Globalization and its Impact on the Australian Economy

This article discusses the concept of globalization and its impact on the Australian economy. It covers the factors that contributed to the rapid globalization of the world economy, the advantages and disadvantages of globalization, and who has gained and lost from globalization in Australia. The article also discusses the impact of globalization on the automobile industry in Australia.

Economics for
Manager

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Question1. What is meant by globalization and what has contributed to the rapid
globalization of the world economy in recent years? Discuss.
Globalization is the process through which the businesses or the other firms start operating a
business on an international scale. In simple words, it can be said that globalization is the process
of the integration and interaction between the companies, people and the government of the
different nations (Beck, 2018). The rise in the economic integration and interdependence of the
national, local and regional economies around the world through an intensification of the cross-
border movement of the technology, goods, services, and capital refers to as the globalization of
the world economy.
Globalization of the world economy has contributed effectively in enhancing the living standards
of the people considering the case study. The globalization brings the opportunities for trade in
the countries across the boarders due to which they likely to grow faster and the economy of the
increase. This faster growth and rise in the economy leads to the rise in the living standard of the
countries (Wright, 2016). Though, this is the fact that there are numerous factors that contributed
to the rapid globalization of the world economy in the past few years. Some of these factors are
discussed below: -
 Technological change: - The rapid change in the technology of some countries has
reduced the cost of the transmitting and communication information which motivates
them to share the information across the world. For instance; Internet, through which the
business and companies started developing the website. Moreover, the other changes with
the help of the technology lead to sharing of information which makes the company
operate the business internationally (Narula, 2014). The rise in the exchange of the

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information in the countries leads to the development of the economy as the countries
started making use of the technology. This reflects the contributed of the technology to
rapid globalization in the world economy.
 Containerisation: - This is one of the reason due to which there was rapid globalization
took place around the world. The cost of the ocean shipping reduced due to the
containerization and bulk shipping. The decreased in the prices of the shipping the
products across the world helps to bring the prices of export equal to the manufacturing
cost of that particular country which makes the markets more contestable globally
(Ducruet, 2016). This is the fact that due to containerization there was a rapid adoption of
the steel transport containers which made the trade cheaper and more efficient for trading
across the world.
 The difference in the tax systems: - The government of the different countries
motivated and encourage the activity of the globalization with the motive to increase the
FDI and improvement in the economy of the country along with the development in the
nation. The want of the business to the advantage from the lower unit labor cost along
with the other favorable production of a factor has motivated the countries to adjust their
tax system to grab the attention of the foreign direct investment (FDI) (Ndikumana,
2015). Moreover, there were many countries who were engaged in tax competition with
each other in a bid to win profitable overseas investment projects.
 Growth strategies of multinational and transnational companies: - In the last few
years, both multinational and transnational companies have implemented the growth
strategy so that they can generate the maximum revenue. To achieve the maximum
revenue they have decided to increase their global business presence. Therefore, these

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brands have started investing their amount in expanding the business. The companies
were also willing to prove themselves that they are able to achieve the growth not only in
the home country market but also in the global market (Cavusgil, et.al, 2014). This leads
to the rise in the globalization rapidly across the world that ultimately leads to the
development of global economy.
The above are some of the major factors due to which there was the rapid globalization of the
world economy took place in the past few years. All these factors have indirectly contributed to
increase the wealth of the country and in increasing the living standard of the people across the
world. Though, this is also the fact that these factors have generated some of the issues which are
now faced by the people in the developed countries. On the other side, this is also fact that
globalization has brought many advantages to the countries.
Question2. Do you support the idea of globalization the Australian economy? Why and
Why not? In writing your answer, wherever possible, back up your arguments with the
theory, research articles or statistical evidence.
Yes, I support the idea of globalization of the Australian economy because the relaxation and the
opportunity of free trade have brought the success for the country. Globalization has provided
the opportunity to the multinational companies in Australia to expand their business in the cross-
border market. Moreover, this is effective way through which companies of Australia can
encounter the needs of the people belongs to the other countries in the world. This will make the
Australia economy more advanced than the most of its neighbors which contribute to increase
the livings standard of the people in the country. This is the fact the Australian forms can better
fulfill the requirement of the western countries (Henry, 2016). For instance; Australian firms are

