Globalization and Australia

Alan Oxley Australian APEC Centre, Monash www.worldgrowth.org

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Three aspects
The impact of globalization

What is globalization
Impact on Australia

What is the impact of globalization?

The wealth gap is narrowing

Gap between richest 20 percent and poorest 20 percent falls - from 15 to 1 in 1970 - to 13 to 1 in 1997

- i.e. by 10 percent

Incidence of poverty is falling

1987 East Asia (- China) Europe/Central Asia Sub-Saharan Africa WORLD 26.6% 23.9% 0.2% 46.6% 28.3% 1998 15.3% 11.3% 5.1% 46.3% 24%
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Quality of life improving

1970
People undernourished Average life expectancy Infant survival rates/1000 Global literacy 920m 58 44 80%

1990s
810m 66 67 67%bb
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Countries open to trade grow faster

7 6 5 4 3 2 1 0 -1

63-73 Open Mod Open

86-92 Mod Closed Closed

The evidence shows that the poorest people within countries share in the gains from national income growth. Generally, as a country s average income rises,the poorest share proportionately in those gains. More specifically,the poorest 20 per cent in an economy gain by the same percentage as the country does. And as a country s average income per person rises,the proportion of its population living in extreme poverty falls.
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What is Globalization?
Defining it

The drivers
The effects

Defining globalization
An open economic system

Non-discrimination
Global brands

Global structures

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The Drivers
Cheap travel
Trade liberalization Information technology

High technology
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Exports % share of world production

25 20 15 10 5 0 1913 1950 2000

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12 10 8 6 4 2 0

Annual % Growth of trade and GDP 1959 96

Trade

Trade GDP GDP

World

USA

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US investment now more global

Percentage of foreign stocks held by US investors
Cumulative US direct foreign investment % of GDP 20 15 10 5 0 1980 1995

1975 One percent

1996 Ten percent

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Effects of globalization
On business On work

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Effects of globalization on business

Cheap offshore production Reduced transport costs Virtual communication Standardization of logistics

Global marketing

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Bigger and smaller

Greater scale in manufacturing
- commodities are globally priced Specialization in manufacturing

Globalization of specialist manufacturing

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New importance of Brands

Selling Fords like Coca Cola?
- Ford sold its components business for $1.5 billion - That business, Visteon, supplied 22% of a new Ford vehicle - Ford spent $9 billion buying brands: Jaguar and Volvo
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Globalized business
Greater specialization of production Hewlett Packard More outsourcing Soap and medicines
Greater increase in brand values - LG New technology niches steel mini mills
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Effects of globalization on work

Jobs in services rather than manufacturing Workers provide services rather than do a job End of lifetime employment

Individuals manage more of their own affairs

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A globalized world
Greater freedom of movement of goods, services, capital, people Global citizens
The Information Age has only just begun
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Australia and Globalization

How is Australia positioned? Examples of globalized industries

The Future

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Australia: globalizations child

Australia has grown on - trade - foreign investment - immigration - adaptation of technology

Australia is the branch office model of development

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Australias position
Openness IT/E readiness Culture

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Australias openness
One of the most open economies in the world - average tariffs 5 percent - open financial and telecoms - open to foreign investment

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Australias IT/Ereadiness
Ranking US Australia UK Canada 1 2 3 4 Score (of 10) 8.73 8.29 8.10 8.09

Norway
Sweden Singapore

5
6 7

8.07
7.89 7.87 Source: Economist Intelligence Unit
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Australias globalized economy

Global industries - mining and agriculture Services distribution, logistics, transport, financial services Manufacturing a new contender
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Manufacturing exports
Growth in manufactured exports vs all exports 1980 - 2000

Manufactures

Exports 0 5 10 15

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Globalized industries
Toyota - manufactures and exports a global car Howe Leather a tier one supplier to Ford Rosemount/Southcorp exporter & offshore producer Westfield real estate management
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The future
The information Age - computing power continues to expand exponentially
- More global distribution of activity - Greater interconnectivity - Bigger organizations - Greater fragmentation - Greater personal freedom
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Australia ready to thrive

Globally oriented economy
High adaptation of IT Workforce adjusting

Open society

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www.globalizationguide.org

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