FTAs and A$892 billion in global trade boost Australia’s resilience

09 Oct 2020

Tags

  • Edmund Tang
  • Benchmark Report
  • Australian Economy

The start of 2020 has brought huge challenges for Australia, with natural disasters and the COVID-19 pandemic impacting trade and travel. But the strength and dynamism of Australia’s economy gives us increased resilience.

As the Benchmark Report 2020 shows, the Australian economy is built on strong foundations. In multiple global comparisons, Australia stands out for our vigorous trade, good governance and robust institutions.

And by global standards, we entered the COVID-19 pandemic with healthy government finances.

These factors enable Australia to withstand all manner of disruptions. They enable Australia to respond effectively to current challenges.

A network of 14 free trade agreements

In 2018–19, Australia’s two-way trade in goods and services reached A$892 billion. And the majority of that trade is with Asia – one of the most dynamic, fast-growing regions in the world (see table below).

Twelve of Australia’s 15 largest trading partners are within the Asia region. These partners account for A$577 billion of Australia’s two-way trade, or 65 per cent of the total. The scale of this regional trade reflects Australia’s competitive economy, strategic location and liberalised trade.

Australia's exports and imports of goods and services1
Current prices (A$ billion)

Financial year total ending June (A$ billion) %Growth
Rank Selected economies2 2015-16 2016-17 2017-18 2018-19 2018-19% Share of total 2017-18 to 2018-19 CAGR 2013-14 to 2018-19)
 

Notes 1. All data is on a balance of payments basis, except for goods by country which are on a recorded trade basis. Totals may not always add up exactly due to rounding. 2.Refer to the DFAT websie (https://www.dfat.gov.au/trade/Pages/trade-and-investment) for more information and a list of the commodities excluded. 3.Includes DFAT estimate for the United States for 2015-16 & 2017-18. 4. Includes DFAT estimates for 2016-17 & 2017-18
SAR=Special administrative region of China.
Sources: Department of Foreign Affairs and Trade (DFAT) data, based on DFAT STARS database, ABS catalogues 5368.0 (Sep-2019) & 536830.55.003/4 and unpublished ABS data; Austrade


Austrade Benchmark Report, July 2020

1 China 152.1 174.3 195.0 235.0 26.4 20.5 9.0
2 Japan 60.6 68.5 77.4 88.5 9.9 14.3 4.1
3 US 70.7 66.5 70.0 76.4 8.6 9.2 5.0
4 Korea 34.1 38.6 52.4 41.4 4.6 -20.9 3.2
5 Singapore 23.3 24.7 27.9 32.7 3.7 17.4 2.2
6 New Zealand 25.4 26.4 28.3 30.6 3.4 8.2 5.4
7 UK 28.4 27.5 27.8 30.4 3.4 9.4 6.7
8 India 20.0 25.7 29.1 30.3 3.4 4.2 14.9
9 Malaysia 18.5 19.8 21.4 25.1 2.8 17.2 4.3
10 Thailand 21.6 21.8 24.6 24.7 2.8 0.5 5.0
11 Germany 20.0 20.9 22.4 23.4 2.6 4.6 5.4
12 Taiwan 12.5 14.7 15.9 19.7 2.2 23.9 9.2
13 Indonesia 16.1 16.5 16.7 17.8 2.0 6.9 1.3
14 Vietnam 10.5 11.8 13.3 15.5 1.7 16.3 10.0
15 Hong Kong SAR 15.7 19.7 18.7 15.2 1.7 -18.7 -1.9
  Other economies 147.8 159.1 158.2 184.8 20.7 16.8 3.4
  Total economies 677.2 736.7 799.0 891.6 100.0 11.6 5.6
of which: APEC3 484.9 528.2 587.1 652.4 73.2 11.1 5.7
ASEAN 95.6 101.0 110.1 123.7 13.9 12.3 4.1
European Union3, 4 98.7 100.4 106.2 114.3 12.8 7.6 5.3
OECD3 310.1 321.7 357.3 375.9 42.2 5.2 4.7

 

With the latest trade agreement entering into force in July – the Australia-Indonesia Closer Economic Partnership Agreement (IA-CEPA) – Australia now has 14 free trade agreements in place. These agreements account for approximately 70 per cent of Australia’s two-way trade.

In effect, these free trade agreements give Australian companies liberalised access to many of the fastest growing economies across the Asia-Pacific region.

Strong exports heading into 2020

When the data is compiled next year, 2020 will be a terrible year for global trade. Lockdowns, air-freight costs and port disruption all hammered physical exports and imports. But Australia went into 2020 from a position of strength.

With around 53,000 goods exporters[1] Australian companies sold goods worth A$373 billion in the 2018–19 financial year. This represents an increase of 18 per cent from the 2018–19 financial year. And it followed other recent strong rises – eight per cent in 2017–18 and 19 per cent in FY2016–17 (see table below).

Australia’s minerals and fuels are our largest export earners. Exports of iron ore, coal and natural gas were Australia’s top three exports overall. In 2018–19, they recorded strong increases in year-on-year export values, of 26 per cent, 15 per cent and 61 per cent respectively.

