human
Provide an essay about how Australia that has combated commodity price volatility in the past. Introduction only.
assistant
It has been the wish of the France president to come up with collective solutions that have the ability of reducing excessive commodity price volatility. This is particularly in agricultural as well as energy product prices. This has been placed as being the first priority due to its effects on food security and world growth. The G20 has been the best forum for dealing with price volatility issues.
This is because; the major stakeholders of oil and agricultural products markets are all G20 members. The France presidency has concentrated more on energy and agricultural products, whereby they want to improve regulations dealing with product financial markets.
This is because such markets have been having no harmonized rules and regulations. Some of them even have no basic rules that govern market abuse as well as price manipulation (Ambafrance-jp.org. 2011,)
France also wants to increase transparency in markets for physical commodities. This is based on the fact that ,there isn’t no international data stating the supply and demand trends that can be termed as reliable, “on commodities markets hamper prices formation and increases volatility” (Ambafrance-jp.org. 2011). Another strategy proposed by French presidency is preventing and managing food crisis.
The first response is increasing the supply of agricultural commodities in developing countries. However, the current food crisis have been stated to be as a result of lack of an international organization entitled with the responsibility of providing responses from governments, apart from channelling unilateral measures that are counterproductive.
The usage of emergency and strategic food stocks in prevention of food crisis will only be successful, if and only if it is coordinated at the international level.
Last but not least, “Stronger hedging instruments to protect the poor populations against excessive price volatility,” (Haig, 1966) is another strategy.
Being the president, France has been exploring different ways through which poor nations can be advantaged by the current financial insurance tools, which have the ability of protecting such countries from price hiking as well as events that impact harvests. To better recognize these strategies, G20 ought to copy what the Australia has dealt with price volatility.
human
Policy Reaction to Price Volatility in Australia
assistant
There have been arguments that during commodity price volatility, higher tariffs were used to protect industries. As a result, price booms resulted to higher revenues, which were then used for infrastructural investments in the country, particularly in the industrialised estates (Anderson, 1987). Statistics shows that, tariffs increased sharply in Australia during commodity price booming.
It is stated by Lloyd (2008) that, in 1921, “Customs Tariff increased on industries that had grown during World War I; the tariffs met with very little resistance as the proponents of protectionism used defence and national pride in the young manufacturing sector as additional justifications for protection” (Lloyd, 2008). In addition, the move was also supported by export booming states, as they appealed for fairness in the country.
However, tariffs continued to increase during depression, and even after price burst. This was following the proposal made by (Brigden, 1925) that protection was raising wages, living standards as well as raising the level of employees working in high wage jobs. This proposal ended up being implemented as a way of redistributive instrument.
One brief existed during Korean War, but great increase in duties happened in 1951-1952. However, it has been argued that tariff rate increase was as a result of an increase on dutiable goods import as compare to free import goods, other than a rise in tariff rates.
The increase in imports was being paid for by great raise in demand for commodity export of Australia. However, such payment stopped immediately the boom termination occurred (Lloyd, 2008).
It should however be understood that protection need went down; by the time Australia was entering post-industrial development stage. As a result, the service sector ended up becoming the most important sector either in employment or GDP shares.
The outcome of this was, “the support for protecting manufacturing jobs to maintain high living standards faded. There was across-the-board cut in tariff rates in 1973 and the trend continued till the current boom” (Anderson 1987).
In short, the response of the federal government to price shocks or volatility by raising tariffs, with the aim of preventing manufacturing unemployment as well as deindustrialisation was brought up by politicians as they though it will matter. In particular, this was during 1920s, the time when manufacturing sector was closely linked to national pride, defence and fairness.
Apart from preventing deindustrialisation, the policies of protectionists served the country well as a toll of reindustrialisation during depression times. However, the need for such policies ended up declining by the time the manufacturing sector was undergoing post war boom effects and in the recent past when the service industry was becoming one of the most significant industry (Brigden, 1925)
It is true that the Australian government was enjoying revenue gains during export price booms. However, as stated earlier, revenues didn’t fall after boom, or during price burst. This suggests that the income revenues for the federal government were diversified appropriately to deal with the effects of price volatility of certain commodities.
In addition, available evidence proves that, payment shares to both states and subsidies went up at this time. This suggests that, there were some efforts aiming at smoothening regional effects on downside of price volatility.
