Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-1 Chapter 20 Industry case studies Telecommunications Automotive industry

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-2 Lecture Plan Case 1: Telecommunications Importance of telecommunications The Australian telecommunications market Deregulation of telecommunications Regulatory arrangements after July 1997 Case 2: The automotive industry Importance of the automotive Industry Government assistance Impact of the car industry plan

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-3 Case 1 Telecommunications industry

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-4 Importance of the Telecommunications Industry Communications sector’s share of GDP up from 1.5% (1980) to 2.8% (2002) Carriers, ISPs and other service providers employed people at 30 June 2001 Exports of communication services over 1995–96 to 2000–01 went up by 70% to reach A$1.5 billion As a large, isolated and sparsely populated continent, Australia needs a world-class telecom system

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-5 Australian Trade in Telecommunications Equipment (SITC 764), US$ million (%), 1999 to 2003 Source: Adapted from ITC, UNCTAD/ WTO,

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-6 Deregulation of telecommunications 1946–1975: the Post Master General’s Department (PMG) 1975: Telecom, AUSSAT, OTC 1991: OPTUS second national carrier December 1992: Vodafone 1993: Telecom and Telstra June 1997: end of legislated fixed network duopoly. Industry deregulation

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-7 Regulatory Arrangements After July 1997 Trade Practices Amendment (Telecommunications) Act 1996 (Cwlth) empowered the ACCC to permit access to the national telecom network A new part XIB of the Trade Practices Act to contain specific competition rules for telecommunications ACCC argued that competition after 1997 has not developed as extensively as was generally expected Telstra still has a predominant position in the major segments of the telecommunications market

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-8 Major Telecommunications Services Market, A$ Million, 2002–03 Telecommuni- cations services market Industry gross product (A$ million) Major providers and market share range estimates (%) Wired services Telstra (52–55%) SingTel Optus (10–15%), Primus Telecommunications (2–5%), AAPT (2–5%) Mobile services Telstra (35–40%), SingTel Optus (30–35%), Vodafone (14–17%), Hutchinson (3%) ISPs 410 Telstra BigPond (20–25%), SingTel (10–15%), Primus (7– 12%), Oz (5%), Source: Adapted from various IBIS World reports.

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser 20-9 Case 2 Automotive industry

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Importance of the Automotive Industry About 1% of Australia’s GDP Uses inputs from a wide range of industries Employs over Australians, with about involved in the component sector Impacts on the demand for the markets of many industries

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Government Assistance 1950s and 1960s: tariff rates, import licences 1964 to 1985: car plans, increases in local content requirements, export facilitation scheme 1985: ‘the Button Car Plan’ – Tariff quotas – Dual tariff arrangements

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Reduction by half of the number of car plants Reduction in the number of basic models from 13 in 1985 to only 5 in 1996 Reduction in import tariffs from 35% in 1992 to 15% in 2000 – Share of local PMVs down from 80% in 1985 to only 56% in 1995 Impact of car industry plan (cont.)

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Tariffs frozen at 15% between 2000 and 2005 Tariffs to be reduced to 10% in 2005 and probably down to 5% in 2010 The Automotive Competitiveness and Investment scheme (ACIS) to encourage competitive investments by firms in Australia’s automotive industry. All industry-specific support to cease by 31 December 2015 Impact of car industry plan (cont.)

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Australian PMVs Market

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Australia’s Trade in Automotive Products, US$ Million and % Ratio (Imports = 100) Source: WTO, International Trade Statistics, various editions.

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Australian Automotive Exports By Destination, %, 1996, 2001 Source: Compiled from Industry Commission Inquiry Report, The Automotive Industry, 1997 and Commonwealth Department of Industry, Tourism and Resources, Key Automotive Statistics 2002, 2003, viewed 15 May 2004,.

Copyright  2005 McGraw-Hill Australia Pty Ltd PPT Slides t/a Economics for Business 3e by Fraser, Gionea and Fraser Australia’s Automotive Trade With the Regional Groups, A$ m, %, 2003 Regional groupExports A$ million Imports A$ million Balance of trade A$ million Exports as % of imports 1. NAFTA –555– % 2. European Union (15) – % 3. ASEAN (10)123916– % Source: Adapted from DFAT, Composition of Trade, 2003.