International Competitiveness

Question 1

International Competitiveness

Answer 1

The ability of Australian businesses to compete in a world market on price or quality of G+S that we produce to export to the world.

Question 2

Factors affecting International Competitiveness

Answer 2

• Productivity
• Production Costs
• Availability of Natural Resources
• Exchange Rates
• Relative Rates of Inflation

Question 3

Productivity factor of IC

Answer 3

Productivity is the measure of outputs per inputs.

Labor and capital productivity drive improvements in cost and quality and increase international competitiveness.

Governments are always trying to invest in improvements in productivity.

Question 4

Production Costs factor of IC

Answer 4

Different countries have varying tax rates, minimum wages / other employment conditions, and costs of utilities. The cost of production in different countries impacts their ability to compete with other countries.

Australia has very high production costs. Partly due to our very high minimum wage. This means that it’s more expensive for businesses to produce in Australia, and their products are more expensive than our major competitors.

Question 5

Availability of Natural Resources - factor of IC

Answer 5

Access to natural resources like Australian minerals / commodities, or access to clean water and arable land improves productivity, decreases costs of production, and improves international competitiveness.

Australia does have large access to these so it helps us be internationally competitive.

Question 6

Exchange Rates factor of IC

Answer 6

A depreciating dollar means that it is cheaper for overseas customers to buy AUD. Thus our prices are lower compared to competitors so we are more internationally competitive.

An appreciated dollar = more expensive for overseas customers, thus higher prices compared to competitors. -> Less internetionally competitive.

Question 7

Relative Rates of Inflation

Answer 7

The rate of inflation will directly affect the ability of Australian firms to compete with global businesses.

If Australian prices rise at a faster rate than our competitors then our goods and services are less competitive on price. (Vice versa)