Introduction to International Integration of the Australian Economy

The structure and performance of the Australian economy have been shaped profoundly by international linkages. Despite their enduring importance, however, the strength of the links between Australia and the rest of the world have varied considerably through time. The depression of the 1930s, and then World War II, saw the trade links weakened substantially. In the three and a half decades that followed, little effort was made to rebuild these linkages, as Australia pursued a development strategy that left the greater part of the economy relatively isolated from the world. This gave Australia some of the characteristics of a ‘dual economy’: one part (resources and agriculture) closely integrated with the outside world, and another (larger) part that was inward looking and sheltered from the efficiency and pricing pressures that come with international integration. In the past decade, all this has changed. Australia has embraced the idea of an outwardlooking, export-oriented economy, with both its goods and financial markets increasingly integrated with world markets. Arguably, today our links with the rest of the world are stronger and more pervasive than at any time, at least over the past century. This change has seen a weakening of the division between the outward-oriented sectors and the domestic sectors, and has led to many non-traded industries also feeling the impact of international integration.