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primary exporters of healthcare services to the Asia-Pacific region. This defines that the country
is performing international trade with other countries (Stromquist & Monkman, 2014).
Moreover, the Australia country is an abundance of the natural resources that the whole
population of the country cannot make use of those resources. This means that there are extra or
surplus resources that are available to them. Therefore, the country deals with the other countries
who demand the natural resources. This trading reflects one of the theories of international trade
that is a Ricardian theory. David Ricardo developed the theory based on comparative advantage
and specialization. The main focus is on a comparative theory which occurs due to the excess of
natural resources in Australia (Levchenko & Zhang, 2016).
In addition, the government of Australia never fallen into the burden of debt like other countries.
There are many countries who suffered the burden of Debt because of a bad investment. This
reflects that economy of Australia is strong and has strengthened during the time of globalization
(Lasserre, 2017). This strengthens the economy of the country was possible because of the
international trade is done by the companies situated in Australia. These companies brought the
development in terms of technology, resources, advancement, employment and many others
(Adres, Vashdi & Zalmanovitch, 2016). Overall, with the help of the globalization, Australia is
able to strengthen their economy; they were able to form good terms with the international
countries which through trade, improvement in the living standard along with the development of
the nation, and globalization is helping the country to make a unique position across the world.
This is the fact that globalization in Australia has also created the negative impact on the
country. The emergence of globalization generated the advance communication opportunities
due to which the companies situated in Australia started hiring the people from the overseas

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market at low cost which leads to the unemployment in Australia. According to the case study,
the increased globalization and outsourcing has undermined the survival of the manufacturing
industry like motor vehicle industry. The wiping out of the industry will affect the job of the
people in the country along with welfare of millions of people in the country in the year 2018.
While considering the negative impact of globalization one can’t avoid the positive outcomes of
the globalization.
The loss in the job is one of the problems which were also faced by the American a year ago.
They took the step to resolve the problems that are associated with the loss in jobs of the people
who are staying in the US because of increase in the overseas workers. US confessed that
thousands of people from India visit the US on special visas for the skilled professionals
considering the fact that there were present of the vast opportunity for professionals in the field
of tech sector. To resolve the problem the US government prevent the US companies for going
overseas for the employees and introduced the visa program with the name of H-1B which brings
up to 85,000 foreign professionals to the US annually for 3-year stays (Bengali & Parth, 2017).
According to this, program the US has shared the preference to the Americans first instead of the
Indian workers.
Similarly, Australia needs to take some of the actions with the help of which they can reduce the
number of overseas employees or another way is that they can increase the job opportunities in
the country for Australians. This helps the company is facing the problem that will arise because
of the globalization of the country.

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Question3. Discuss who has gained and lost from globalization in Australia and in your
own country with respect to a particular industry. Back up your answer with the evidence,
wherever possible
The globalization in Australia has brought both gain and loss not only in Australia but also in
other countries across the world. The biggest advantage which is gained by the country is in
terms of the economy. According to the case study, the particular industry that has been
discussed is manufacturing industry which includes the automobile industry. Export is
continuously increasing for a long time back in these industries which have contributed in adding
to the welfare of the country and their citizen (Turner & Holton, 2015). Moreover, there is a rise
in the living standard of the people because of the improvement in the economy of the country.
The international trade done by the companies in Australia brought the rise in the economy as
well as the development of a nation is possible because of this industry. The nation’s
development brings the rise in the living standard of the people. Therefore, this clearly reflects
that the Australian citizens and government has gained the maximum benefit because of the
international trading by these industries.
On the other hand, the automotive industry including the automobile industry of Australia is
affected due to globalization. The globalization in the country leads to the several factors due to
which the companies started hiring the people from the overseas market at low price. This results
in the loss of jobs of the Australian people and loss in the welfare of the millions of people in the
country in 2018. Therefore, it reflects the loss for Australia but gains for the countries from
where the Australian companies are hiring the employees such as India, China, and many others.
The people of another country will get the benefit and this also leads to the rise in their economy
and enhance the welfare. The automotive industries in Australia are employing the employees

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from the overseas markets because they are not able to earn the profit due to which they started
hiring the labor at low cost (Manyika, et.al, 2017). In addition, the globalization has made the
labor skilled and effective due to which they preferred hiring them because will save the cost of
training provided by the company.
Moreover, according to the analysis the successive Australian government have embraced the
globalization and abandoned the discredited import substitution model related to the economic
development. This affected the producer of automobile and they decided to stop the production
because without the imports they won’t be able to produce the products in the country. If any of
the company tries to manufacture the products then they will spend four times the cost of Asian
levels and double those of Europe ((Wood, 2014).
This has created the impact as the production will stop and the industry will wipe out. The people
who will be willing to buy automobile they need to get it imported from the other countries.
Moreover, this will also affect the economy of the country. It is suggested to the government of
Australia to manage their import restriction which they have imposed on the industry.
Considering the analysis, it can be said that vehicle manufacturing companies of Australia have
left a negative impact on the economy of Australia. The businesses of the automobile are not
able to achieve desire profit because of rise in the cost of the business processes and business
operations. For instance; Ford Company has decided to close their two plans in Australia. At that
time, the government of Australia offered a financial help to the company so that they can retain
in the market and will not create any impact on the economy of the country (Wood, 2014). The
same step is taken by most of the vehicle manufacturing companies in Australia. The closure of

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the business will affect the jobs in the market of Australia as a maximum number of people will
get unemployed.

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