Australia is the world's biggest island and the sixth-largest nation on earth. It has a population of approximately 21 million. Australia has a democratic society with a stable and competitive economy. Australia's economy has been growing every year for the last 20 years. Each year more than $50 billion is invested in private businesses in Australia (Koch 1998). The factors that contribute to the stability of Australia's economy are the diversity of its economy, sound regulatory environment, availability of highly skilled labor, excellent infrastructure and its proximity to Asia Pacific Markets. Australia's international competitiveness not only affects international trade but also the national production hence employment and income. A decrease in competiveness will make the goods and services that are produced in Australia to find difficulty in getting markets at home and internationally. In the past decade Australia's international competitiveness have fluctuated widely.
Australian Manufacturing Industry has been consistent in terms of performance for the past few years. It reached its peak in the last one year. Job openings reached a record of 40,000 last year (Jacobs & Chase 2011). The rise has been attained due to the recent investments especially in the areas of research and development. The future of Australian Manufacturing Industry is thus very bright. The goods consumed by the Australians are provided by the Australian industry. Australian Manufacturing Industry has to survive through harsh competition industrious Nations like China and India. Australian industry achieves this by manufacturing standard products with respect to industry requirements and incorporatin latest techniques to improve on quality of products. Every effort has been made in investing in the IT sector, which also enhances quality production.
The other aspect that has contributed so much in the success of Australian Manufacturing Industry is the efficient communication system. Constant and reliable communication within and abroad keeps the industry informed particularly on the prevailing market conditions overseas. The success that the Australian Manufacturing Industry is enjoying currently is due to the strategies that were laid down more than 30 years ago. (Cachon &Terwiesch 2006)In the last 30 years, Australian industry policy has gone through major changes. High tariffs that were imposed to protect manufacturing industries have reduced significantly. The tariffs have reduced from above 30% to less than 5%. This caused Australia to move a long way towards attaining the Asia-Pacific Economic Cooperation (APEC) goals.
APEC requires that there be a free trade access to developed nations. So far trade liberation supporters consider the protection debate a non- issue because of the great improvements already achieved. However, a critical observation of protection in Australia still makes it a controversial issue. Stakeholders argue that barrier protection and industry policy in general should be treated as dynamic policy issues. The government still assists manufacturing industry significantly. Last year, the government contributed more than $ 3.5 billion in the manufacturing industry(Koch 1998. The assistance is unequally distributed with approximately 40 % directed on textile, clothing and footwear (TCF).
Australia has improved substantially, its Tariff level is catching up with those in US, EU, and Japan. Policy makers are currently diverting their attentions from the tariffs and searching for other options of achieving industry policy objectives. The alternative tools that have been suggested include non-tariff barriers, assistance through the budget and anti dumping actions. Of these three, the anti-dumping measures are being applied more. State aid or as often called, public support for industry was at the highest in the 90's but gradually declined in the recent years. Currently, budget assistance is at 2.3 % of value added in Australian manufacturing. This is the cause of the new interest in rural Australia.
Trade liberalization in Australia has been a slow and sensitive process. The process can easily run off the rail if not managed properly. The tariff board played a significant role in negotiating with the government assist in implementing industry measures. The government thus demonstrated that a major structural change could be facilitated particularly if supported by major players. This calls for measures to be developed to create a working partnership between industry and government. The government has finally realized the impact of industry policy on economic and social context. Australian industry has been opened to enhance its global competitiveness. With the declining tariffs, the government is committed to supporting industry through the budget. In this role, it will facilitate reforms in the private sector. Apart from this, the government is also committed to facilitating education, best practice in the industry and innovation.
There are a number of ways of setting a business in Australia. They include forming a company, establishing a partnership, trusts and joint ventures. There are two ways of establishing a company. This is by either incorporation or acquisition. A foreign company can create a branch in Australia through registration as a foreign company. Companies have limited liability but a financier may request shareholder or directors to be the personal guarantors. A company is required to submit its reports of performance and financial position each year to the Australian Securities and Investment Commission (ASIC) (Goldratt & Cox 1992).
Any interested investor can request for detailed information on how to establish a company in Australia from the ASIC. Two individuals or more can form a partnership. Similarly, two companies or more can unite and form a partnership. While forming a partnership the parties involved need to register with the department of commerce. They must come up with a name, which does not reflect the name of any individual partner. Partners are jointly and equally liable because all companies are separate legal entities. Each partner gets an equal share of profit and tax is calculated accordingly. Finally, partners should remit a group tax annually.
Australia boasts an excellent service sector that has skilled and multilingual personnel. The political system is liberal and stable backed by a strong economy. The proximity of Australia to the key financial markets of Asia makes it a great business environment. Up to 70 % of Australians economic activities is related to the service or tertiary economy. The major industries are the banking, insurance, media, entertainment industries, retail and tourism. Services provided by the government are education, health and welfare. The third largest sector in Australian Economy is finance and insurance.
