Queensland’s Manufacturing and Australian Federation, 1897-1906: The Effects of an Exogenous Trade-Policy Shock CHERRY SEMINAR
Speaker: Brian D. Varian, Newcastle University
Abstract: Australian Federation in 1901 entailed the formation of a customs union among the six hitherto tariff-autonomous Australian colonies. New South Wales and Victoria, Australia’s two largest economies, dominated in setting the common external tariff, while Queensland had little political influence in formulating the trade policy to which it would become subject. This paper examines the effects of the trade policy shock of Federation, consisting of both internal trade liberalisation and the shift from a colony-specific to a common external tariff, on the performance of Queensland’s manufacturing sector. Using a difference-in-differences approach and taking advantage of the annual manufacturing data collected by Queensland—the only colony to report such data pre- and post-Federation—this paper finds that productivity growth was positively associated with the intensity of Queensland’s liberalisation of its internal trade with other Australian colonies, with the effect occurring via the output rather than the employment channel. A 1 percentage-point increase in the degree of trade liberalisation was associated with a 0.4 percentage-point increase in the labour productivity growth rate during the post-Federation period. This paper contributes to economic historians’ understanding of the influence of trade policy on industrialization in high-income settler economies. It also extends the literature on the economic consequences of Federation beyond just New South Wales and Victoria.