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A success story, Australia's trading performance



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PLS.

41 444Ute

Minister for Trade and Owens Development

As Tabled In Parliament 15th October 1992.

Parltament House Canberra ACT 2000

A SUCCESS STORY

AUSTRALIA'S TRADING PERFORMANCE

L Trade Performance Australia's ratio of exports to GDP has increased from 16% in 1979180 to 22% in 1991/92 in 1984/85 prices. This represents a six percentage point share of GDP redirected to the

export sector.

(a) Merchandise Trade

Australia recorded its seventh consecutive balance of trade surplus in the June quarter 1992 - its strongest performance since 1978/79 and 1979/80.

Over the past ten years, Australia's merchandise trade structure has shifted dramatically away from the traditional rural industries to non-rural exports, particularly manufactured exports. Rural industries however, remain fundamental to Australia's external health and comprise nearly 30% of total merchandise exports. Manufactured exports comprised

nearly 20% of all merchandise exports in 1991/92 compared to just on 12% in 1982/83. Over the equivalent period, rural exports as a percentage of total merchandise exports fell from 38% to 28%.

Merchandise Exports

(Percentage of Total Merchandise Exports)

Rural Manufactured Non Rural

Exports Exports Exports

1982/83 38.3 12.3 61.6

1983/84 37.9 12.4 61.6

1984/85 37.2 11.4 62.9

1985/86 38.1 10.8 62.0

1986/87 37.1 14.1 62.9

1987/88 37.6 14.1 62.4

1988/89 36.7 14.0 63.2

1989/90 31.6 15.9 68.4

1990/91 26.9 18.0 73.1

1991/92 28.4 18.9 71.6

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Source: Australian Bureau of Statistics, Catalogue Number 5303.0

COMMONWEALTH PARLIAMENTARY LIBRARY M/CAH

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Together, these statistics dispel a common myth that Australia's merchandise exports are restricted to rural and mineral products. One in every five dollars of Australia's merchandise export revenue is generated by the sales of manufactured goods.

Australia's export performance in manufactures over the past three years has exceeded that of the OECD average and the G7 Industrial Nations. Export performance is measured as export penetration, or in other words the ratio of export market growth over export volume growth.

Export Performance in Trade for Manufactured Goods. (Percentage Change Previous Year)

1989 1990 1991 1992(e)

US 5.6 3.6 2.4 1.1

Japan -3.5 -4.0 -3.4 -2.6

Germany -0.7 -5.2 -1.3 -0.2

France 0.8 -1.6 0.8 0.1

Italy -3.6 -4.7 -1.9 -0.6

UK 0.8 1.5 -2.7 -2.6

Canada -2.7 0.6 -3.0 0.6

G7 Total -0.1 -0.6 -2.5 -1.0

OECD -0.3 -0.5 -2.0 -0.9

Australia 0.9 8.0 13.6 0.2

Source: OECD Economic Outlook, Various Issues

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(b) Trade in Services

Australia posted its sixth consecutive surplus on the goods and services account in the June quarter 1992 - a result not seen since 1979/80.

Australia is now a truly international service economy. One in five total export dollars comes directly from the export of services, whether tourism, business, legal services, accounting services etc.

Trade in Services

( % of Total Exports in Goods 4 gc Services)

1984/85 15.9

1985/86 16.7

1986/87 17.9

1987/88 19.4

1988/89 20.3

1989/90 19.7

1990/91 20.3

1991/92 20.5

Source: Australian Bureau of Statistics, Cat No 5303.0

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The substantial increase in the export of Australian services has also led to a substantial reduction in the net service deficit.

Net Services Deficit (Percentage of GDP)

1984/85 1.8

1985/86 1.6

1986/87 1.2

1987/88 0.8

1988/89 0.9

1989/90 1.2

1990/91 0.8

1991/92 0.6

Source: Australian Bureau of Statistics, Cat Numbers 5302.0 & 5206.0

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2.0 Australia's Trading Partners.

Australia's merchandise exports to the Asian region have grown dramatically over the past five years. In 1986/87 merchandise exports to ASEAN nations comprised 7% of total merchandise export revenue. By 1991/92 for the ASEAN nations the equivalent share stood at 13% - a doubling in a period of just over five years.

Trade with Asian Region ( Percentage of Total Exports)

ASEAN Japan China

Hong Kong Korea Taiwan

86/87 6.7 25.4 4.4 3.0 4.2 3.4

87/88 7.3 26.0 3.1 4.8 4.3 3.4

88/89 8.8 27.2 2.8 4.3 5.0 3.6

89/90 10.2 26.0 2.5 2.7 5.5 3.7

90/91 12.1 27.4 2.5 3.0 6.2 3.8

91/92 13.2 26.5 2.7 3.8 6.1 4.6

Source: Australian Bureau of Statistics, Cat Number 5410.0

Australia's total merchandise trade (ie Imports and Exports) to the ASEAN nations comprised 11% of total Australian trade in 1991/92. This represents a doubling of trade to the region in the past five years. Total trade to the ASEAN nations represented 5.9% of total trade in 1986/87.

Australia enjoyed a $32 billion trade surplus with the ASEAN nations in 1991/92. Similarly, the Australian trade surplus with Japan over the equivalent period was $5.2 billion.

In real terms (after adjusting for inflation) the value of Australia's merchandise exports to ASEAN nations has virtually trebled over the five year period since 1986/87.

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Growth in Volume of Trade to ASEAN Nations ($ Millions, Constant Prices, 1984/85 = 100)

Exports Imports Trade Surplus

1986/87 2213 1546 667

1987/88 2558 2083 475

1988/89 3077 2443 634

1989/90 3912 2463 1449

1990/91 5096 2828 2268

1991/92 6066 3347 2719

Notes:

Source:

Constant Price estimates calculated by utilising available export and import price deflator

Australian Bureau of Statistics, Cat Numbers 5410.0 & 5206.0

Australia's trade merchandise surplus with ASEAN nations has, in real terms, increased by four times since 1986/87. Australia's trade surplus with Japan has doubled in real terms from $2.1 billion in 1986/87 to $4.4 billion in 1991/92.

3_0 Role of Trade in Economic Growth

Australia has enjoyed a strong contribution to economic growth from net exports over the past three years. Indeed, the contribution to economic growth from net exports (le exports less imports) has exceeded comparable OECD nations.

Net Export Contribution to Economic Growth (Percentage Points Contribution)

1989 1990 1991 1992(p)

United States 0.6 0.6 0.7 0.0

United Kingdom -1.1 1.1 1.2 -0.5

Canada -1.3 0.8 -0.5 -0.4

Japan -1.0 -0.3 1.4 0.2

Germany 1.2 0.1 0.2 0.0

Australia -3.4 2.7 2.8 0.5

Source: OECD Economic Outlook, Various Issues

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4.0 Inflation, Competitiveness and Productivity

Australia's inflation rate has now fallen below the average of our major trading partners. Australia's Consumer Price Index is among the lowest in the OECD. Even the rates of price increase in the traditionally low inflation economies of Japan and Germany now exceed that of Australia.

As a consequence, Australia's competitive position has improved considerably over the past few years. Australia's real exchange rate (ie index of competitiveness) is at its lowest level since 1987/88.

October 1992