Economic history of Australia
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This article is a timeline of the economic history of Australia.
The description 'bridgehead economy' was used by one of Australia's foremost economic historians, N. G. Butlin to refer to the earliest decades of British occupation when the colony was essentially a penal institution. The main settlements were at Port Jackson (modern Sydney, 1788) in New South Wales and Hobart (1804) in what was then Van Diemen's Land (modern Tasmania).
The colony barely survived its first years and was largely neglected for much of the following quarter-century while the British government was preoccupied with the war with France. An important beginning was nevertheless made in the creation of a private economy to support the penal regime.
Above all, agriculture was established on the basis of land grants to senior officials and emancipated convicts, and limited freedoms were allowed to convicts to supply a range of goods and services. Although economic life depended heavily on the government Commissariat as a supplier of goods, money and foreign exchange, individual rights in property and labour were recognised, and private markets for both started to function.
In 1808, the recall of the New South Wales Corps, whose officers had benefited most from access to land and imported goods (thus hopelessly entangling public and private interests), coupled with the appointment of a new governor, Lachlan Macquarie, in the following year, brought about a greater separation of the private economy from the activities and interests of the colonial government. With a significant increase in the numbers transported after 1810, New South Wales' future became more secure. As laborers, craftsmen, clerks and tradesmen, many convicts possessed the skills required in the new settlements. As their terms expired, they also added permanently to the free population. Over time, this would inevitably change the colony's character.
- 1826 Nineteen Counties – limits of location established aimed to restrict ungoverned settlements
From the 1820s economic growth was based increasingly upon the production of fine wool and other rural commodities for markets in Britain and the industrializing economies of Northwestern Europe. This growth was interrupted by two major depressions during the 1840s and 1890s and stimulated in complex ways by the rich gold discoveries in Victoria in 1851, but the underlying dynamics were essentially unchanged.
At different times, the extraction of natural resources, whether maritime before the 1840s or later gold and other minerals, was also important. Agriculture, local manufacturing and construction industries expanded to meet the immediate needs of growing populations, which concentrated increasingly in the main urban centers.
The opportunities for large profits in pastoralism and mining attracted considerable amounts of British capital, while expansion generally was supported by enormous government outlays for transport, communication and urban infrastructures, which also depended heavily on British finance. As the economy expanded, large-scale immigration became necessary to satisfy the growing demand for workers, especially after the end of convict transportation to the eastern mainland in 1840.
The costs of immigration were subsidized by colonial governments, with settlers coming predominantly from the United Kingdom and bringing skills that contributed enormously to the economy's growth. All this provided the foundation for the establishment of free colonial societies. In turn, the institutions associated with these – including the rule of law, secure property rights, and stable and democratic political systems – created conditions that, on balance, fostered growth.
In addition to New South Wales, four other British colonies were established on the mainland: Western Australia (1829), South Australia (1836), Victoria (1851) and Queensland (1859). Van Diemen's Land (Tasmania after 1856) became a separate colony in 1825. From the 1850s, these colonies acquired responsible government. In 1901, they federated, creating the Commonwealth of Australia.
The process of colonial growth began with two related developments. First, in 1820, Macquarie responded to land pressure in the districts immediately surrounding Sydney by relaxing restrictions on settlement. Soon the outward movement of herdsmen seeking new pastures became uncontrollable. From the 1820s, the British authorities also encouraged private enterprise by the wholesale assignment of convicts to private employers and easy access to land.
In 1831, the principles of systematic colonization popularized by Edward Gibbon Wakefield (1796–1862) were put into practice in New South Wales with the substitution of land sales for grants in order to finance immigration. This, however, did not affect the continued outward movement of pastoralists who simply occupied land where they could find it beyond the official limits of settlement.
By 1840, they had claimed a vast swathe of territory two hundred miles in depth running from Moreton Bay in the north (the site of modern Brisbane) through the Port Phillip District (the future colony of Victoria, whose capital Melbourne was marked out in 1837) to Adelaide in South Australia. The absence of any legal title meant that these intruders became known as 'squatters' and the terms of their tenure were not finally settled until 1846 after a prolonged political struggle with the Governor of New South Wales, Sir George Gipps.
The impact of the original penal settlements on the indigenous population had been enormous. The consequences of squatting after 1820 were equally devastating as the land and natural resources upon which indigenous hunter-gathering activities and environmental management depended were appropriated on a massive scale. Aboriginal populations collapsed in the face of disease, violence and forced removal until they survived only on the margins of the new pastoral economy, on government reserves, or in the arid parts of the continent least touched by white settlement. The process would be repeated again in northern Australia during the second half of the century.
