Australia's global role in the economy

Australia’s Role in the Global Economy

2.2 Australia’s Trade and Financial Flows

2.2.1 Value, Composition and Direction of Australia’s Trade and Financial Flows

International trade has historically played a very significant role in the development of the Australian economy

Due to geographical isolation – trade has always represented high proportion of Australia’s economic activity, overseas market for Aust.’s primary commodities (agricultural products, minerals), imports new technology and items not produced in Aust. (small population size)

Only producing 2% of GWP

Export 1/5 of Aust. production, import 1/5 of GDP  Aust. economy has little influence on developments in global economy - world economic developments can have significant impact on Aust.

Trends in Australia’s trade pattern:

Trends in Exports:

Traditionally, Aust. relied on rural products for its export income

1950s: agricultural commodities (wheat, wool) were main sources of income

Mid-1950s: over 80% of export income was earned from agricultural products

Mid-1980s: exports in agricultural products fell to 35%

1999-2000: exports in agricultural products fell to 26%

2008-2009: exports in agricultural products fell to 12.7%

Exports of minerals and fuels had assumed much greater importance:

Mid-1950s: 3%

Mid-1980s: 38%

1999-2000: 37%

2008-2009: 60.5%

Manufactured items exported:

Mid-1950s: 11%

1999-2000: 24%

2008-2009: 13.5%

Major problem relying on agricultural and mineral exports – volatile world prices for those commodities. Fluctuations in prices can often be extreme

STM’s: Simply transformed manufacturers (low value added) e.g. wine – Aust. does much of these

ETM’s: Elaborately transformed manufacturers (high value added) e.g. cars

Composition of Aust. exports:

1950s: most exports went to UK and Europe

1998-1999: most exports sent to Asia (particularly Japan) and North America

1990s: