ATAR Survival Guide

Linkages Between Economies

 

In today's age, globalisation has seen economies more integrated and interconnected.

 

Trade

Global trade is evident in Australia, as our commodities are exported to countries such as China, Japan and the United States. Other countries rely on our commodity exports to build infrastructure, goods and provide services, particular services of a professional nature.

 

In addition, we rely on other countries for imports such as cars, electrical goods and clothing textiles as Australia cannot produce these on their own, or it is too costly to produce. Australia suffers from an expensive and small labour force which makes it uncompetitive to produce large scale, low value goods and services. 

 

Investment

Australia relies on foreign investment to finance large capital projects. This is because Australia's small population means we cannot produce a sufficient level of savings to meet our investment needs, hence relying on outside sources of finance. Countries such as China and Japan have large populations with high savings ratios, providing a surplus in savings which is reinvested into capital poor countries such as Australia.

 

The Foreign Investment Review Board reviews proposals for foreign investments such as the purchase of Australian property from an oversea resident. Without foreign investment, Australia would not be able to achieve its high levels of investment, with many mining projects unable to access sufficient capital to develop. 

 

Examples of Recent Australian Foreign Investment:

• FIRB rejection of Chinese foreign investment for Gas Pipeline Operator APA Group (The Conversation, Nov 2018)

• Gina Rineheart and Shanghai CRED purchase of S Kidman and Co Cattle Empire (ABC News, Dec 2016)

• Lease of the Port of Darwin to a Chinese Company for 99 Years (The Guardian, Jun 2017)