The world economy has undergone major structural change over the last quarter century. There have been significant and continual changes in the capacity of different countries to supply goods and services as a result of technological change, the opening up of trade, the discovery and harnessing of natural resources and the development of human skills. At the same time, rising incomes and demographic change have influenced the pattern of demand for different goods and services.
Governments around the world have responded differently to structural change at different times, sometimes attempting to restrict trade and to insulate selected activities from that change. Other countries - including Australia - have introduced microeconomic reforms aimed at facilitating structural change. Some of the reforms undertaken include deregulation of financial markets, freeing up aviation and telecommunications markets, taxation reform, making government enterprises more commercial and reductions in border protection such as tariffs and quotas. In recent years, particular attention has been given to reform of public utilities and making labour markets more competitive.
The freeing up of financial markets and rapid advances in communication technology have resulted in speedier and larger international movements of investment funds in response to changing financial conditions. This development has placed more discipline on the conduct of macroeconomic policies, which must now have regard for well-informed and influential market sentiment.
This Statement examines the nature of structural change and the benefits of facilitating change through microeconomic reform in terms of increased productivity, increased economic flexibility, lower prices for consumers and increased employment opportunities. The Statement then considers whether Australia's macroeconomic and microeconomic policies are meeting the demands of structural change and the possible need for further policy change. Consideration of what is an appropriate industry policy is also included in the Statement.