The political economy of manufacturing protection in Australia

Abstract

Throughout the past half century manufacturing has been more heavily protected against import competition in Australia than in perhaps any other industrial country except New Zealand. Protection emerged as a political issue in Australia well before Federation in 1901. The discoveries of gold in the 1850s in the two most populous colonies, Victoria and New South Wales, caused the population of Australia to treble in less than a decade. The period from Federation to 1973 was one of periodic increases in protection from manufacturing import competition, while the decade since then has been one of protection cuts for most manufacturing industries. One of the strongest conclusions in neo-classical trade theory is that protection against imports reduces the average level of income in countries like Australia whose economies are too small to influence international prices. In Australia, a belief that protection raised real wages played an extremely important part in moulding public opinion in favour of protection.