: 1
COURSE: Graduate Diploma in Vocational Education and Training
Spring Session 2006
NOTES:
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Table of Contents
Introduction...........................................................................................................1
A globalised Australian economy...........................................................................1
What has influenced these changes?.................................................................4
How far can and should VET respond to the globalisation challenges?..............5
Economic change through Labour Market deregulation........................................6
What has influenced these changes?.................................................................8
How far can and should the VET system respond to the deregulated labour
market?..............................................................................................................8
Conclusion.............................................................................................................8
Bibliography.........................................................................................................10
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How Australias modern economy has been shaped
Introduction
Over the past 25 years, the economy in Australia has undergone massive
transformations in order to make it open and less regulated. This paper will
explore two of those changes the shift towards a globally centred economy and
the deregulation of the labour market. Each change will be discussed and
followed by a discussion of what drove the change and how the VET system
should respond.
A globalised Australian economy
Mitchell & Bessanese (2003) argue that the Hawke-Keating governments, which
held power in Australia from 1983 until 1996 changed the Australian economyforever when they opened it up to international competition. I would argue that
this transformation heralded the beginning of globalisation in Australia.
While the precise definition of globalisation remains disputed, I agree with Holm
& Sorensen (in Snarr,2005:2)that globalisation is the intensification of
economic, political, social and cultural relations across borders. In the realm of
economics, this means that a globalised economy has the ability to trade labour,
resources and capital relatively freely.
Those supporting globalisation claim it will make the most efficient use of
resources, spread wealth and foster peace through international co-operation
and interdependence (World Bank, 2001; Moon, 2005).
Those opposing globalisation claim the opposite is happening. They believe the
only ones to benefit from the globalisation process are capitalists, who are
getting richer while the poor are getting poorer (Snarr, 2005; Moon, 2005; WTO,
2006).
This brings us to the question. If the Hawke-Keating governments began the
transformation to globalisation in Australia just how did they do it?
Australia had long been part of the international economy as an exporter of
primary materials, whose prices were largely set by international markets(McEachern, 1991). Another large sector in the Australian economy
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manufacturing had also long been built upon foreign investment (for example,
the automotive industry) protected by high import tariffs.
Following the oil crisis of the late 1970s, governments form both ends of the
political spectrum began to realise that Australias economy had to be
restructured in an effort to make it competitive internationally (McEachern,
1991). Unfortunately little was done in this regard until the election of the Hawke
government in 1983.
Despite typically being seen as socialist, the Labor party began to dismantle
international barriers in much the same way as the conservative Thatcher
government of the United Kingdom. Most of this dismantling came in the form of
deregulation, privatisation and the introduction of competition. It could be said
that the Hawke-Keating governments were the first to embark on the creation of
a global economy in Australia.
The first move towards a open economy in Australia came in late 1983 when the
Australian dollar was floated on international currency markets, ending the
system where it was centrally controlled by the federal government (Taylor,
1993).
This was the first of a number of initiatives to dismantle Australias centrally
planned economy, public ownership and financial regulation (Kitney, 2003) all
characteristic of a globally centred economy.
The reform that followed was that of financial deregulation. Prior to the change,
Australias banking system was grossly inefficient and ignored international
competition. Major bankers in Australia seemed to be interested only in gaining
increased market share with little regard to anything else. Following
deregulation, banks found themselves in a climate of renewed competition and
had to only provide credit to profitable sectors of the economy at a lower overall
cost (Mitchell & Bassanese, 2003).
These two reforms, which had already subjected parts of the Australian economy
to international forces were followed by a decrease in average trade tariffs,
further opening the Australian economy to global competition (Willis, 2003).
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Industries within Australia which had primarily been competing domestically,
found themselves in an environment where they were forced to compete on the
global stage. Australian companies had to increase efficiency to compete with
lower-priced imports. Australian companies began to learn the hard lessons of
the market economy that how and where resources are used depends on
consumer demand (Moon, 2005; Edwards, 2002).
At the same time, deregulation proceeded to reduce government interference in
most sectors of the economy in order to foster international trade and
investment.
These changes can best be seen within the airline industry, where long standing
policies allowing only two airlines to operate in Australia and protection of
QANTAS international routes were abolished (Davies, 2003).
Increased competition within the Australian economy presented yet another
interesting problem for the government how to achieve the same efficiencies
within government owned enterprises? Australia followed the UKs lead by
subjecting them to privatisation and increased competition.
