Traditionally, it has been pointed out that as economy develops further and further, the gravity of the economy shifts from the primary industries to the secondary industries, and from the secondary industries to the tertial industries. This is well known as "law of Colin Clark" or "Petty's law". Australia has ex-perienced the exceptional development process. That is to say, Australia has already attained the situation of "advanced society without the industrialization" where the tertial industries sector has rapidly expanded with prematured industries sector and matured primary industries sector. Australia has faced two paradox. One is the fact that Australia is suffering from the high unemployment rate although the population is too small to establish economic development. This is explained as follows. Traditionally it is said that at least 50 millions of population is necessary for establishing the industrial sector in a country. Australia has less than one third of this minimum i.e. 15 millions. In the case of industrial productions, the scale economies are especially important. Under the current population size, there are not sufficient demands for products and if the industrial production expands, there tend to be surplus of supply. Moreover Australia is isolated from the major countries importing the industrial goods. On the contrary, the areas, such as Asean and NICs, where the industrialization has developed steadily, are located near Australia. In this sense,the small scale of domestic market is one of the major bottleneck for the industrialization. On the other hand, Australia has been facing unemployment issues. As well known, the industrial sector has greater labour absorption ability or creates larger employment opportunities. The present industrial structure in Australia has more than 70% of tertial industries sector such as service sector and the primary industries sector takes second biggest share. Be-cause the industrial sector, which creates larger employment opportunities, cannot grow sufficiently due to population scarcity, Australian economy cannot employ even such a small population. This is the first paradox which Australia has faced. The second paradox is the fact that Australian economy has been in the situation of recession at the same time Australia has suffering from the inflation. According to the lessons of classi-cal economic theory, the inflation is caused by the situation that production increase cannot catch up the demand expansion through the economic boom. Current situation in Australia is different from these. Although consumer demands have been shrinking under the recession, prices have been rising supported by wages increase. These situation is rather common in many advanced countries. Under these situations, we should discuss about the economic development strategy both in short term and long term. As for the short term strategy, following the "comparative advantage theory", Australia should reenforce export growth of primary products taking into account the resources endowments. In this case, there are several problems. In the international side, major importers have imposed the import restrictions for the primary products and the competing exporters such as EC and USA have adopted the exportsubsidy scheme. So, the terms of trade have been deteriorated for the primary products. In addition to these, in the domestic side, the primary industries are not suitable to solve unemployment issues. As for the longer term strategy, Australia should reenforce the inchistrialization. However, the problem is not alternative selection, such as export expansion strategy of primary products or reenforcement of the import substituting industrialization, In other word, the inter-industries division of labour (or vertical division of labour). It is important to reenforce the intra-industries division of
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