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WILLIAM RICHMOND

 ‘old model’ economic development

The term has been used to describe Australian economic development (as measured by

the European yardstick of increases in GDP) up to the end of the 1920s. The central

characteristic of the period is that rural industries (i.e. those based on the use of land)

provided the main basis of economic development (i.e. increases in GDP). Three phases

of ‘old model’ have been identified: the first, until about 1860 when new land was being

brought into use; the second, until about 1890 when capital was being applied to land so

that land could be used more intensively for the grazing of sheep and the production of

wool; and the third, until the end of the 1920s when the more intensive use of land was

based on the ‘new rural industries, i.e. those involving the use of land for agriculture

rather than the grazing of sheep. It was the second of these phases that resulted in a rapid

increase in production) and a level of GDP per head considerably in excess of any other

comparable country.

 trade protection

This term refers to a policy of protecting (or shielding) producers within an economy

from competition from overseas producers. In Australian economic history it refers

particularly to the protection of producers within the manufacturing sector, in order that

the Australian manufacturing sector could develop. The main instrument of the policy

was the tariff (in effect a tax on imports) which made overseas produced goods less

competitive relative to domestically produced goods. The policy was implemented in the

1920s when there were major increases in tariff levels, and in the context of the 1930s

Depression, this being one factor in the relatively rapid recovery from the Depression.

The policy continued to characterise the Australian economy in post-WWII decades. In

so far as trade protection resulted in the extensive development of industries that were

economically inefficient it has been held to be one of the main factors underlying the

poor economic performance of the Australian economy for most of the twentieth century.

 the price of iron ore since the year 2000

The price of iron ore was approximately $12-$14 per tonne in the early 2000s then started

to increase sharply after 2004, reaching a peak of nearly $180 per tonne in 2011. After

this time it fell steadily to about $50 - $60 per tonne. The significance of this lies in the

fact that iron ore is the largest export commodity. There were major positive economic

effects through linkages to other industries, both through the expenditure of incomes

made by owners and employees and (‘backwards’) through the supply of inputs to

producers of iron ore. There was also large-scale investment associated with the

development of new mines and on infrastructure associated with mining projects. A

further effect was that the value of the Australian dollar (because of the high demand for

Australian dollars to purchase iron ore) increased sharply. However, this negatively

affected industries in other sectors that were oriented to export.