These two generate approximately 8 % of real gross value. The growth rate of the two industries is maintained at 5% in the lat two years. This is a reflection of the strength of the service-based industry. One of the major drivers of Australian financial services sector is the increase in investment funds. The sector boasts a total asset fund pool of more than $ 1.4 trillion and is the forth largest internationally. Since 1992, Australia has had a growth rate of more than 12 % per annum. Estimations projects that the investment fund pool will exceed $ 2.5 trillion before 2015 (Goldratt & Cox 1992)
The competitiveness of Australia's goods and services depend on a number of factors. The important factors being the Australia's unit labor cost, the relative price, which has the major effect and value of currency in relation to currencies of the nations trading partners. In the last two years, there has been marginal change in Australia's real unit labor cost consequently leading to insignificant impact on international competitiveness of Australia. The Australian dollar thus continues to be stronger against most of its trading partners. This has caused reduction in the competitiveness of Australia's Exports. Statistical indicators of global competitiveness are also based on price measures.
Trade-weighted exchange rate
Trade-weighted exchange rate index is used in measuring the changes in the worth of Australian dollars in relation to that of its major trading partners. The main nations being those whose currencies make up 90 % of Australia trade. The weights of exchange rates are based on proportion of two-way trade that individual nations account for. For illustration, the weight of the United States dollar is approximately 15% and that of the Japanese Yen is about 17 % (Goldratt & Cox 1992). Measuring the competitiveness of Australia's can be calculated in many ways.
The first method is based on changes in domestic prices with respect to those of competitor states. If all other factors are constant, a country is said to be more competitive if its prices increase slowly compared to those of its competitors. The second method is to consider exchange rate movements. If we assume that all other things are equal, a country is more competitive if the worth of its currency reduces in relation to that of its competitors. This is called depreciation in the nominal exchange rate. Various values of Real unit labor costs and the trade-weighted exchange rate are shown in the graph below
In the decade 1992-2002, the Australian dollar fell slightly relative to the US dollar. It fell to approximately 0.7 %. Compared to the UK pound the fall was about 12 %, which is more significant. The Australian dollar however appreciated in relation to other trading partners like Japan. The increase against the Japanese Yen was almost 12 %.
Factors influencing change
The competitiveness of Australia is the outcome of many interconnected factors. The important factors are the technological advancement and improvement in productivity. Movement in Australian wages against the wages in other nations influences these two factors greatly. Movement in labor productivity compared to those in other nations also influences them to a given degree and finally, changes in exchange rates of currencies of other nations with respect to Australian dollar.
The interaction and openness of Australia's economy with the global economy provide great benefit to Australians. If imports come in from other Nations it means that, the citizens of Australia will have a wider variety of goods at more competitive prices (Koch 1998). International trade and investment by foreigners provide Australian businesses with access to new technologies, which causes improvements in productivity. Competition that the imports give to domestic goods also prompts efficiencies and greater innovation in Australia. Thus in analyzing Australian openness two important factors come into play, the first one is imported goods and services. The other is investment by foreigners that flow in Australia(Chopra & Meindi 2004).
We can analyze the openness of Australia in two ways. We can base our consideration on the oversea trade and investment and their influence in the economy. Alternatively, we can base our examination on the barriers that Australia puts on trade and investment that flow in her. for illustration, how much tarrifs or quotas are imposed on imports or how much does Australia restrict foreigners from owning property and land within her borders. These measures are placed in order to assist industries. However, measures put to act as barriers to investment are more difficult to summarize as a single indicator.
Goods and services that are imported in Australia are important when analyzing aspects of progress. Analysts use the amount of imported goods and services in calculating the rate of progress (Koch 1998). Openness gives citizens a wider variety of goods and services. The ratio of imports to the total sales made in the economy is thus an indicator of openness. The graph below shows the ratio of imports to the gross domestic product (GDP).
During the same period, the ratio of imports to GDP increased from 18.6% to aver 22%.
Other factors apart from the openness of the economy affect these indicators. These include fluctuation in the exchange rate of Australian dollar, nominal value of industrial equipment and varying tastes of domestic consumers. Foreign investments in Australia are another important aspect of openness. Those that flow in Australia provide funds for capital formation; provide local businesses with opportunity of accessing new technology and management skills.
Assets that Australians own
Australia's total assets have been stable over the past decade. There has been an increase in financial assets and non-produced assets. The significant assets include land, which constitute up to 28%, buildings and structures forming 19%, machinery and equipment 9% and financial assets outside Australia constituting 12%(Chopra & Meindi 2004). Changes that occur on Australia's net worth is the result of fluctuations in the assets and liabilities. Between 2003 and 2004, the net worth per capita rose at an annual rate of 0.6%. Australia's real asset per capita rose at 1.8%, the growth was upset by capital liabilities whose rise was more significantly, it grew by 6.5%. Nonetheless, this is insignificant as the total value of assets in 2003 was four times that of liabilities. The table below shows the key assets and liabilities.