For the colonists this could happen because Australia was considered terra nullius, vacant land freely available for occupation and exploitation. The encouragement of private enterprise, the reception of Wakefieldian ideas, and the wholesale spread of white settlement were all part of a profound transformation in official and private perceptions of Australia's prospects and economic value as a British colony. Millennia of fire-stick management to assist hunter-gathering had created inland grasslands in the southeast that were ideally suited to the production of fine wool.
Both the physical environment and the official incentives just described raised expectations of considerable profits to be made in pastoral enterprise and attracted a growing stream of British capital in the form of organizations like the Australian Agricultural Company (1824); new corporate settlements in Western Australia (1829) and South Australia (1836); and, from the 1830s, British banks and mortgage companies formed to operate in the colonies. By the 1830s, wool had overtaken whale oil as the colony's most important export, and by 1850 New South Wales had displaced Germany as the main overseas supplier to British industry (see table 3).
Allowing for the colonial economy's growing complexity, the cycle of growth based upon land settlement, exports and British capital would be repeated twice. The first pastoral boom ended in a depression which was at its worst during 1842–43. Although output continued to grow during the 1840s, the best land had been occupied in the absence of substantial investment in fencing and water supplies. Without further geographical expansion, opportunities for high profits were reduced and the flow of British capital dried up, contributing to a wider downturn caused by drought and mercantile failure.
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.
- 1861 Robertson Land Acts
Due to the increases in income attributable to the Gold Rush, manufacturing and construction sectors of the economy fared very well.
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).
An investment boom in Australia in this decade saw increased economic expansion despite the fact that the investments were providing less of a return. 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 property prices and exacerbated by the imprudent use of capital.
- 1890 – The Great maritime strike
- 1891 – Australian shearers' strike
- 1891 – 16 small banks and building societies collapse in Melbourne2
- 1892 – Broken Hill strike
- 1892 – 133 limited companies go into liquidation in Victoria alone2
- 1893 – major international depression
- 1893 – Australian banking crisis of 1893: the Federal Bank collapses; many financial institutions, including several major ones, suspend trading
- 1894– The worst of the economic crisis was over and the task of rebuilding society started. There were some reforms to regulation and law with a view to preventing future abuse.3
- 1901 first federal government formed by the Protectionist Party.
- 1904 the Australian Labor Party forms federal government. The first labour movement in the world to attain government.
- 1907 Harvester Judgment – court ruling that established the right to a basic wage – a 'fair and reasonable' minimum wage for unskilled workers of 7/- (7 shillings).
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 profit 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 1931–32.
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 's terms , this is where Australia 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.
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, TCF (textiles, clothing and 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.
- 1955 Australia begins exporting coal to Japan. Japan soon becomes a major destination for Australian exports of raw minerals and agricultural products.
In the 1950s and 1960s, Australian manufacturers who were nurtured by government policy failed to increase productivity. This was highlighted by the increases in the productivity of overseas manufacturing which 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.
- 1967 Britain begins negotiations to enter the European Economic Community. Australia's privileged access to the British market begins to end.
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".
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 economy started under the Hawke 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 reforms, including establishing a Goods and Services Tax and deregulating labor markets.
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|
|2007||1,044,162||1.26 Australian Dollars||122|
For purchasing power parity comparisons, the US Dollar is exchanged at 0.98 Australian Dollars.In recent times Australia has received financial growth in the mining industry. This has been a major contributing factor of a high Australian dollar.
- Agriculture in Australia
- Economy of Australia
- Banking in Australia
- Button car plan
- Snowy Mountains Scheme
- Whaling in Australia
- "Media Business Communication timeline since 1861". Caslon. Retrieved 2008-09-29.
- "Timeline: Depression". The Age. 2003. Retrieved 29 November 2007.
- Cannon, Michael (1966). The Land Boomers. Melbourne University Press. p. 197.
- Adam McKissack, Jennifer Chang, Robert Ewing and Jyoti Rahman (2008). "Structural effects of a sustained rise in the terms of trade". Australian Treasury.
- Butlin, N. G. (1964). Investment in Australian Economic Development. Cambridge University Press.
- Sinclair, W. A. (1976). The Process of Economic Development in Australia. Melbourne: Cheshire.
- Snooks, G.D. (1994). Portrait of the Family within the Total Economy, Australia Since 1788. Cambridge University Press.