Australia Must Diversify the Economy Essay -- The Australian Economy

The economist describes the definition of a banana republic as â€Å"a country dominated by foreign investment and dependent on a single export commodity† (The Economist. 2014). This definition has some correlation to the Australian economy as over previous year’s Australia has experienced a commodity boom which has dominated and under pinned the nation’s economy. The development of the natural resources industry in Australia has grown the economy and has become the number export for the nation (Figure 1). Australia’s reliance on the commodity industry does not support long term economic stability for the nation, commodity prices are falling as the developing world industries slow down. The Australian government must continue with the development of the commodity industry but must also invest into developing new industries that will ensure the economic growth of the nation continues and to ensure the nation is not dependent on the natural resources of t he country. Figure 1: Composition of Exports 2009(Ian McCauley 2012) In the past the nation has been a significant exporter of agricultural products such as grain and livestock, it was able to make advancements in the manufacturing industry by imposing high tariffs on imported goods. This was until internationally and locally it was not viable to continue with these economic policies and the Australian market was opened up with the lowering of tariffs and the floating of the Australian dollar. While this benefited the economy with free trade agreements, foreign investment and a diversification of the export base it also contributed to the demise of other industries (Sara Cousins 2013). Throughout Australia’s economic history mining and the exports of commodities have been ... ...conomy–well prepared for the challenges ahead. [ONLINE] Available at: http://www.dpmc.gov.au/publications/skills_for_all_australians/chapter2_the_australian_economy_of_the_future.html. [Accessed 04 March 2014]. (The Economist. 2014). The Economist explains: Where did banana republics get their name? |. The Economist explains: Where did banana republics get their name? | The Economist. [ONLINE] Available at: http://www.economist.com/blogs/economist-explains/2013/11/economist-explains-16. [Accessed 28 February 2014]. (Zheng, Bloch 2012) Australia’s Mining Productivity Paradox: Implications for MFP Measurement by Simon Zheng, Harry Bloch: SSRN. 2014. Australia’s Mining Productivity Paradox: Implications for MFP Measurement by Simon Zheng, Harry Bloch: SSRN. [ONLINE] Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1715235. [Accessed 03 March 2014].