Economic history of Australia

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This article is part of the series
History of Australia

Prehistory

This article is a brief timeline of the economic history of Australia.

1 > 1850
2 1850 > 1860
3 1860 - 1875
4 1875 - 1880
5 1880 - 1890
6 1890 - 1900
7 1900 - 1939
8 1939 - 1974
9 1974 - present

[edit] > 1850

Before 1850, Australian economic development was almost entirely based on the production of wool. As more land became settled and occupied, pastoral businesses were established that provided the major portion of economic expansion.

[edit] 1850 > 1860

The discovery of gold in 1851 changed the direction of the Australian economy. The discovery led to increased immigration, which put a burden on the gold supply. This in turn led to the resumption of wool as the principal provider of economic growth by 1860. Actual estimates of populations of the time indicate that the population of 400,000 at the start of the decade increased to 1,000,000 by 1860.

The Australian government started a "development strategy" by issuing bonds to the London market, selling public land and using this to fund infrastructure.

[edit] 1860 - 1875

Due to the increases in income attributable to the “Gold rush”, manufacturing and construction sectors of the economy fared very well.

[edit] 1875 - 1880

As fertile land became less available to settlers, pastoral industries continued to increase their land holdings for the use of wool production. This caused a retraction in returns on investment by pastoral companies. Even when poorer land was utilized for the purpose of wool production there was continued investment both from private backers, and governments (in the form of transportation infrastructure).

[edit] 1880 - 1890

An investment boom in Australia in this decade saw increased economic expansion despite the fact that the investments were providing less of a return per dollar spent on investment. This can be attributed to foreign funds becoming more available to Australia. This influx of capital led to Australians experiencing the highest per capita incomes in the world during the late nineteenth century. However, by the end of the decade 1880-1890, overseas investors became more concerned with the difference between expected returns and actual returns on Australian investment and withdrew further funding. Consequently Australia saw the start of a severe depression starting in 1890. Australian economic historian Noel Butlin would later argue that the history of Australian settlement has been one of growth financed by foreign capital, punctuated by depression caused by balance of payments crises after a collapse in commodity prices and exacerbated by the imprudent use of capital.

[edit] 1890 - 1900

[edit] 1900 - 1939

While wool-growing remained at the centre of economic activity, a variety of new goods such as wheat, dairy and other agriculturally based produce became a part of the Australian export repertoire. It was in this period that the latter started contributing more to economic growth than wool production. Part of this emergence of other sources of economic expansion came from technological progress, such as disease-resistant wheat and refrigerated shipping. It was also the development of this technology that renewed large-scale foreign investment.

This injection of foreign investment led to increases in construction, particularly in the private residential sector. The fact that this injection of foreign cash was the main contributor to economic expansion was again troublesome for Australia’s economy. Returns on investments, as before, were immensely different from expected returns. By the 1920s agricultural producers were experiencing profitability troubles and governments, who invested heavily on transportation infrastructure, were not getting the returns they expected. Cutbacks in borrowing, government and private expenditure in the late 1920s led to a recession. The recession itself became worse as internationally nations fell into depressions which not only cut back on foreign investments to Australia, but also led to a lower demand for Australian exports. This culminated into the biggest recession in Australia’s history which peaked in 1931-1932.

The recession was not felt as badly in Australia as compared to its international counterparts, due to the increases in productivity from the manufacturing sector. (In William Sinclair[1]'s terms[2], this is where we moved from the old model to the new model.) Trade protection, particularly from tariffs implemented by governments at the time were instrumental to the prosperity of the manufacturing sector.

[edit] 1939 - 1974

From the beginning of the Second World War until the 1970s, Australia experienced a period of maintained economic expansion which is now known as the “long boom”. This period was marked by large increases in the Australian population (by 80%) and little, if any, economic fluctuation. Despite the huge increases in the Australian population, GDP per capita still grew strongly. It is significant that during this period, the standard of living, as measured by GDP per capita, literally doubled. As mentioned earlier, the 1920s started an increase in manufacturing as a more important factor in Australian economic expansion. The Second World War gave a significant boost to this sector.

The highest growth in the manufacturing sector was found in the period after the end of the Second World War. Import restrictions implemented by the government of the time led to increased profits to the manufacturing industry, which encompassed a wide range of industries including motor vehicles, metal processing, textiles, clothing, footwear and chemicals. The impetus, for the most part, was U.S. investment in Australia. The manufacturing industry was bolstered only to serve the domestic market, led by economic policy makers who implemented “import replacement” strategies. This was afforded by continuing increases in both productivity and economic protection.

In the 1950s and 1960s, Australian manufacturers which were nurtured by government policy failed to increase productivity. This was highlighted by the increases in the productivity of overseas manufacturing who did not have the same level of protection as Australian producers. Foreign investors noticed this lack of competitiveness and investment declined in the manufacturing sector.

Economic growth was not hampered by this, as the development of mining initiatives to exploit Australia’s natural resources attracted foreign investment, which underpinned economic expansion. This establishment of a mining industry continued the high level of economic growth in the post-war period.

1974 was the end of the ‘long boom’. While these years were called the “golden years” in Australian economic development, they primarily had an artificial basis through the use of tariffs and other protectionism. The growth itself was unsustainable.

[edit] 1974 - present

The Australian Stock Exchange Limited (ASX) was formed in 1987 through the amalgamation of six independent stock exchanges that formerly operated in the state capitals. Each of those exchanges had a history of share trading dating back to the 19th century.

Deregulation of the Australian government started under the Hawke and Keating Labor government. Tariffs were progressively cut, the Australian Dollar was floated in 1983 and government run enterprises from the Commonwealth Serum Laboratories to Qantas were privatised. The Howard government continued with even more controversial reforms, including establishing a Goods and Services Tax and deregulating labor markets. The Australian economy enjoyed healthy growth from 1996, partially due to the reforms from the different governments, and partially due to a boom in commodity prices.

This is a chart of trend of gross domestic product of Australia at market prices estimated by the International Monetary Fund with figures in millions of Australian Dollars.

Year	Gross Domestic Product	US Dollar Exchange	Inflation Index (2000=100)
1980	140,987	0.87 Australian Dollars	36
1985	245,596	1.42 Australian Dollars	54
1990	407,307	1.27 Australian Dollars	80
1995	500,458	1.34 Australian Dollars	90
2000	669,779	1.71 Australian Dollars	100
2005	926,880	1.30 Australian Dollars	116