Protection is a policy that places a tariff or tax on an imported product to raise its price to a level that allows local producers of the same product to compete in the local market. It first became a political issue in Melbourne during the gold rushes of the 1850s. During that heady decade of inflated wages, Victorian farmers and manufacturers demanded protection from cheap imports from lower-wage colonies and countries. Protective tariffs were seen as a way in which Victoria could provide work for diggers after the alluvial gold ran out and maintain a high-wage economy, while also financing government without the need for additional taxes.
The introduction of protective tariffs in the mid-1860s led to spirited debate about their impact on the Victorian economy, especially in comparison with New South Wales, which retained free trade. David Syme, editor of the Age newspaper, campaigned vigorously for protection and provided an intellectual defence of the policy. By creating jobs in labour-intensive manufacturing activities, protection stimulated the city's overall growth during the latter decades of the 19th century.
After Federation, Alfred Deakin developed the doctrine of 'New Protection'. Effectively this meant that the Commonwealth adopted a variant of Victoria's earlier policy, offering protection to those industries that paid fair wages. During the 1920s the Australian economy was able to industrialise behind protective tariffs, stimulating the growth of manufacturing jobs in Melbourne during the 1920s and encouraging centralisation. However, tariffs also worsened the impact of the 1930s depression.
Until the early 1970s Australia maintained a protectionist regime with tariffs and quotas of varying levels, which was regarded as a way of providing jobs to the large number of immigrants. The general effect of this approach was to enlarge Melbourne's job base, particularly in the new consumer-based manufacturing industries, such as those producing the motor cars, white goods and electrical equipment that were equipping the new suburban homes.
As the Australian economy ran into serious difficulties from the early 1970s, and as 'economic rationalists' gained greater influence, there was a dramatic reversal of the policy of protection. Henceforth, it was argued, exposure to international markets would ensure the long-term health of the economy. This policy change hit Melbourne hard. As tariffs came down, foreign competition devastated some parts of the city's industrial base, resulting in high unemployment. Local manufacturing, particularly in the areas of textiles, clothing and footwear, contracted markedly, especially during the recessions of the 1980s and early 1990s.