Globalization and Deregulation in Australia's Financial System
This paper examines the key forces behind the transformation of Australia's financial system from the 1980s onward, focusing on the twin drivers of technological change and deregulation. It explores how improved communication technology lowered barriers to trade and expanded access to financial instruments for both businesses and households. The paper then analyzes Australia's export-driven economy, particularly its commodity and mining sectors, which benefited from growing demand in China and India and helped insulate the country from the worst effects of the 2008 global credit crisis. Finally, it considers the social costs of deregulation, including hardship in agricultural and rural communities, before concluding that globalization affects different nations in markedly different ways.
- Introduction: Twin drivers of technology and deregulation transform Australia
- Technology and the Financial System: Technology expands access but increases market volatility
- The Export-Driven Economy: Commodity exports and mining sustain growth through crisis
- Deregulation and Its Effects: Deregulation boosts economy but creates social hardship
- Conclusion: Globalization's effects vary significantly across nations
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What makes this paper effective
- The paper clearly identifies two distinct causal forces — technology and deregulation — and traces their combined impact rather than treating either in isolation, giving the argument analytical depth.
- It uses concrete economic evidence, such as the 42% improvement in export prices and Australia's avoidance of recession during the 2008 crisis, to ground its claims in measurable outcomes.
- The acknowledgment of deregulation's social costs (rural hardship, aboriginal and working-class communities) adds nuance and prevents the paper from reading as one-sided advocacy.
Key academic technique demonstrated
The paper demonstrates effective use of a causal framework: it introduces a thesis (dual drivers of change), develops each driver in its own section with supporting evidence, and then qualifies its overall argument in the conclusion by noting that globalization's effects are uneven across nations. This structure models how to present a multi-factor explanation clearly and concisely.
Structure breakdown
The paper is organized into five sections. The introduction establishes the dual-driver thesis. The second section covers technology's role in expanding financial access and increasing market volatility. The third section details Australia's export and mining boom and its resilience during the 2008 credit crisis. The fourth section addresses deregulation — its mechanisms and its social costs. The brief conclusion synthesizes the argument and offers a comparative observation about globalization's uneven national impact.
Introduction
One of the primary forces driving the globalization of Australia's financial system has been the rapid technological change that has swept the world. The Internet has enabled businesses to connect with one another and with consumers at the click of a mouse. Additionally, financial markets are no longer confined to real-time trading or affected primarily by national developments. Enterprise has become a truly global phenomenon. However, technology alone did not cause the dramatic improvement in Australia's economy from the 1980s onward. Rather, the twin driving forces of technological change and deregulation were required to create an Australian economy deeply enmeshed within the world community (Kellerman 2011). Deregulation fueled the nation's current commodity boom, creating an export-driven economy so strong that it was relatively insulated from some of the problems spawned by globalization, including the 2008 global credit crisis.
Technology and the Financial System
Improved technology in the financial industry and in the world's communication systems overall has facilitated access to both goods and services and financial instruments. As the costs of technology have dropped, more and more businesses have used it to promote their products as well as to access aspects of the financial industry that were previously unavailable to them. Electronic transactions have made borrowing, spending, and trading much easier and faster — and have also radically destabilized the markets because of the subsequent increase in volatility. Technology has reduced costs and entry barriers and increased access to information, but it has also given entities the ability to shield their transactions. Theoretically, technology should make it easier to calculate risk, but it can also make it easier to conceal risk (Financial System, 2010, Australian Treasury).
Both businesses and households have increased their exploration of new financial instruments. The expansion of enterprise and the availability of goods and services have increased the desire of households to borrow as well as to expand their financial asset holdings, given the availability of new investment options (Financial System, 2010, Australian Treasury). Increased wealth and the increased speed of economic transactions have together facilitated the pace of trade.
The Export-Driven Economy
Australia has been described as one of the economies to have most benefited from globalization because of its expanded access to developing markets in India and China. As a developed Pacific Rim nation, Australia has been uniquely positioned to exploit these opportunities. The price of exports relative to imports "improved by 42% since 2004" (Everybody Needs Good Neighbors, 2011, The Economist). At its height, the Australian economy was operating at virtually full employment, the government was concerned about inflation and encouraging consumers to save, and the central bank was pursuing a tight monetary policy. While there have been some conflicts with major trading partners — such as a dispute with Indonesia over Australian beef exports — overall Australia's strength as an exporting power has been robust and welcomed by much of the developing world (A Row Over Cows, 2010, The Economist).
The recent credit crisis understandably caused great anxiety in Australia, given that an export-driven nation is likely to be disproportionately affected by a global financial shock. As a result, the Australian government launched a stimulus package. Australia, in contrast to other developed nations in Europe and the United States, "increased its production of goods and services in the first few months of 2009 … Alone among the developed nations that belong to the G-20, it was not being sucked into a world recession" (Stutchbury 2010). Its currency even reached parity with the U.S. dollar.
One unique facet of Australia's economy — not present in the other developed nations hard-hit by the credit crisis — was the expansion of its mining sector. In the years before the crisis, "Australian iron ore was stoking the very Chinese industrialization that in turn was recycling a massive export surplus into excess U.S. consumption, driving up Washington's budget deficits, and inflating an American housing bubble that would almost bring down the global financial system" (Stutchbury 2010:4). This dynamic sustained demand for Australia's commodities and mining products. Technology and globalization, which had spread to the developing world, were strong enough to keep the Australian economic "miracle" afloat (PNC, 2011, Australia Banking and Finance).
Conclusion
Deregulation and globalization in Australia have not been embraced by all. Regardless, the success of Australia's economy and its durability in the wake of the recent credit crisis indicate that while the effects of globalization may be widespread, globalization does not affect all nations — even developed nations — in the same manner.
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