The elimination of economic protection in Australia

Essay by davo22High School, 11th gradeA-, July 2004

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Historically, Australia has been one of the most highly protected countries on earth. Australia uses protection in order to keep its young, relatively inefficient industries competitive on a global stage. There are 3 main types of protection used in Australia; these include tariffs, import quotas, and subsidies. Only over the past 30 years has Australia begun to reduce protection levels, first starting with the Whitlam government in 1974. The gradual reduction of protection in Australia will bring many long-term benefits, but will also cause short-term implications for businesses, individuals, and the government. The elimination of protection has also caused economic structural change. Australia's future in the global economy is expected to prosper with the reduction in protection. Australia's current situation is a transition from a highly-protected economy to one of free global trade.

Australia is still a young country, and thus its industries are also young and relatively inefficient - due to our geographical isolation and our youth, our industries have not yet experienced competition which will force them to be efficient.

In order for our domestic industries to hold any global market share, they must be able to compete with international competitors, most of which hold significant advantage over Australia (e.g. China has very low wage costs) To protect domestic producers, the Australian government used 3 incentives known as tariffs, quotas, and subsidies. Tariffs involve putting a tax on imports, so international competition that wishes to export to Australia must do so at a higher price to cover their tax costs, hence allowing local industry to compete easier. Quotas involve the setting of a maximum number of imports allowed into the country, thus reducing supply from overseas allowing domestic producers to meet or exceed that supply and hence be more competitive. Subsidies involve the government...