It is stated that “The revenue growth rate during the Korean War almost doubled from 6.9 to 12.3 percent on either side of 1950, showing how unimportant commodity prices were as a determinant of government revenues by mid-century” (Bambrick, 1973)
The recent price boom also led to an increase in government revenue and an increase in share transfer. This has been attributed to the goods and service tax (GST) introduction in 2000. This has been much helpful particularly in eliminating not only territorial and states taxes, but also in the elimination of levies and duties.
However, with this policy it was aimed that the federal government will have to “return that revenue proportion to its states through the Council of Australian Government mechanism” (Corden & Gruen1970). As a result the current redistributive share is not as an effect of conscious redistribution strategy, which is accelerated by commodity price volatility, though they are consistent.
By comparing government investment growth during price booming, and revenue growth, studies have identified a higher government investment. As a result, studies have attributed this to expenditure smoothing policy. However, during price slumps government investments particularly in infrastructure sector collapsed. This fell has been attributed to fell in revenue growth.
This can hardly explain the stabilization policy, but can easily explain the contrary. This brings us to the point that, there is no prove that, the Australian government used investment as way of dealing with commodity price volatility that occurred in 1920s (Koren & Tenreyro 2007).
During Korean War similar policy response occurred however, this time round government investment grew spectacularly, as compared to 1920s boom’s growth. At this time, the infrastructure sector like roads experienced drastic growth. However, government investment growth in other sectors like education has remained unmatched in the modern history of Australia.
By looking at the downside that occurred after 1920s and 1950s commodity price burst, it has been observed that government investment growth went down. “In contrast, the recent commodity price boom coincided with drop in aggregate government investments” (Bodie, Kane & Marcus, 1999).
This break can be explained by the government role ideological shifts, other than viewing it in terms of expenditure smoothening over commodity price volatility. However, the best evidence that will prove Australian policy response historical determination is the government’s response on the collapsing metal base prices.
human
Reverse the sentences.
assistant
However, the best evidence that will prove Australian policy response historical determination is the government’s response on the collapsing metal base prices.
This break can be explained by the government role ideological shifts, other than viewing it in terms of expenditure smoothening over commodity price volatility. “In contrast, the recent commodity price boom coincided with drop in aggregate government investments” (Bodie, Kane & Marcus, 1999).
By looking at the downside that occurred after 1920s and 1950s commodity price burst, it has been observed that government investment growth went down. However, government investment growth in other sectors like education has remained unmatched in the modern history of Australia. At this time, the infrastructure sector like roads experienced drastic growth.
During Korean War similar policy response occurred however, this time round government investment grew spectacularly, as compared to 1920s boom’s growth. This brings us to the point that, there is no prove that, the Australian government used investment as way of dealing with commodity price volatility that occurred in 1920s (Koren & Tenreyro 2007).
This can hardly explain the stabilization policy, but can easily explain the contrary. This fell has been attributed to fell in revenue growth. However, during price slumps government investments particularly in infrastructure sector collapsed. As a result, studies have attributed this to expenditure smoothing policy.
By comparing government investment growth during price booming, and revenue growth, studies have identified a higher government investment. As a result the current redistributive share is not as an effect of conscious redistribution strategy, which is accelerated by commodity price volatility, though they are consistent.
However, with this policy it was aimed that the federal government will have to “return that revenue proportion to its states through the Council of Australian Government mechanism” (Corden & Gruen1970). This has been much helpful particularly in eliminating not only territorial and states taxes, but also in the elimination of levies and duties. This has been attributed to the goods and service tax (GST) introduction in 2000.3 percent on either side of 1950, showing how unimportant commodity prices were as a determinant of government revenues by mid-century” (Bambrick, 1973)
The recent price boom also led to an increase in government revenue and an increase in share transfer.9 to 12.
It is stated that “The revenue growth rate during the Korean War almost doubled from 6. This suggests that, there were some efforts aiming at smoothening regional effects on downside of price volatility.
In addition, available evidence proves that, payment shares to both states and subsidies went up at this time. This suggests that the income revenues for the federal government were diversified appropriately to deal with the effects of price volatility of certain commodities. However, as stated earlier, revenues didn’t fall after boom, or during price burst. However, the need for such policies ended up declining by the time the manufacturing sector was undergoing post war boom effects and in the recent past when the service industry was becoming one of the most significant industry (Brigden, 1925)
It is true that the Australian government was enjoying revenue gains during export price booms.
Apart from preventing deindustrialisation, the policies of protectionists served the country well as a toll of reindustrialisation during depression times. In particular, this was during 1920s, the time when manufacturing sector was closely linked to national pride, defence and fairness.
