by Cilla

Created on: February 01, 2008

Globalisation refers to the increased integration of individual economies to form a global economy, characterised by increased flows of trade, finance, investment, technology, labour and skills across national borders. As the Australian economy becomes increasingly integrated into the world economy, all of the above areas of Australia's economy have been impacted by globalisation, in both positive and negative ways.

Globalisation has allowed for significant increases in Australia's trade of goods and services with other countries. World trade has increased 16 times its 1950s level, while world output has increased 6 times its 1950s level, and Australia has benefited from globalisation as a result. In response to increased world trade, Australia has formed a number of trade agreements, such as its bilateral agreement with New Zealand (CERTA) and its involvement in the Asia Pacific Economic Co-operation(APEC) forum, which, by giving preferential trade to each other, has benefited as these countries become open to Australia's exports. This has benefited the Australian economy in several ways. The fostering of free trade that arises from such trade agreements has resulted in lower prices and more competitive markets, thereby increasing the individual's purchasing power, allowing them to satisfy more wants. Th e availability of a wider range of goods and services this caused also contributed to the rise in living standards. The extent to which Australia has benefited from this can be seen in the rise in Australia's living standards- from having the 15th highest living standards in the world to being ranked 7th. The formation of such trade agreements has also impacted the direction of Australia's trade, while over 60% of Australia's goods and services were exported to Europe (esp UK) in the 1980s. Australia has shifted the direction of its trade to Austrian countries as well as North America. Currently, 75% of Australia's exports are directed to members of APEC, with 60% going to Australia's Asian trading partners, while only 14% of Australia's exports go to Europe.

However, Australia has also been negatively impacted by globalsation in trade, mainly due to the deterioration of Australia's terms of trade in recent decades. This too has caused changes in Australia's exports. While Australia traditionally relied on commodity exports such as wool, coal and beef, (5)% of Australian exports in 19950s), Australia has gradually expanded its export base to a range of manufactures

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