The government sold its international airline QANTAS and the Commonwealth
Bank. The federally owned telecommunications company (then Telecom) as well
as other public utilities were subjected to competition. It was thought that this
process would reduce government interference in markets and create a more
efficient public sector.
Seeing competition as beneficial to the way the government operates, a National
Competition Policy was introduced in 1995. The NCP subjected the public sector
to the same market power and price fixing rules as the private sector. No longer
were public monopolies protected. Private companies were given the opportunity
to compete directly with their publically owned competitors and given equal
access to infrastructure (NCC, 2006).
With globalisation, Australian consumers have also seen a shift towards
international standardisation. Companies now produce the same goods for many
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different markets. The location goods are produced depends on the value the
company gets from its resources. This trend is most evident when we walk into a
fast-food restaurant such as McDonalds. The Big Mac we are getting in Australia
is the same as the one someone is getting in the United States. We can also
know that with other industries following suit, we can purchase a Ford Focus in
Germany which is virtually the same as the one available in Australia.
Reduced import tariffs have also caused a shift in corporate sourcing habits.
Many industries now produce goods in a few countries, but source or produce
components for these goods in another. The Australian car industry provides us
with one such example. Companies often produce engines in a different country
to where the cars body is built. This allows for economies of scale by having a
dedicated engine plant servicing a number of body plants. We also see
manufacturers sourcing components which are difficult or too expensive to
produce themselves from other countries where they can be made for a fraction
of the price (Uhlmann & Dawson, 2006).
This aspect of globalisation presents problems for Australia. How can our workers
compete when countries such as China have labour available for $30 per month?
(Uhlmann & Dawson, 2006) What will happen if our industries can not competeinternationally? Where should Australia be concentrating its resources?
In order for Australia to be successful in the global economy, it needs to build
upon its strengths and reduce its weaknesses (allowing our weaknesses to be
serviced by someone else).
What has influenced these changes?
The economic changes surrounding the change to a global economy in Australia
have been primarily influenced by the Australian government itself. While the oil
crisis and subsequent recession of the 1980s showed that Australia needed to
compete internationally, it was the government which drove the economy
towards internationalisation.
Australias richest economic sector has traditionally been the primary industries
which had long been subject to international markets. The prices our producers
received for their goods was largely set by markets outside of Australia itself.
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Following the 1970s oil crisis it was obvious that Australia had to change its
economy radically in order to remain competitive (McEachern, 1991).
I would argue that the government most likely saw the success of the primary
resources sector as riding upon the variability of world markers and decided to
open the entire economy up to these potential benefits.
What followed were structures that set Australia up to compete in the global
economy. Australia could not export goods internationally while retaining the
protectionist regimes which restricted imports. At the same time, Australia had
to encourage foreign investment in order to grow. To get this investment into the
country, the economy had to be seen as a place of opportunity, be open and
competitive.
How far can and should VET respond to the globalisation challenges?
The VET system in Australia is in a unique position at present. Despite being
seen by many as a system which prepares the working-class for work (Anderson,
Brown & Rushbrook, 2004), the VET system is in the position to respond to
changes in the make up of Australias workforce due to its flexibility.
As industries in which Australia competes in changes, so do the training and
education needs of the general population. To do this, we need a system which
can readily adapt to change.
The VET system needs to identify potential opportunities and encourage training
in these opportunity areas. This will help Australia exploit new opportunities
and compete within them. Certain industries will decline, while others emerge.
To be competitive, Australia needs to identify the emerging industries in which it
can be competitive and invest in the human capital to them. To do this may
require radical change, something only the VET system may be able to adapt to.
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Economic change through Labour Market deregulation
While the deregulation of the Australian labour market could be seen as part of
the shift towards a globally-centred economy in Australia, I feel that the topic
deserves its own consideration.
Throughout Australian history industrial relations have played an important part
in our economy and politics (Pickersgill, 2006; Wikipedia, 2006a). Australians
were the first to successfully campaign for a eight hour working day and the first
to elect a labour government. The influences of industrial relations can be seen
in the regulatory structures which characterised the Australian industrialrelations system until recently.
In the years leading up to the recent industrial relations changes, Australia and
New Zealand had a unique industrial relations system which centred on
government provided arbitration (Pickersgill, 2006; MacIntyre in Campbell &
Brosnan, 1999:2). Throughout the rest of the developed world, governments
supported a system of bargaining centred around legislated minimum
requirements, but did not provide any means for arbitration when these
negotiations failed.