In short, the response of the federal government to price shocks or volatility by raising tariffs, with the aim of preventing manufacturing unemployment as well as deindustrialisation was brought up by politicians as they though it will matter. There was across-the-board cut in tariff rates in 1973 and the trend continued till the current boom” (Anderson 1987).
The outcome of this was, “the support for protecting manufacturing jobs to maintain high living standards faded. As a result, the service sector ended up becoming the most important sector either in employment or GDP shares.
It should however be understood that protection need went down; by the time Australia was entering post-industrial development stage. However, such payment stopped immediately the boom termination occurred (Lloyd, 2008).
The increase in imports was being paid for by great raise in demand for commodity export of Australia. However, it has been argued that tariff rate increase was as a result of an increase on dutiable goods import as compare to free import goods, other than a rise in tariff rates.
One brief existed during Korean War, but great increase in duties happened in 1951-1952. This proposal ended up being implemented as a way of redistributive instrument. This was following the proposal made by (Brigden, 1925) that protection was raising wages, living standards as well as raising the level of employees working in high wage jobs.
However, tariffs continued to increase during depression, and even after price burst. In addition, the move was also supported by export booming states, as they appealed for fairness in the country.
It is stated by Lloyd (2008) that, in 1921, “Customs Tariff increased on industries that had grown during World War I; the tariffs met with very little resistance as the proponents of protectionism used defence and national pride in the young manufacturing sector as additional justifications for protection” (Lloyd, 2008). Statistics shows that, tariffs increased sharply in Australia during commodity price booming. As a result, price booms resulted to higher revenues, which were then used for infrastructural investments in the country, particularly in the industrialised estates (Anderson, 1987).There have been arguments that during commodity price volatility, higher tariffs were used to protect industries
human
Price Shocks in Australia
assistant
Although many studies have indicated that Australia experienced huge commodity price shocks just like other developing countries, it has been proved that, the government curbed volatility in a better way.
In Australia, price shocks brought lots of impacts on resource allocation, distribution as well as development in the last century. In combating such commodity price volatility, studies have argued the significance of tariffs, which aimed at offsetting industrialisation forces which originated from price volatility, and the significance of revenue booms to attain accumulation, and revenue burst in spending.
Though the country has undergone greater commodity price volatility; especially between 1870 to1939, as compared to Latin American, Asian countries, Middle East as well as European periphery. But with such tools at hand, they were able to combat the situation. Since 1939, Australian price volatility has not been greater than other countries like US (Corden & Gruen, 1970).
According to available statistics from (Cashin & McDermott, 2002) it has been revealed that, wool was the dominant export product. This is because, of the 70% of Australian export, 50 percent of them were made up of wool. Therefore, price shocks have been as a result of wool prices, even though mining and agricultural commodities had similar trends according to Gregory, (1976).
However, wool price effects claimed a dominant position. On the other hand, the current booms have been as a result of mining and residual sector. As a result, wool and agriculture seem to be having no effects on the current commodity price volatility (Gregory, 1976)
In addition, the category of residual export has been used in offsetting volatility in agricultural, mining and wool commodities. In the 20 th century, the time Australia got industrialized, the export mix transformed to manufactures. As a result, though commodity price volatility was still an attribute of Australia, but its effects diminished in the 20 th century.
This reduction is as a result of industrialization and post industrialization forces; “first, reducing export concentration, and raising the manufacturing export share and second, reducing the relative size of agriculture and mining activity in the economy, both serving to mute the impact of export price volatility in Australian markets” (Gregory, 1976)
human
How about a Conclusion section.
assistant
With the strategies laid down by the Australian federal government, commodity price volatility that affected major product exports in developing countries, never impacted Australia greatly as compared to other countries, be it on aggregates like GDP or unemployment. This is not because the Australian markets were in a position of responding to external forces.
But because, revenue was coming from many different sources, though some studies have refuted this point claiming that the Australian government didn’t use countercyclical investment policy to the maximum. Another reason that seems to have prevented greater impact was the fact that, the country was in a position to diversify revenue sources, hence mute the effects of price volatility.
This is because, diversification “made the difference – a big and growing industrial sector before about 1970, and a big and growing service sector after about 1970. More efficient factor markets and better institutions didn’t seem to matter much at all” (Kose & Reizman, 2001).
human
Provide an The Response of Australian Markets on Price Volatility section. End with the sentence '& McLean, 1987)'.
assistant
By looking at structural change index and SCHEMP index, we can conclude that in those three price shocks that Australia underwent, there exists no significant difference in structural change during downsizing and upsizing. This has been attributed to secular manufacturing increase; commodity price volatility had very little effects on either deindustrialization or reindustrialization (Koren & Tenreyro 2007).
