T HE E CONOMY

The Australian economy, and its structure, is both a key institution, the product of other institutions (as well as the natural and human endowments of the nation) and provides a significant part of the framework for the wages system. A number of aspects have already been identified. Revisiting this, at the beginning of the twentieth century the economy may be best considered as part of a wider empire economic structure. In 1907 almost two thirds of Australian trade was with the British Empire. The UK accounted for 46.7 per cent of Australian exports and was the source of 51.8 per cent of imports; other ‘British Possessions’, accounted for 18.0 per cent and 12.6 per cent respectively. Trade with ‘Foreign Countries’, principally the US and Germany, accounted for around a third of exports and imports. Major exports were wool, meat, butter, wheat and gold and other metals, while imports were dominated by apparel and ‘manufactured metal’ – which included machinery (ABS 1301.0 1909, 597-611).

More generally the ‘productive economy’, as it was recorded at the time, comprised the pastoral industry which accounted for 30.3 per cent of the estimated value of production, agriculture 18.2 per cent, dairy 9.3 per cent, forestry and fishing 2.9 per cent, mining 16.9 per cent and manufacturing 22.4 per cent (ABS 1301.0 1909, 1127).

The evolution of the economy from 1900 to 2010, using more usual GDP measures, is illustrated in Figure 2.23. This shows considerable compositional change. Considering each of the three identified sectors: Agriculture accounted for some 20 to 30 per cent of GDP up until the 1950s, although fluctuating with climatic conditions and prices, before commencing a slow decline stabilising in the mid-1970s at some 2 to 5 per cent; Mining slowly fell from over 10 per cent at the turn of the century to some 2 to 3 per cent by the 1920s and remained at low levels until two booms, in the mid-1980s, and late- 2000s, reaching a peak of 10 per cent in 2009; Manufacturing from early levels of 10 to 13 per cent at the beginning of the century, rose to almost 30 per cent in the late 1950s and early 1960s before declining to below 10 percent by 2009.

and of the way in which the most highly trained and experienced minds foresee their operation…. And, out of the great mass of material which is before us, it is by the evidence of the statisticians and the economists that we must principally guide ourselves. (59 CAR 581, 596-567)

While these economists over the early history of the court presented their evidence, as in the above case, as ‘experts’, d’Alpuget reports that after Hawke commenced as an advocate in the early 1960s there was a change: “In the economics fraternity news had already spread that Hawke, because he understood economics, was much harsher than the ordinary barrister in cross-examination, and that his technique of taking a statement and tearing it into small, verbal shreds, and the sheer violence of the aura around him when he was battling with a witness caused embarrassment and intimidation” (1982, 97). And that following this, and the refusal of some economists to appear in a case and face this form of examination, “the practice of calling economic experts was over: Hawke had created a situation where his opposition would have, like him, to speak with authority” (97).

222 _{While it can be argued that the direct impact of this report was relatively limited it}

Figure 2.23 Sectoral Shares of GDP, 1900 to 2010

Source: See Table A 6.20

Over the first third of the century economic growth was slow. While in the first decade GDP per capita had increased, in part due to the ongoing recovery from the Depression of the 1890s, this growth petered out with the commencement of the First World War and GDP per capita declined. Although there was again some recovery in the early 1920s, the economy once again stalled, and as a result, by 1930 just prior to the Depression, GDP per capita in Australia was little different to what it had been in 1914. From the depth of the Depression in 1934 GDP per capita grew, in a relatively steady fashion, at an annualised rate of 2.2 per cent to 1964 and then at a slightly lower rate of 1.9 per cent until 1984. At this point it had another strong surge in growth, 2.3 per cent per annum, until 2008 and the Global Financial Crisis.

A central element of economic policy, and focus for debate was tariff policy. In the initial post-federation period, and indeed for much of the federation debate, the major political debate was between the free-traders and protectionists. Although the Labor Party was initially ambivalent on this, it soon moved to support protection.223 _{While the tariff regime discussed in}

section 2.3 was initially a revenue measure, rather than industry protection, this changed. The development of tariffs over time is detailed in Chapter 6. For most of the period exchange rates played a lesser role in economic policy. The Australian currency was effectively linked to the pound sterling, initially directly and then from 1925 with the adoption of the gold standard. In 1931 Australia devalued against sterling but then remained pegged to the United Kingdom pound until 1971. It was then briefly pegged to the US dollar before

223 _{The Federal Platform of the Labor Party adopted in July 1905 contained as its}

fourth element: “Referendum of Electors on Tariff question, after the report of the Tariff Commission is completed. Party to give legislative effect to decision of referendum vote” (Worker (Qld) 11/11/1905, 17).

Griffiths argues that “while Labor opinion did shift from 1901 to 1908, the party was divided and equivocal on protection until around 1914 and did not become unambiguously protectionist until 1919” (1999, 1).

0 10,000 20,000 30,000 40,000 50,000 60,000 0 10 20 30 40 50 60 70 80 90 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 $2010 -11 Sec to ra l s ha re of G D P (% )

moving to a trade-weighted peg in 1974, which persisted with some changes to the firmness of the peg until it was floated in 1983.