a work about econ reading summary
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KCIs - EXAMPLE
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.