The major reasons that could have resulted to such a scenario are two. One lays on “development of fundamentals and favouring manufacturing, which completely swamped the impact of the commodity price shocks between 1945 and 1955” (Maddock, & McLean, 1987).
The second reason is based on market factors which did not play its allocative role as expected. The two reasons do not compete in any way, as similar situation seem to have happened in the recent mining price volatility.
However, the “only exception to this rule appears to have been the 1920s where there does seem to be evidence of deindustrialisation on the commodity price upswing and reindustrialisation on the downswing” (Cashin & McDermott, 2002)
By looking at the factors that suppressed deindustrialization during price boom and reindustrialisation during price slumps, one might be confused in determining whether it was development basic which swamped the effects of price volatility or it were immobility factors (Koren & Tenreyro, 2007). In 20 th century, Australian immigration boom occurred; however, it occurred five years after the price boom.
Though some parts of Australia like Queensland had specialized heavily on agricultural and wool products, high immigration rates were only reported in Western Australia. Moreover, higher immigration rates in this region, occurred during price burst, as compared to boom prices times.
As a result, immigration never played any role in price volatility. In general, labour markets have not yet responded sufficiently in the creation of industrialization and reindustrialisation in commodity price volatility (Hatton & Williamson, 1998).
By considering unemployment rate behaviours, price booms should have led to low unemployment rates and higher employment rates. This would have been the outcome in case labour would have been immobile. In case labour was mobile, then the rates would have been the same in the entire country.
By looking at available statistics, it proves that labour was immobile. Major parts of the country that were mostly affected by price shocks experienced different rates during commodity price volatility. However, such differences can’t be predicted, as they seem to be ambiguous (Hatton & Williamson 1998).
In general, the labour market of Australia didn’t respond to commodity price volatility as they were inconsistent with conventional theory predictions. There exist very little prove of industrial response along with structural change during price volatility.
This suggests that, “long run economic fundamentals were swamping them. In addition, we find very little evidence that labour markets were responsive to these price shocks; labour migration during commodity price booms and busts was modest and inconsistent” (Maddock. & McLean, 1987)
human
The complete essay please.
assistant
##Introduction
It has been the wish of the France president to come up with collective solutions that have the ability of reducing excessive commodity price volatility. This is particularly in agricultural as well as energy product prices. This has been placed as being the first priority due to its effects on food security and world growth. The G20 has been the best forum for dealing with price volatility issues.
This is because; the major stakeholders of oil and agricultural products markets are all G20 members. The France presidency has concentrated more on energy and agricultural products, whereby they want to improve regulations dealing with product financial markets.
This is because such markets have been having no harmonized rules and regulations. Some of them even have no basic rules that govern market abuse as well as price manipulation (Ambafrance-jp.org. 2011,)
France also wants to increase transparency in markets for physical commodities. This is based on the fact that ,there isn’t no international data stating the supply and demand trends that can be termed as reliable, “on commodities markets hamper prices formation and increases volatility” (Ambafrance-jp.org. 2011). Another strategy proposed by French presidency is preventing and managing food crisis.
The first response is increasing the supply of agricultural commodities in developing countries. However, the current food crisis have been stated to be as a result of lack of an international organization entitled with the responsibility of providing responses from governments, apart from channelling unilateral measures that are counterproductive.
The usage of emergency and strategic food stocks in prevention of food crisis will only be successful, if and only if it is coordinated at the international level.
Last but not least, “Stronger hedging instruments to protect the poor populations against excessive price volatility,” (Haig, 1966) is another strategy.
Being the president, France has been exploring different ways through which poor nations can be advantaged by the current financial insurance tools, which have the ability of protecting such countries from price hiking as well as events that impact harvests. To better recognize these strategies, G20 ought to copy what the Australia has dealt with price volatility.
##Price Shocks in Australia
Although many studies have indicated that Australia experienced huge commodity price shocks just like other developing countries, it has been proved that, the government curbed volatility in a better way.
In Australia, price shocks brought lots of impacts on resource allocation, distribution as well as development in the last century. In combating such commodity price volatility, studies have argued the significance of tariffs, which aimed at offsetting industrialisation forces which originated from price volatility, and the significance of revenue booms to attain accumulation, and revenue burst in spending.