The system seen in Australasia pivoted heavily on industrial awards legally
binding contracts between employers and their employees. Awards specified the
minimum standards for workers and were arbitrated or certified before industrial
tribunals (Pickersgill, 2006; Campbell & Brosnan, 1999).
As international dependence increases, it has been said that traditional industrial
relations systems are failing (Macdonald, 1997). Campbell & Brosnan (1999)
support this assessment and claim that in order to remain competitive, nations
must foster a flexible workforce.
While the Howard governments Workchoices legislation is seen as the most
radical changes in Australian industrial relations history (Pickersgill, 2006), the
Australian labour market has been changing progressively since the late 1980s.
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According to Campbell & Brosnan (1999), the Hawke-Keating governments
began modifying the industrial relations system in Australia by encouraging a
shift from collective bargaining (affecting all companies in an industry) to
enterprise bargaining (Wooden, 2000). This shift was mirrored throughout the
developed world in the late 1980s, driven by the belief that economic
environments were varied and affected individual enterprises in different ways
(Erickson & Kuruvilla, 1998).
This new era of industrial relations was accelerated with the election of the
Howard government in 1996. The new government reduced the number of
statutory award conditions and began encouraging individual bargaining through
Australian Workplace Agreements (AWAs). These AWAs allowed for employers to
negotiate employment terms and conditions directly with employees, reducing
the need for collective agreements (Pickersgill, 2006). Critics claimed that the
government was attempting to push employees out of the award system
(Campbell & Brosnan, 1999).
From 1996 until 2006, these AWAs were not allowed to undercut award
conditions as they were subject to a no disadvantage test. The idea was that
an employee under an AWA should not be worse off than an equivalent colleagueunder an award (Peetz, 2005).
In 2006, the government implemented its Workchoices package, which centres
on AWAs. The industrial relations system which has served Australia for many
years has been effectively dismantled. Under the new system, the number of
statutory award conditions have been reduced, unfair dismissal protection
applies only to those working for organisations with more than 100 employees,
union power is limited and industrial action is restricted (Peetz, 2005; Wikipedia,
2006b).
All corporations will be subject to the new federal system, where the Australian
Industrial Relations Commission will play a reduced role. Minimum standards will
be set by a Fair Pay Commission and agreements certified by the Office of the
Employment Advocate. The AIRC will essentially become a tribunal of last resort
when negotiations fail.
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The changes signify a shift to a deregulated labour market, where power is given
to employers. The government will play a reduced role, subjecting the system to
market forces in much the same way as the rest of the economy.
What has influenced these changes?
It is hard to identify exactly where the forces behind labour market deregulation
in Australia have come from. One could argue that it was a natural progression
from the Hawke-Keating governments opening of the Australian economy. On
the other hand, one could argue that the changes have been driven by
international market forces.
What is certain is that in the face of cheap labour from developing countries such
as India and China, Australia had to do something to make our labour market
more competitive. With deregulation working elsewhere in the economy, it would
appear logical to apply those same principles to the labour market. As capital
moves in order to take advantage of cheaper labour resources, labour is
relatively immobile, confined to a localised area (Macdonald, 1997). The
Australian labour market had to become flexible in order to provide opportunities
for its workers.
How far can and should the VET system respond to the deregulated
labour market?
As Australia and the rest of the world move to a labour system centred on
individual contracts between employers and employees (McGoldrick & Stewart,
2003), the VET system needs to ensure that its graduates have the skills needed
to negotiate. Employees who can not negotiate fair terms with their employer
are likely to be exploited.
The VET system also needs to ensure that it continues to provide additional
opportunities for workers through increased training so that they are best placed
in the flexible labour market.
Conclusion
It must be noted that these changes have changed the Australian economy for
the foreseeable future. No longer can we see our nation as an isolated island in
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the South Pacific, reliant only upon our own economy but as a responsible and
competitive player in the global market.
The key to being flexible in the global marketplace is flexibility. The Australian
economy needs to be able to adapt to the challenges that lie ahead. The Hawke-
Keating governments set Australia up for the challenge, we are now required to
continue to take it. While market economics dictate that capitalists will move
around to make best use of resources, it is clear that industries will rise and fall.
These changes will effect both our goods and services markets as well as the
labour market. In order to survive economically, we need to quickly adapt to
these changes and ensure we have the right resources when new opportunities
arise.
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