Compostition and direction of Australia's trade

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Composition and Direction of Australia’s trade


The composition of trade refers to the various commodities or sectoral groupings, which make up the total trade in exports and imports for a country. The direction of trade refers to those economies that buy the goods a country produces, exports, or the economies where goods are purchased from, imports. The composition and direction of Australia’s trade has changed significantly in the 10’s as a result of a broadened export base, increased international competitiveness, rapid growth rates of neighbouring countries and a number of structural changes.


Australia is basically a commodity exporter and importer of capital goods.


Traditionally Australia has relied on exports of rural products and primary production as a result of its factor endowment and its distinct competitive advantage in the production of these goods. A major percentage of export revenue depends on the sale of primary products and will continue to do so. But commodity prices fluctuate widely and have shown a falling trend relative to manufacturing and services. Thus throughout the 180’s and 10’s Australia’s composition of exports has changed significantly.


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In the 10’s Australia’s export base has broadened and diversified, as a result of increased value adding and growth in global markets. Australia has particularly increased its exports of services and Elaborately Transformed Manufactured goods (ETM’s), that are high value added. ETM’s (vehicles, industrial equipment) grew by % per year over the nine years to 14 and now constitute % of all our exports. Exports of services (tourism, education, and health) grew at 14% per year since 186/87 and now make up 4% of all exports.


The structural shift towards ETM’s and services is a result of


- An improvement in international competitiveness, that is, our ability to compete with foreign products, due to government reforms, and at times a fall in our exchange rate.


- The rapid growth rate of Asia, which allows Australia to provide its neighbours with the productive skills ETM’s require.


- Growth in the Australian tourism industries Tourists from newly industrialising Asian economies have become important markets.


Manufactured goods dominate Australia’s imports. The most important group of imports is intermediate goods (eg parts) which are used in production by Australian firms and contributed to 7% of Australia’s imports in 1/00. Capital goods are also significant (eg machinery and equipment), 1% of total imports in 1/00, and consumption goods (eg motor vehicles, toys, books, and leisure items) contributed to 1% of Australia’s imports in 1/00. Services are also very prominent, (eg transportation services) and contributed to 1% of imports in 1/00.


Throughout the 10’s there have only been small changes in the nature of Australia’s imports of goods and services in recent years. Only capital goods have become more important in our imports.


Changes in the composition of Australia’s exports are closely linked with the changes in the direction of Australia’s trade. The major change in Australia’s trade relations was the switch away from British and European markets to Japan and Asia.


As a result of new Asia markets opening up and the growth of export markets, over the past decade, shares of Australian exports for South East Asia, the ASEAN countries have grown the most with China, Korea, Hong Kong, and Taiwan closely following. Japan remains Australias largest single export market, buying about one-fifth of total merchandise exports, with the Republic of Korea, China, Indonesia, Taiwan and Singapore also in the top ten of Australias export markets. The United States, New Zealand and the United Kingdom continue to be important markets.


North East Asian countries have overtaken the USA as Australia’s major source of imports. China has shown the most growth in import shares rising from .1% in 10-1 to 6.% by 18-. The ASEAN countries have nearly doubled their import share from 7.1% in 10-1 to 1.7% in 18-.


Much of the growth in Australia’s export and import merchandise trade is due to


- Higher rates of internationalisation or trade intensity(ie the ratio of imports and exports to GDP)


- Trade liberalisation in the region due to WTO, APEC and ANZCERTA initiatives.


- Various bilateral trade agreements between Australia and its trading partners.


The composition of Australia’s imports and exports and the various destinations to which these products go to and come from have changed significantly in the 10’s. The composition of Australia’s trade has changed as a result of a broadened and diversified export base, and a focus away from primary products to value added ETM’s and services. The direction of Australia’s trade has moved away from European countries and the USA, to Asian countries as a result of a growth in these markets and new markets opening. The greater globalisation of the world economy has seen Australia change the composition and direction of its trade over the past decade.








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