Though the country has undergone greater commodity price volatility; especially between 1870 to1939, as compared to Latin American, Asian countries, Middle East as well as European periphery. But with such tools at hand, they were able to combat the situation. Since 1939, Australian price volatility has not been greater than other countries like US (Corden & Gruen, 1970).
According to available statistics from (Cashin & McDermott, 2002) it has been revealed that, wool was the dominant export product. This is because, of the 70% of Australian export, 50 percent of them were made up of wool. Therefore, price shocks have been as a result of wool prices, even though mining and agricultural commodities had similar trends according to Gregory, (1976).
However, wool price effects claimed a dominant position. On the other hand, the current booms have been as a result of mining and residual sector. As a result, wool and agriculture seem to be having no effects on the current commodity price volatility (Gregory, 1976)
In addition, the category of residual export has been used in offsetting volatility in agricultural, mining and wool commodities. In the 20 th century, the time Australia got industrialized, the export mix transformed to manufactures. As a result, though commodity price volatility was still an attribute of Australia, but its effects diminished in the 20 th century.
This reduction is as a result of industrialization and post industrialization forces; “first, reducing export concentration, and raising the manufacturing export share and second, reducing the relative size of agriculture and mining activity in the economy, both serving to mute the impact of export price volatility in Australian markets” (Gregory, 1976)
##The Response of Australian Markets on Price Volatility
By looking at structural change index and SCHEMP index, we can conclude that in those three price shocks that Australia underwent, there exists no significant difference in structural change during downsizing and upsizing. This has been attributed to secular manufacturing increase; commodity price volatility had very little effects on either deindustrialization or reindustrialization (Koren & Tenreyro 2007).
The major reasons that could have resulted to such a scenario are two. One lays on “development of fundamentals and favouring manufacturing, which completely swamped the impact of the commodity price shocks between 1945 and 1955” (Maddock, & McLean, 1987).
The second reason is based on market factors which did not play its allocative role as expected. The two reasons do not compete in any way, as similar situation seem to have happened in the recent mining price volatility.
However, the “only exception to this rule appears to have been the 1920s where there does seem to be evidence of deindustrialisation on the commodity price upswing and reindustrialisation on the downswing” (Cashin & McDermott, 2002)
By looking at the factors that suppressed deindustrialization during price boom and reindustrialisation during price slumps, one might be confused in determining whether it was development basic which swamped the effects of price volatility or it were immobility factors (Koren & Tenreyro, 2007). In 20 th century, Australian immigration boom occurred; however, it occurred five years after the price boom.
Though some parts of Australia like Queensland had specialized heavily on agricultural and wool products, high immigration rates were only reported in Western Australia. Moreover, higher immigration rates in this region, occurred during price burst, as compared to boom prices times.
As a result, immigration never played any role in price volatility. In general, labour markets have not yet responded sufficiently in the creation of industrialization and reindustrialisation in commodity price volatility (Hatton & Williamson, 1998).
By considering unemployment rate behaviours, price booms should have led to low unemployment rates and higher employment rates. This would have been the outcome in case labour would have been immobile. In case labour was mobile, then the rates would have been the same in the entire country.
By looking at available statistics, it proves that labour was immobile. Major parts of the country that were mostly affected by price shocks experienced different rates during commodity price volatility. However, such differences can’t be predicted, as they seem to be ambiguous (Hatton & Williamson 1998).
In general, the labour market of Australia didn’t respond to commodity price volatility as they were inconsistent with conventional theory predictions. There exist very little prove of industrial response along with structural change during price volatility.
This suggests that, “long run economic fundamentals were swamping them. In addition, we find very little evidence that labour markets were responsive to these price shocks; labour migration during commodity price booms and busts was modest and inconsistent” (Maddock. & McLean, 1987)
##Policy Reaction to Price Volatility in Australia
There have been arguments that during commodity price volatility, higher tariffs were used to protect industries. As a result, price booms resulted to higher revenues, which were then used for infrastructural investments in the country, particularly in the industrialised estates (Anderson, 1987). Statistics shows that, tariffs increased sharply in Australia during commodity price booming.
It is stated by Lloyd (2008) that, in 1921, “Customs Tariff increased on industries that had grown during World War I; the tariffs met with very little resistance as the proponents of protectionism used defence and national pride in the young manufacturing sector as additional justifications for protection” (Lloyd, 2008). In addition, the move was also supported by export booming states, as they appealed for fairness in the country.
However, tariffs continued to increase during depression, and even after price burst. This was following the proposal made by (Brigden, 1925) that protection was raising wages, living standards as well as raising the level of employees working in high wage jobs. This proposal ended up being implemented as a way of redistributive instrument.
