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Abstract

The concept of competitiveness develops and amplifies the older concept of comparative advantage. It is based on factors which influence domestic prices of inputs and outputs as compared with foreign competitor's prices of the same inputs and outputs. Usually national statistics of the ratio of domestic and foreign prices (adjusted by the exchange rate) are compared in the form of the real rate of exchange. The factors concerned are changes in internal and external inflation rates, changes in exchange rates, changes in productivity, changes in microeconomic efficiency, and changes in protection. In recent years the real rate of exchange for Australian agriculture has varied considerably as internal prices and costs have fluctuated about international trends. Since 1990, there has been a period of slow improvement in the real rate of exchange as the relative Australian rate of inflation has slowed down. The factors affecting competitiveness are discussed in this article.

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