ABSTRACT
Australia’s deep-seated economic problems have only recently been fully recognized. Competitive advantage in international trade increasingly depends on knowledge and research expenditure, embodied as advanced technology both in products and methods of manufacture. The consequence is a substantial long-term reduction in the demand for commodities. Australia’s past industrial strategy has been based on exporting its abundant natural resources, according to the theory of comparative advantage. The devaluation of the Australian dollar has been slow to improve the balance of payments because world demand for commodity exports has been little changed by price reductions, while on the other hand higher-technology capital goods must be imported at higher prices because there is no suitable local alternative. A national targeting policy was instrumental in the miraculous shift in Japan’s post-war industrial society, which ran diametrically opposite to the prescriptions of comparative advantage.
