RDP 9401: Resource Flows to the Traded Goods Sector 6. Conclusion

The paper has examined the sectoral allocation of resources since the early 1980s; a period in which there has been important structural change in the traded goods sector. Using an input-output framework, industries were defined as traded or non-traded according to their propensity to export or compete with imports. By this measure, the share of total investment allocated to the traded goods sector has increased in recent years. Importantly, this has been driven by an increase in the allocation of investment to export oriented industries. In contrast, the share of investment allocated to import competing industries has fallen. A similar switch in the allocation of total employment away from import competing industries has also occurred, although the share of employment in the exportable subsector has not changed greatly. These results contradict earlier findings of an increase in resources allocated to import replacement industries; a result which seemed at odds with observed structural changes in production.

For both investment and employment, the switch is most evident from the mid 1980s, consistent with the accelerated pace of international integration from this time (Bullock et al. 1993; Menzies and Heenan 1993). These changes in the sectoral allocation of resources are the corollary of the specialisation in production that has accompanied international integration. The recent tendency to allocate resources towards export oriented industries and away from those that compete with imports is a tangible measure of the outward orientation of the Australian economy.

Given the course of internationalisation on which the economy has embarked, the sectoral switch in the allocation of resources evident since the early 1980s will become more pronounced. Over time, the development of a greater capacity to export should offset the increase in import penetration and assist the adjustment of Australia's balance of payments to a state of longer-run sustainability (Bullock et al. 1993). Furthermore, it is an empirical regularity that outward-looking export oriented countries attain higher rates of growth than do countries with inward-looking policies of import replacement (Balassa 1978; Edwards 1991; Marin 1992). Thus the continued development of Australia's export capacity should improve the nation's long-run growth prospects.