Asian Australian Ecomomics Relations

Answer the questions:
Teaching week 3:
Q1(c), Q2,3,4,6,7
1. What is meant by ‘openness’ in the economic sense? Why has openness been
important to the economic ascent of Asia and rise in the significance of Asia’s trade
relations with Australia? In answering these questions, refer to Australia in the Asian
Century, White Paper, October 2013 (AGPS), pages 40, 86 and 87 in particular.
Search it out on the internet.
2. Explain briefly what the following refer to:
(a) GDP
(b) GNP
(c) Purchasing power parity
(d) Per capita GDP
(e) Constant Price GDP
(f) Implicit GDP deflator
(g) Inflation
(h) Economic growth
(i) Nominal bilateral exchange rate
(j) Nominal effective exchange rate
3. In what way does a country’s exchange rate affect its international competitiveness?
In answering this question consider the value of the Australian dollar in the table
below.
At end United
Tradeweighted
Chinese Japanese
of States Index Renminbi Yen
Dollar
May 1970 =
100
USD/AUD “OS$/AUD” YUAN/AUD YEN/AUD
Jun-2001 0.5075 49.7 4.2006 62.94
Jun-2002 0.5648 52.3 4.6749 67.48
Jun-2003 0.6674 59.4 5.5243 79.99
Jun-2004 0.6889 59.1 5.7017 74.82
Jun-2005 0.7637 64.5 6.3208 84.14
Jun-2006 0.7433 62.2 5.9413 85.11
Jun-2007 0.8487 68.9 6.4642 104.70
Jun-2008 0.9626 73.4 6.6002 101.93
Jun-2009 0.8114 64.7 5.5442 77.76
Jun-2010 0.8523 67.3 5.7863 75.46
Jun-2011 1.0739 77.8 6.9410 86.33
Jun-2013 1.0191 76.5 6.4776 80.89
Source: RBA Exchange Rate Data.
4ORDER WITH US FOR AN A+ QUALITY PAPER….

Calculate (i) the overall percentage change in the value of the AUD against the
currencies indicated between 2001 and 2013 and (ii) the compounded annual
percentage growth rate in the value of the AUD against the currencies indicated
between 2001 and 2013. Identify three major reasons why these relative values have
changed in the way they have
4. Explain the meaning and measurement of a Gini coefficient. In your answer mention
the Lorenz curve and the ‘Line of equality’. Compare the Gini coefficients for China
and Taiwan and suggest reasons for any differences.
5. For the table below, calculate the compounded annual growth rates for the periods
1960-80, 1980-2000 and 2000-2010 for the three variables indicated. Compare and
comment on the results for the three periods.
China: Selected Indicators
Date Nominal GDP
Yuan billion
Constant Price GDP
Index: 1995=100
Exchange rate
Yuan/US$
1960 151.1 8.88 2.46
1980 454.6 23.1 1.50
2000 9921.5 151.2 8.28
2010 35003.0 394.0 6.83
6. For the table above, calculate the compounded annual growth rates in the implicit
GDP deflator for the periods 1960-80, 1980-2000 and 2000-2010. Compare and
comment on the results for the three periods
Teaching Week: 3
1. Visit the UTSOnline website (or the table below) which gives data on prices and
exchange rates for Australia, the USA and Japan.
(a) Calculate the bilateral nominal exchange rates for Australia and the USA (i.e.
the number of Australian dollars required to purchase one US dollar,
$A/$US) and the corresponding bilateral real exchange rates for Australia and
the USA. Next, calculate the bilateral nominal exchange rates for Australia
and Japan (i.e. the number of Australian dollars required to purchase one
Japanese Yen, $A/Yen) and the corresponding bilateral real exchange rates
for Australia and Japan.
(b) Next convert the two $A/$US series (i.e. the nominal series and the real
series) into indexes with a 1985 base year value of 100. Compare the two
indices by charting them over time on the same diagram. Similarly, convert
the two $A/Yen series into indexes with a 1985 base year value of 100.
Compare the two indices by charting them over time on the same diagram.
(c) Comment on the international trading implications of your results
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General note: In this subject expressions such as A$/US$, Yuan/US$ and Yen/US$ read as
the number of local currency units (Australian dollars, Chinese Yuan and Japanese Yen,
respectively) required to purchase one US dollar. Thus in 2000, 1.7265 Australian dollars
were required to purchase one US dollar. This interpretation or convention is found in most
economics textbooks. However, financial markets and thus financial-markets textbooks
typically take an alternative interpretation of expressions such as A$/US$. This alternative
approach interprets A$/US$ as the ratio of the value of one Australian dollar to one US dollar.
That ratio of values for, say, 2000 is A$/US$ = A$1/US$1 = A$1/A$1.7265 = 0.5792. Thus
the first interpretation of A$/US$ gives a numerical result (1.7265) which is the reciprocal of
the second interpretation (0.5792). You need to be aware of the different conventions and use
only the first convention in this course.
Selected Exchange Rates and Price Indexes
(1) (2) (3) (4) (5)
Y.JPN.EXCHUD Y.AUS.EXCHUD Y.USA.PGDP Y.JPN.PGDP Y.AUS.PGDP
JPY/USD AUD/USD 2000=100 2000=100 2004/05=100
1985 238.62 1.4317 61.6 92.8 43.9
1986 168.52 1.4960 62.9 94.5 46.6
1987 144.62 1.4288 64.8 94.4 50.0
1988 128.13 1.2806 67.0 94.7 54.2
1989 137.97 1.2648 69.5 96.8 58.3
1990 144.80 1.2818 72.2 99.0 61.2
1991 134.50 1.2840 74.8 101.6 62.4
1992 126.67 1.3623 76.5 103.2 62.7
1993 111.18 1.4730 78.2 103.6 63.6
1994 102.23 1.3691 79.9 103.7 64.4
1995 94.07 1.3496 81.5 103.2 65.8
1996 108.82 1.2769 83.1 102.6 67.0
1997 121.00 1.3480 84.6 103.1 67.8
1998 130.89 1.5923 85.5 103.1 67.9
1999 113.89 1.5497 86.8 101.7 68.6
2000 107.83 1.7265 88.6 100.0 71.6
2001 121.48 1.9354 90.6 98.7 74.2
2002 125.25 1.8413 92.1 97.2 76.5
2003 115.94 1.5415 94.1 95.7 78.2
2004 108.15 1.3592 96.8 94.6 81.5
2005 110.10 1.3128 100.0 93.5 85.1
2006 116.35 1.3279 103.3 92.6 89.6
2007 117.76 1.1952 106.3 92.0 93.3
2008 103.39 1.1975 108.6 91.0 99.3
2009 93.57 1.2822 109.6 90.7 98.4
2010 87.76 1.0902 110.7 88.8 103.5
2011 81.04 0.9492 112.2 87.6 108.3
2013 80.31 0.9330 113.8 87.1 111.3
(1) Japan: Exchange rate: Yen/US Dollar
(2) Australia: Exchange rate: Australian Dollars/US Dollar
(3) United States: Deflator: GDP at market prices
(4) Japan: Deflator: GDP at market prices
(5) Australia: Deflator: GDP at market prices
6ORDER WITH US FOR AN A+ QUALITY PAPER….

Note: Series (3), (4) and (5) are price indexes for the USA, Japan and Australia respectively.
The above data are in an excel file at the UTSOnline website for this subject. Go to
‘Assignments’ and follow the leads. Don’t leave it till the last minute. Once you’ve opened it
make all the necessary transformations to generate the data and the graphs. Below are some
suggested answers for the first few years (1985-87)
Index Index Index Index
1980=100 1980=100 1980=100 1980=100
Nominal Nominal Real Real
Nominal
AUD/USD
Nominal
AUD/JPY
Real
AUD/USD
Real
AUD/JPY
AUD/USD AUD/JPY AUD/USD AUD/JPY AUD/USD AUD/JPY AUD/USD AUD/JPY
1985 1.4317 0.00600 2.01 0.01268 100.0 100.0 100.0 100.0
1986 1.4960 0.00888 2.02 0.01800 104.5 148.0 100.5 141.9
1987 1.429 0.00988 1.85 0.01865 99.8 164.7 92.2 147.1
2. Comment briefly on the following events. (Check the web, Grasso et. al. or an
encyclopaedia – such as Wikipedia – for more background)
(a) The overthrow of the Qing Dynasty in 1911
(b) The May Fourth Movement
(c) The Long March
(d) Sino-Japanese War (1937-45)
How do you think these events may have shaped attitudes of governments and the
general population over the last half-century?
3. Compare and contrast the intentions behind, and consequences of (i) the Great Leap
Forward and (ii) the Cultural Revolution.
4. What is meant by a ‘cult of personality’? Does this notion have any relevance to
Mao? Explain why or why not. (Check the web, Grasso et. al. or an encyclopaedia –
such as Wikipedia – for more background)
5. Consider the table below for China on the next page. Calculate the annual
compounded per capita real GDP percentage growth rate for the following periods:
(a) 1949 to 1958
(b) 1958 to 1962
(c) 1962 to 1966
(d) 1966 to 1968
(e) 1968 to 1976
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Comment briefly on your results.
Period
Real GDP Index
Population (Millions)
1949
100.0
550.0
1958
283.3
664.9
1962
164.2
665.8
1966
298.2
735.4
1968
252.1
774.5
1976
485.7
930.0
6. Briefly compare the economic and social policies of Mao and Liu Shaoqi. (Check the
web, Grasso et. al. or an encyclopaedia – such as Wikipedia – for more background)
7. Compare and contrast Australia’s trade with China, Hong Kong and Taiwan during
the period of Mao’s governance of China. Explain the differences
Teaching Week: 4
1. Discuss China’s agricultural communes. Compare and contrast mainland China’s
performance in agricultural output with that of Taiwan
2. ‘Some in China and the West have gone so far as to predict the demise of the
one-party state, which they allege cannot survive if leading politicians stop delivering
economic miracles. Such pessimism is misplaced.’ (Li, 2013) Explain why?
3. Discuss China’s system of meritocracy.
4. Comment on ‘top down’ policy experiments versus other policy experiments
‘rising up from the local level’.
5. Critics question the legitimacy of the rule of the CCP, because it is not
democratically elected. But Li argues against this. What is his argument?
Assess it.
6. Explain the Quantity Theory of Money. What relevance might it have to China?
(Refer to the lecture notes)
7. Comment briefly on the following contemporary issues in China: (i)
Urbanisation, (ii) entrepreneurship, (iii) financial liberalisation and (iv)
corruption.
8. Does China’s success mean the end of the democracy experiment? Does
China’s one-party state – with its emphasis on adaptability and its system of
meritocracy – represent the way of the future? Compare briefly the views of Li
and Huang.
8ORDER WITH US FOR AN A+ QUALITY PAPER….

9. In the light of The Economist Magazine’s (2011) review of Vogel’s recent biography
of Deng, briefly explain why Deng’s policies were described as representing ‘a
breathtaking ideological reversal’.
10. Compare Deng’s leadership style to that of Mao. Comment on political policies,
economic policies, personality cults and personal characteristics.
.
Teaching Week: 5
1. Using a Table, give an overview of the positive and negative economic and broader
social aspects of the Sukano administration versus the Suharto administration.
2. According to Grigg (2008): ‘In the history of corruption nobody stole more from a
country over a longer period than former Indonesian president Soeharto: That’s the
conventional wisdom, anyway. Transparency International put Soeharto and his
family at the top of its list, estimating he stole between $US15 billion and $US35
billion, equating to roughly 1.3 per cent of Indonesia’s GDP for each of his 32 years
in power. It’s a huge number, but like many aspects of the Soeharto era, it was never
that simple.’ Not that simple? Explain
3. Indonesia’s exchange rate management regime ‘… is still a work in progress’ (Basri
and Hill, 2011, p.94). What system is in place and why? How effective has it been?
4 Consider the data below for ‘foreign direct investment’ (FDI) into Indonesia. Chart
these data in nominal and real terms. (Deflate FDI by the USA CPI, and express values
in terms of 1995 US$s) What does ‘foreign direct investment’ mean (look it up on the
web)? Comment on the implications of these data.
Year
FDI (US$)
Manufacturing
FDI (US$)
Total Indo CPI USA CPI
1995 30,441 40,629 100.0 100.0
1996 19,884 29,776 108.0 102.9
1997 23,017 33,127 114.7 105.3
1998 8,388 13,557 181.7 107.0
1999 6,335 10,892 218.9 109.3
2000 9,597 15,284 227.0 113.0
2001 5,145 15,043 253.1 116.2
2002 3,206 9,744 283.2 118.1
2003 6,464 13,621 301.9 120.7
2004 6,332 10,275 320.7 124.0
2005 6,028 13,579 354.4 128.1
2006 4,500 9,300 400.7 132.3
5. Compare and contrast sectoral output and employment growth prior to the Asian
Financial Crisis
(AFC) and after the AFC. Refer to Basri and Hill (2011). How might
your answer to Question 4 throw light on the manufacturing sector’s growth
performance?
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6. According to Basri and Hill (2011, p.101): ‘Indonesia now has a political system
resembling that of the USA’. Explain.
7. Go to the Department of Foreign Affairs and Trade (DFAT) website
(http://www.dfat.gov.au/). Go to ‘Countries and Regions’ and then ‘Indonesia’.
Download the ‘Indonesia Fact Sheet (PDF)’ and use it in combination with lecture
material to give (i) an overview of Australia’s trade with Indonesia over the last few
decades and (ii) the current structure of Australia’s exports to and imports from
Indonesia. Why have Australia’s exports to Indonesia declined in relative importance
since the late 1990s?
Teaching Week: 6
1. Consider the table below.
(1) (2) (3) (4) (5)
Year
Share Price:
Japan
Share Price:
Australia Exchange Rate CPI Japan CPI Australia
June 1980=100 1980=100 Yen per $A 1980=100 1980=100
1980 100.00 100.00 251.31 100.00 100.00
1990 495.24 238.90 120.41 121.67 217.87
2000 336.26 526.88 63.19 132.64 268.24
2013 162.64 651.53 80.89 130.00 383.00
(a) Calculate the annual average inflation rate (i.e. the compounded annual
growth rate of the CPI) for Japan and Australia for the periods (i) 1980-90 (ii)
1990-2000 and (iii) 2000-2013. Comment on the results.
(b) Calculate the annual average nominal rate of return on shares (ignoring
dividends, taxes, exchange rates and transaction costs) for Japan and
Australia (i.e. the compounded annual growth rate) for the periods (i) 1980-
90 (ii) 1990-2000 and (iii) 2000-2013. Comment on the results.
(c) Mr Ito and Mr Suzuki are Japanese residents. Who would have benefited
most? Mr Ito invested in Japanese shares in 1980 and sold them in 1990. Mr
Suzuki invested in invested in Australian shares in 1980 and sold them in
1990 so as to purchase a new house in Japan. In your answer calculate the
compounded annual rates of return. Ignore dividends, taxes and transaction
costs.
(d) Who would have benefited most if they both bought in 2000 and sold in
2013? In your answer calculate the compounded annual rates of return.
Comment on your results.
2. Refer to the Economist (2013) in the Readings for this week. Why is the
newly-elected Prime Minister in favour of (i) monetising government debt, (ii)
pushing up inflation, (iii) pursuing ‘unbridled fiscal stimulus’ and (iv) pushing
down the international price of the Yen? Explain the meaning and mechanics
of these four policies and comment briefly on their economic implications.
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3. How come falling and historically low interest rates in Japan were associated with a
depressed economy during the 1990s and early 2000s?
4. Given the data below and in reference to Sugeno’s discussion of labour disputes in
Japan, comment briefly on the following:
(a) trends in union-management disputes
(b) trends in individual employment disputes and civil litigation
(c) the spring 1977 wage offensive as a turning point
(d) ‘the labor tribunal system’
Decade
Av.
Japan – Work stoppages
(‘000s) Annual average
Japan – Employees (‘000)
annual average
1960-69 3911.3 29117
1970-79 4443.3 36236
1980-89 412.1 42914
1990-99 109.2 52069
2000-06 14.9 54185
5. Discuss the current structure of international trade between Japan and Australia and
elsewhere. Go to the Australian Department of Foreign Affairs and Trade for data.
Try: http://www.dfat.gov.au/.
6. What is the Current Account Balance? Compare and contrast the Current Account
Balance of Japan with Current Account Balance of the USA.
7. Compare and contrast share price movements over the last few decades for Australia
and Japan. How might share price values and real estate (i.e. land) price values affect
aggregate demand (for goods and services)?
8. Funabashi (2009) refers to Japan’s ‘lost decade’ and that ‘another lost decades
ensued’. Explain. What implications might this have had for Japan-Australian trade?
9. Funabashi claims ‘Today, Japan faces several acute problems, among them a
shrinking population, collapse of agriculture, few prospects for young adults, and the
erosion of the middle class’. In what sense are these problems? And are these
problems more imaginary than real?
10. ‘The insistence, long promoted by the central bank, that structural reform is the best
way to revive growth is now part of a government document whose progress will be
reviewed at regular intervals by the prime minister, top members of his cabinet and
the BoJ governor in Mr Abe’s newly formed Council on Economic and Fiscal Policy’
(Economist 2013). What are these structural reforms? How might they work?
Teaching Week: 7
1. Outline the stages of Japan’s economic development prior to World War II.
2. “The Meiji restoration claimed to be a return to antiquity. However, it was actually an
abandonment of antiquity” Discuss
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3. Discuss briefly the following pre-WWII topics:
(i) Japan’s Meiji Constitution
(ii) Adult suffrage
(iii) Zaibatsus as an instrument of government policy
(iv) Government guided economic development
(v) Emperor Hirohito
4. Outline the structural changes in the pattern of Japan’s international trade from Meiji
to WWII
5. Discuss inter-war growth in Japan. Refer to the data below (on the next page).
GDP COMPONENTS AND POPULATION
Constant 1934-36 Prices-Millions of Yen
Period C + I + G + X – M = Y Population
Millions
1920 8566 2471 1026 1234 1798 11,499 55.0
1930 11005 2430 1476 2211 2985 14,137 65.0
1940 13389 7070 3377 4276 4931 23,178 72.0
Growth (Annual Compounded %)
1920-30 2.5 -0.2 3.7 6.0 5.2 2.1 1.7
1930-40
6. How did Japan’s pre-WWII experience influence post-war Asian economic policy?