THE POLITICAL ECONOMY OF AUSTRALIA’S TRADE AND ECONOMIC REFORMS: PROCESS AND LESSONS

The document examines Australia's transition from a 'fixed price country' characterized by high protectionism and structural rigidities to a competitive, liberalized economy. It highlights the critical role of independent institutions like the Tariff Board in publicizing the costs of protection, the political leadership of the Hawke and Keating governments in implementing gradual tariff reductions, and the necessity of structural adjustment packages to maintain social cohesion. The author argues that the combination of economic crisis, transparent data, and political courage enabled Australia to dismantle its protectionist 'Australian Settlement Compact' and integrate into the global economy.

• In the 1970s, Australia was known as a "fixed price country" due to structural rigidities including high inflation, high unemployment, low productivity, and a "pessimistic siege mentality" regarding globalization and competition from East Asia.
• The 'Australian Settlement Compact' relied on a policy of "protection all around," which used high tariffs to support high wages and domestic industry, but eventually led to a 'rent-seeking' mentality and inefficiency.
• The Tariff Board and its successors (the Industries Assistance Commission and Productivity Commission) were pivotal in dismantling protection by systematically identifying and publicizing the costs of industry assistance to the public.
• The Hawke and Keating governments implemented a strategy of unilateral trade liberalization, opting for successive, small, and pre-announced tariff reductions rather than sudden cuts to minimize disruption.
• A critical factor in the public's acceptance of reform was the use of structural adjustment assistance, including labor adjustment programs for displaced workers in the automotive and textile sectors, costing at least $90 million.
• The 'Prices and Incomes Accord' between the government and trade unions helped break wage inflation by persuading workers to accept government superannuation contributions instead of nominal wage increases.
• The document identifies that economic crisis—such as the stagflation of the 1970s and the threat of becoming a "banana republic"—often serves as the necessary catalyst for the public to accept the pain of structural reform.
• Complementary microeconomic reforms, such as the National Competition Policy and financial deregulation (floating the dollar), were essential to ensure that industries losing tariff protection could remain competitive by lowering input costs.

APA

Bowen, B. (n.d.). THE POLITICAL ECONOMY OF AUSTRALIA’S TRADE AND ECONOMIC REFORMS: PROCESS AND LESSONS. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2008/04/dttp_pap_bowen_australia_20071307.pdf

Chicago

Bowen, Bill. THE POLITICAL ECONOMY OF AUSTRALIA’S TRADE AND ECONOMIC REFORMS: PROCESS AND LESSONS. South African Institute of International Affairs, n.d. https://saiia.org.za/wp-content/uploads/2008/04/dttp_pap_bowen_australia_20071307.pdf.

Wikipedia

{{cite report |last1=Bowen |first1=Bill |title=THE POLITICAL ECONOMY OF AUSTRALIA’S TRADE AND ECONOMIC REFORMS: PROCESS AND LESSONS |publisher=South African Institute of International Affairs |url=https://saiia.org.za/wp-content/uploads/2008/04/dttp_pap_bowen_australia_20071307.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bowenndpolitical, author = {Bowen, Bill}, title = {{THE POLITICAL ECONOMY OF AUSTRALIA’S TRADE AND ECONOMIC REFORMS: PROCESS AND LESSONS}}, institution = {South African Institute of International Affairs}, url = {https://saiia.org.za/wp-content/uploads/2008/04/dttp_pap_bowen_australia_20071307.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }