Australia vs. China: An Economic Comparison Essay

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Australia and China adopt very different economic systems in order to cater the best for their society. However, Australias economic system is more successful than Chinas and, due to the writers right-wing value system, will be measured in terms of environmental efficiency, labour and entrepreneurial resource efficiency and the standard of living.

The basic economic problem for any country is that resources are scarce while wants are infinite. This means that countries must decide what to produce, how to produce and for whom to produce in the most efficient and equitable way possible. Australia and China both take different approaches to solving this economic problem, even though both can technically be classified as a mixed economy (Year 11 Economics, 2007). Australia approaches the problem from the perspective of what is best for the individual however China believes in doing what is best for the country (Year 11 Economics 2007). These ideals are more clearly shown in the importance of market forces to each country.

Australia and China allow different degrees of market forces and government interference in order to best solve the basic economic problem. Australia allows a lot more market-based forces to determine what, how and for whom things are to be produced. This means that the competitiveness of the market combined with the need for profit allows Australia to have high quality products at competitive prices (Mixed Economies, 2007). However, market forces also determine for whom things are to be produced, which means people with little or no income can be forgotten and this is where the government interferes.

The government works to protect the rights of workers so that they are not abused by large companies and tries to be more equitable by providing welfare to the disadvantaged (Mixed Economies, 2007). China believes in a lot more government interference due to its communist ideals. The government has the most control over what, how and for whom things are to be produced although market forces still play a huge part for the minority of Chinese people who have money. China tries to spread its wealth over its huge population however due to its numbers it is hard to keep track of and provide for its entire population (An Introduction to Economics, 2007).

These ideals are both effective in theory however in practice Australias economic system is more equitable than Chinas. Equity can be determined by two things; equity in comparison to the world and equity within their own country. This is measured with the global living standards and the safety net within the country. The safety net is made up of health, education and welfare; three essential things for each person to have in case they fall ill, have a low income or wish to be educated. The standard of living includes the safety net as well as life expectancy and economic growth and therefore determines equity amongst people in comparison to the rest of the world. This is measured with a single number called the Human Development Index (HDI). Australia ranks very highly in the HDI achieving 0.957 in 2005 making it third in the world (Hamel, 2006).

In terms of a safety net, Australia provides free health, education and an efficient welfare program. The government uses programs like Medicare, Centrelink and public school facilities to provide lower income workers, the disabled and disadvantaged a fair go (Australian Department of Health and Ageing, 2007). China still has a safety net but it is a very poor one. Health, education and welfare are provided but they are not up to the standards of Australia. In fact, these services do very little to help its incredibly large population. This results in a very low HDI of 0.768, making it 81st in the world (Hamel, 2006) Therefore, as Australia has a more effective safety net and a higher HDI, Australia has a more successful economic system in terms of equity.

Australia is also able to use its environmental resources more efficiently than China. Environmental efficiency can be determined by power distribution, the resources used and the social costs. Australias power distribution is very effective with very few blackouts and 24 hour assistance in case of emergencies (Metcalfe, 2007). Like any other country, Australia has environmental issues however it is trying to become more environmentally friendly and efficient. Australia is building more infrastructure and becoming more environmentally friendly. China on the other hand does not have effective energy distribution. Blackouts are a common thing in China due to the overwhelming demand for energy (Xinzhang, 2007). Right now China faces the problem that there is not enough transmission capacity to provide additional supplies which results in poor distribution.

Coal is the main resource used for energy supply in China by a staggering 63.4% compared to 6.9% hydroelectricity (China Today, 2005). Coal use in Australia is significantly less than this with only 42% of its energy source being coal (Metcalfe, 2007). China has overwhelming carbon dioxide emissions, so overwhelming that China is accountable for 15% of the worlds emissions (World Fact book, 2007). This has very negative social costs with acid rain being a frequent problem for China. 5% of Chinas GDP is spent on trying to fix the social costs of pollution (China Today, 2007). Not only is this not statically efficient, but it is not dynamically efficient either. Therefore, even though both countries have environmental issues, Australia is able to provide a better power supply with less social costs and so its economic system is more environmentally efficient than Chinas.

As well as environmental efficiency, Australias economic system uses its labour and entrepreneurial resources more efficiently than China. The effectiveness of labour and entrepreneurial resources can be measured by unemployment and the degree of allowance of privately owned businesses. Australia had an unemployment rate of 5.6% in 2004 and a 4.9% unemployment rate in 2006 (ABS, 2006). This shows unemployment decreasing and more people entering the workforce. This increase in workforce allows more resources to be given to the business sector and therefore speeds up the economy. As well as this, Australia allows more private businesses than China. In 2004, there were over 3 million privately owned businesses in Australia (ABS, 2004). Not only does this create employment but it promotes consumer sovereignty, giving consumers competitive prices and choice between products. The government only interferes in the case of market failure i.e. national defence and public schools.

This is to ensure that the needs of the country are met and to try and create equity amongst those who cannot afford the necessities. Therefore, Australia uses its workforce and entrepreneurial resources more efficiently. China however had a 9.9% unemployment rate in 2004 which shows that a lot of labour is not being used effectively (World Tax Inc, 2007). For many of the people who are employed, they are underpaid and overworked which can lead to poor goods and is not very equitable. Also, China does not utilise its entrepreneurial resources as well as Australia does. Private business is increasing in China but the state-owned and collective enterprises still out number them significantly.

In 2004, Chinas first economic census showed that private enterprise had gone up 49% while state-owned enterprise had gone down 48% (Xinhua News Agency, 2005). The government still rules the majority of business which does not promote competitive quality or give people a choice of goods. The government often interferes even in cases where there is no market failure and unfortunately what consumers demand may not necessarily be acknowledged and supplied by the government. Therefore, due to better employment rates and better use of entrepreneurial resources, Australias economic system is more successful than Chinas.

An effective safety net, high standard of living, environmental efficiency and an efficient workforce are key components in any successful economic system. Australia manages to maintain these components making its economic system highly successful. China on the other hand is still developing and trying to improve these components. It is almost unfair to compare the two as they are at different stages of economic growth. Perhaps in years to come China will become more efficient and equitable and be able to compete with the best economic systems in the world. For now, Australias economic system is more successful than Chinas and only time will tell as to whether it will stay that way.


Hamel, J.(2006): Human Development Report 2006., L. (2007): City Faces Prospect of Electricity Blackouts., L. (2007): Nation Master: Energy Facts. World Factbook (2007) Government: Department of Health and Ageing (2007)
alian Beaureau of Statistics (2007) Today (2005) News Agency (2005): China Publishes Results of 1st National Economic Census Tax Inc (2007): Chinas Unemployment Rates, G., T.A. Boden, and R.J. Andres(2006): Global, Regional, and National CO2 Emissions. 11 Economics (2007): Tim Riley Publications.

-Unit 43: Mixed Economies (2007)-The Market Economy: How Economies Differ (2006)-Introduction To Economics: Chapter 1

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