One brief existed during Korean War, but great increase in duties happened in 1951-1952. However, it has been argued that tariff rate increase was as a result of an increase on dutiable goods import as compare to free import goods, other than a rise in tariff rates.
The increase in imports was being paid for by great raise in demand for commodity export of Australia. However, such payment stopped immediately the boom termination occurred (Lloyd, 2008).
It should however be understood that protection need went down; by the time Australia was entering post-industrial development stage. As a result, the service sector ended up becoming the most important sector either in employment or GDP shares.
The outcome of this was, “the support for protecting manufacturing jobs to maintain high living standards faded. There was across-the-board cut in tariff rates in 1973 and the trend continued till the current boom” (Anderson 1987).
In short, the response of the federal government to price shocks or volatility by raising tariffs, with the aim of preventing manufacturing unemployment as well as deindustrialisation was brought up by politicians as they though it will matter. In particular, this was during 1920s, the time when manufacturing sector was closely linked to national pride, defence and fairness.
Apart from preventing deindustrialisation, the policies of protectionists served the country well as a toll of reindustrialisation during depression times. However, the need for such policies ended up declining by the time the manufacturing sector was undergoing post war boom effects and in the recent past when the service industry was becoming one of the most significant industry (Brigden, 1925)
It is true that the Australian government was enjoying revenue gains during export price booms. However, as stated earlier, revenues didn’t fall after boom, or during price burst. This suggests that the income revenues for the federal government were diversified appropriately to deal with the effects of price volatility of certain commodities.
In addition, available evidence proves that, payment shares to both states and subsidies went up at this time. This suggests that, there were some efforts aiming at smoothening regional effects on downside of price volatility.
It is stated that “The revenue growth rate during the Korean War almost doubled from 6.9 to 12.3 percent on either side of 1950, showing how unimportant commodity prices were as a determinant of government revenues by mid-century” (Bambrick, 1973)
The recent price boom also led to an increase in government revenue and an increase in share transfer. This has been attributed to the goods and service tax (GST) introduction in 2000. This has been much helpful particularly in eliminating not only territorial and states taxes, but also in the elimination of levies and duties.
However, with this policy it was aimed that the federal government will have to “return that revenue proportion to its states through the Council of Australian Government mechanism” (Corden & Gruen1970). As a result the current redistributive share is not as an effect of conscious redistribution strategy, which is accelerated by commodity price volatility, though they are consistent.
By comparing government investment growth during price booming, and revenue growth, studies have identified a higher government investment. As a result, studies have attributed this to expenditure smoothing policy. However, during price slumps government investments particularly in infrastructure sector collapsed. This fell has been attributed to fell in revenue growth.
This can hardly explain the stabilization policy, but can easily explain the contrary. This brings us to the point that, there is no prove that, the Australian government used investment as way of dealing with commodity price volatility that occurred in 1920s (Koren & Tenreyro 2007).
During Korean War similar policy response occurred however, this time round government investment grew spectacularly, as compared to 1920s boom’s growth. At this time, the infrastructure sector like roads experienced drastic growth. However, government investment growth in other sectors like education has remained unmatched in the modern history of Australia.
By looking at the downside that occurred after 1920s and 1950s commodity price burst, it has been observed that government investment growth went down. “In contrast, the recent commodity price boom coincided with drop in aggregate government investments” (Bodie, Kane & Marcus, 1999).
This break can be explained by the government role ideological shifts, other than viewing it in terms of expenditure smoothening over commodity price volatility. However, the best evidence that will prove Australian policy response historical determination is the government’s response on the collapsing metal base prices.
##Conclusion
With the strategies laid down by the Australian federal government, commodity price volatility that affected major product exports in developing countries, never impacted Australia greatly as compared to other countries, be it on aggregates like GDP or unemployment. This is not because the Australian markets were in a position of responding to external forces.
But because, revenue was coming from many different sources, though some studies have refuted this point claiming that the Australian government didn’t use countercyclical investment policy to the maximum. Another reason that seems to have prevented greater impact was the fact that, the country was in a position to diversify revenue sources, hence mute the effects of price volatility.
This is because, diversification “made the difference – a big and growing industrial sector before about 1970, and a big and growing service sector after about 1970. More efficient factor markets and better institutions didn’t seem to matter much at all” (Kose & Reizman, 2001).
human
What could be a reference for this essay?
assistant
“Australian Price Levels