Australia's Trade by Level of Processing1
  A$ Billion % change 2017-18 to 2018-19
Exports of goods and services 2017-18 2018-19  
Primary products2 243.1 289.2 19.0
   Unprocessed food 15.9 13.8 -13.3
   Processed food 26.2 28.9 10.1
   Minerals 89.7 109.2 21.7
   Fuels2 101.3 127.0 25.4
   Other primary 9.9 10.3 4.2
Manufactured products 46.1 53.9 16.7
   STM (excl Nickel)3 14.9 18.0 20.4
   ETM4 31.2 35.9 15.0
Other goods (incl gold) 25.3 24.3 -3.9
Services exports 88.1 97.1 10.2
   BOP adjustment5 0.8 5.7  
Total exports6 403.4 470.2 16.6
Imports of goods and services      
Primary products 57.2 64.3 12.4
Unprocessed food 2.2 2.3 5.7
   Processed food 16.5 18.4 11.5
   Minerals 1.6 1.2 -26.8
   Fuels 34.8 40.2 15.5
   Other primary 2.0 2.1 4.0
Manufactured products 231.0 231.0 0.0
   Simply transformed manufactures3 14.9 15.4 3.6
   Elaborately transformed manufactures4 216.1 215.6 -0.2
Other goods (incl gold) 13.0 11.4 -12.2
Services imxports 93.2 101.6 9.0
   BOP adjustment5 1.2 13.1  
Total imports6 395.6 421.4 6.5
Two-way trade 799.0 891.6 11.6

 

 

Note: 1. Goods on a recorded trade basis, Services on balance of payments (BOP) basis, original data; 2. Includes the DFAT adjustment for coal (based from the ABS catalogue 5368.0, Value adjustments, Sep 2019). 3. STM - Simply transformed manufactures; 4. ETM - Elaborately transformed manufactures. 5. BOP adjustment includes low-value goods for imports and timing and valuation adjustments. 6. BOP basis. 7. Balance of payments basis. 8. Includes BOP adjustment. 9.Includes student expenditure on tuition fees and living expenses. 10. Includes Related agency fees & commissions.
Sources: Department of Foreign Affairs and Trade (DFAT), Data were based on based on DFAT STARS database, ABS catalogue 5368.0 & DFAT estimates; Austrade

Top 10 Commodities (Goods and Services)1
    A$ Billion % change 2017-18 to 2018-19
  Exports of Goods & Services Total7 2017-18 2018-19  
Rank Commodity      
1 Iron ores & concentrates 61.4 77.2 25.7
2 Coal8 60.4 69.6 15.3
3 Natural gas 30.9 49.7 60.9
4 Education-related travel services9 32.6 37.6 15.2
5 Personal travel (excl education) services 21.3 22.5 5.2
6 Gold 19.3 18.9 -2.2
7 Aluminium ores & conc (incl alumina) 9.4 11.4 20.2
8 Beef (fresh, chilled or frozen) 8.0 9.5 19.0
9 Crude petroleum 6.5 8.5 30.5
10 Copper ores & concentrates 5.7 5.9 4.1
         
  Imports of Goods & Services Total7 2017-18 2018-19  
Rank Commodity      
1 Personal travel (excl education) services 42.7 46.3 8.6
2 Refined petroleum 21.7 25.1 15.7
3 Passenger motor vehicles 23.3 21.6 -7.4
4 Telecom equipment & parts 13.4 14.6 8.8
5 Crude petroleum 11.7 13.4 14.3
6 Goods vehicles 10.2 10.6 3.8
7 Freight transport services 9.4 10.1 7.3
8 Computers 8.8 9.8 10.5
9 Professional services 6.7 7.8 16.8
10 Passenger transport services10 7.1 7.5 5.5

 

Services: growing before COVID-19

Australia’s trade in services was also growing particularly fast prior to the pandemic. Services make up over one-fifth of Austrade’s two-way trade. They are helping to steadily broaden our export mix beyond resources and agriculture.

Exports rose ten per cent to A$97 billion in 2018–19. Before the pandemic closed borders, the sector benefitted from strong demand from overseas students seeking a high-quality education.

Also, successful tourism campaigns have attracted a rising number of overseas visitors in recent years.

Together, tourism and international education accounted for about 60 per cent of total services exports in 2018–19. Education-related travel grew by 15 percent, year on year. Personal travel services – which is mainly recreational – grew by five per cent.

Future resources

One way to build strength for the future is to diversify Australia’s dependence on a few commodities.

In 2019, the Australian Government released its Critical Minerals Strategy. This strategy aims to make Australia a major supplier of the critical minerals[2] that are used across today’s advanced manufacturing. It envisages Australia attracting investment to develop mining and processing in 24 rare-earth minerals, where deposits have been identified in Australia.

This strategy will likely have a major impact on Australia’s export resources mix over the coming decade. An updated prospectus will be released shortly. Its goal is straightforward: to position Australia as a world leader in the exploration, extraction, production and processing of critical minerals.

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1  Australian Bureau of Statistics (ABS), Characteristics of Australian Exporters (Released 21/Aug/2019)
2  Critical minerals are used in a range of emerging high‑tech applications across a variety of sectors such as renewable energy, aerospace, defence, automotive (particularly electric vehicles), telecommunications and agri-tech.