With the lowering of tarrifs by the Hawke/Keating Govts,there was a supposition that as we lowered our barriers to foreign imports,living standards would rise in third world countries to meet ours and thus people all around the world would benefit.

There are two very basic flaws in the proponents of free trade ideology.Firstly countries like China and India have so many poor that they will have access to a cheap labour source for many decades to come.Secondly with diminishing energy and resources only a select few in the world will be able to experience the standards of living we all take for granted now.

With the lowering of tarrif barriers we are all working harder and longer just to maintain living standards we enjoyed ten yrs ago.Most of our manufacturing jobs have moved off shore and now we in the land of OZ are fighting over fewer options in the job market,thus working harder for less.

Small business in this country is being destroyed and the multinationals just take up the slack in China or India and sell back to Aussies with profits of over 1000%.

When the mineral boom ends,we will have no industries or technologies to provide a future for our children.

Manufacturing is not a troglodyte activity,it needs a lot of genius/tenacity from individuals and our universities to make it flourish.We are the gutless,stupid country in serious decay.

The energy/minerals boom is our poisoned chalice.

Yes. All we are doing is gradually lowering our own living standards closer to those of the countries we are helping by allowing them to take away our jobs and industries. Not very clever, but not unsurprising given the vicious, self-serving creeps we have for politicians.

Australia will only ever have a strong manufacturing sector again when, like the workers in Third World countries, our workers cannot afford to buy the products they are producing for export.

You are confusing the standard of living with quality of life.

What we can show is that overall, Australians have benefitted largely
through the global economy, with a better standard of living.
They are richer then they ever were and the money they earn buys
them more. If the clothes, electronic equipment, power tools and
many other imports were made in Australia, many consumers could
simply not afford them, especially the poor.

Quality of life is another story all together, thats not the same
as standard of living. But then go down to your local Lotto kiosk
and see what people are really dreaming about. They mostly seem to
focus on becoming rich as their future source of happiness. So
they usually vote through their wallets, as many an election result
shows.

Arjay
You say “countries like China and India have so many poor that they will have access to a cheap labour source for many decades to come.” That’s exactly what we said about Hong Kong and Japan a 40 years ago. But trade raised their living standards from third world to first world in a generation. Trade is not the sole panacea for world poverty, but it is an important and indispensable part of the solution.

You also say “We are working harder and longer to maintain living standards of 10 years ago”. This is wrong.

Average weekly hours worked were 33.1 in 1996 in the year to March 2007, 34.3 in the year to March 1997. Average full-time hours fell from 40.7 to 39.9 over the same period.

Between November 1996 and November 2006 average weekly earnings (seasonally adjusted) of all employees (part time and full time) rose from $570.40 to $846, or 48.3%. Full-time earnings rose from $728.5 to $1,105.10, or by 51.7%. The Consumer Price Index by 29.3% over the same period. So earnings growth outstripped inflation by 14-17% over the period.

We are not “fighting over fewer job opportunities” – there are more Australians in employment now than at any time in history, both in absolute terms and as a percentage of the population. The unemployment rate is at its lowest since the 1970s.

It’s true that the minerals boom is a boon for our economy, but these positive trends were evident through the 1990s, before it happened. And they will continue once the boom ends, as long as our governments don’t try to turn the clocks back and undo the benefits of economic reform and reduced protectionism we’ve enjoyed in the past 20 years.

If we had tariffs and import restrictions, the countries to whom we export would impose more of their own on us. Most people think of standard of living in terms of life style and that includes everything from cars, TV sets, air conditioning, holidays overseas, large houses with granite bench tops, the latest in medical and therapeutic medicines, eating out, latest fashions etc. I would suggest that a lot more people either enjoy many of these things or aspire to them (as they are a lot cheaper comparatively except land prices which are constrained by availability), than they were 10 years ago because we all want to import them, so we accept that others can do it more cheaply and we benefit as a result. In return we dig things out of the ground, offer tourism, educate people and offer financial services, farm produce etc. We are in a constant state of flux and it is interesting to note that South Korea, once the cheap manufacturer of Asia, is now outsourcing a lot of its manufacturing such as cars, to other countries in order to compete.

If you think that imposing sanctions on cheap imports and doing all the manufacturing here, think again. It would create a high level of inflation. It would also have the side effect of making Australia even more expensive a place to live and make us even more uncompetitive. We are an innovative country that can't live in the past and we have to constantly reinvent ourselves. We are only held back by our out of date labour practices, tax laws and discrimination. The important things like broadband, water conservation, education, research and development are the things that provide employment rather than living in a past era like the Luddites, who smashed the textile industry in England because they felt the industrial revolution threatened their existence. Change is part of life. China and India are certainly lifting themselves out of poverty. There are also a lot more small businesses in Oz than there were 10 years ago. Just look at all those self employed people.

Rhian in the manufacturing sector the reality is longer hours for less pay.Even in the Building industry contractors are quoting prices that haven't changed much in 10yrs.Overheads and wages have gone up and there are almost no margins for profit,that is why we see a proliferation of micro business which is really another term for buying yourself a job.

Quality of life is measured in terms of return for hourly endeavour and the time spent servicing the bottom line.In small business most people are working more for less.

Perhaps this is just a NSW disease that other states are not experiencing.

The bottom line is this,how low do wages have to go to stop the bleeding of our industries to third world countries?We cannot compete with $1.00 per hr wages with no OH&S regulation or our litigation mad society,so all our industry will eventually move off shore and the knowledge and skills will be gone forever.

Can we all work for the public service generating regulation and laws for industries that don't exist?

Rhian said: "It’s true that the minerals boom is a boon for our economy, but these positive trends were evident through the 1990s, before it happened. And they will continue once the boom ends..."

The minerals boom has provided a short-term boon for our economy, but it may have also exacerbated our economy's long-term structural imbalances e.g. narrow export base, overreliance on foreign capital and the resultant large current account deficit. Demand for Australian minerals has allowed the private to continue borrowing in order to keep spending more than it earns. Such a trend is only sustainable as long as international investors and creditors believe it is.

Considering the massive blow-out in Australia's net foreign liabilities, most would agree that it's only a matter of time before we face another balance of payments crisis. As Australia lacks an alternate export base, our economic fortunes are almost completely tied to global commodity prices. A substantial downturn in commodity prices would lead foreign investors to take their funds out of the Australian economy. We would suffer a credit crunch and the currency would fall, thus leading to further sales of Australian assets in a down spiral toward debt-induced recession.

Simply put, Australia's high vunerability to external shocks means that our economy is more akin to an oil-rich sheikdom than a modern industrialised nation.

Arjay
I’d agree that quality of life is not measured only in hours worked and dollars earned, but your original post made claims about trends in these indicators that are clearly wrong. Nor does shifting ground to the manufacturing sector help your case. Average earnings growth in manufacturing has actually been faster than the all-industries average data I quoted, with full time adult earnings rising by 56% and total earnings up by 57% in the past 10 years. This is no surprise to those of us who understand that competition is driving productivity gains, and refutes those who argue that competition forces us into a race to the bottom in wages.

No, we can’t and shouldn’t compete with third world wages, but we don’t have to. The whole point of the gains from trade is to concentrate on the things we’re RELATIVELY good at and exchange the product for things others are relatively good at. A good analogy I read recently is this – Tiger Woods is a trained and certified tax accountant, but it makes no sense for him to complete his own tax return. He’s better off practicing his golf and paying someone else to do his paperwork.

Oligarch
The issues you raise have more substance, and there is evidence from overseas of a “resource curse” effect of resource endowment crowding out other industries. Our rising exchange rate may be evidence of that. I suspect our reliance on foreign capital has more to do with low domestic savings that industry structure, however, and on balance our reliance on primary industries for exports is less now than it was 20 years ago, despite its recent increase, because of the declining importance of agricultural exports and rise in services exports.

Overall, Australia’s real per capita economic growth in the past few years compares favourably with other developed economies. This suggests to me that the booms make the busts worthwhile, but I accept there are costs and risks as well as benefits in our current economic structure.

Rhian,we have a balance of payments deficit now approaching $400 billion and the US has a deficit in the trillions.We are are relying on others to produce goods and services that we have no way of servicing the cost or debt.

If you try to send manufactured goods to China there is an import duty of 110%.We have import duties of just 5%.This is not a level playing field.No other country has a no tarrif barrier policy on primary/manufacturing products other than Australia.Why are we the sacrificial lambs?

There is no method in our madness and the pursuit of free trade with this present ideology will bring us all asunder.

True wealth is in your educated population,so why do we in the land of OZ do the opposite to that of Ireland in not investing in affordable education?We have infinately more resources from the minerals boom,yet have no resources for infrastructure or to effectively educate our youth.

Our present preoccupation with an expectant milaise of cheap products will prove to be serious folly.