Australias Trade Performance 1988 89 to 2008 09

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Australia’s trade performance1

1988-89 to 2008-09

Australia’s total trade in goods and services has more than quadrupled over the past 20

years. In 2008-09, total trade was valued at $563.7 billion 2 compared to $118.1 billion

in 1988-89. Trade’s share of GDP rose to 47.1 per cent in 2008-09. The terms of trade index has risen 56.2 per cent during this period with significant increases since 2004-05

which have helped boost national income.

With strong world economic growth, in conjunction with the commodity price boom,

Resources exports (mainly Coal and Iron ore & concentrates) dominated the growth in

nominal exports over the period. Manufactures exports outstripped most other exports

in terms of volume 3 growth. Imports grew strongly. Capital and Intermediate imports,

such as equipment, fuels and business services (used mainly as inputs into Australian

production) contributed around 60-70 per cent of Australia’s import profile over the 20

year period.

In 2008-09, China was Australia’s largest two-way trading partner ($83.0 billion)—in

1988-89 China was ranked 11th

valued at $2.6 billion—followed by Japan ($75.3 billion)and the United States ($53.1 billion). Countries from Asia accounted for six out of

Australia’s top 10 trading partners in 2008-09 (amounting to 44.9 per cent share of

Australia’s total trade).

Composition of trade

Over the past 20 years, Australia has further integrated into the global economy. Trade as a share of GDP rose

from 32.5 per cent in 1988-89 to 47.1 per cent in 2008-09. This occurred at a period of continued trade reform

including liberalisation of trade flows in the Uruguay Round and Free Trade Agreements with New Zealand,

Singapore, the United States, Thailand, Chile and AANZFTA (ASEAN, Australia & New Zealand).

Exports

Goods and services exports rose from $55.5 billion in 1988-89 to $284.7 billion in 2008-09, averaging 7.7 per centper annum growth over the 20 year period. Export volumes have grown 5.2 per cent per annum since 1988-89

(see Table 1).

Table 1: Australia’s trade by broad category

Exports Imports

Average annualtrend growth

1988-89 to 2008-09

Value Volume

Average annualtrend growth

1988-89 to 2008-09

Value Volume

Total

Rural

Resources

Manufactures

Gold

Other goods

Services

7.7 5.2

3.8 2.9

9.9 4.8

7.0 5.8

6.1 3.3

10.3 8.0

7.8 5.6

Total

Consumption goods

Capital goods

Intermediate & other goods

Gold

Services

7.7 7.6

9.4 8.9

7.8 12.2

7.3 6.4

17.3 13.2

6.2 4.3

Source: ABS catalogue 5368.0 (September 2009).

1 All Balance of Payments trade data on a current price basis is on a BPM6 standard, while chain volume data is on a BPM5 standard— see changes in this issue.2 2008-09 goods and services data is based on ABS catalogue 5368.0 (September 2009).3 Volumes refer to real growth, i.e. removes the impact of price movements such as exchange rate and inflationary effects.



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Resources are particularly important and accounted for nearly half of Australia’s exports in 2008-09. Services were

the second largest export sector, followed by Manufactures and then Rural exports.

Resources (Minerals & fuels)

The value of Australia’s Resources exports has grown strongly from $12.8 billion in 1988-89 to $127.5 billion in

2008-09, an average growth of 9.9 per cent per annum over the 20 year period. Since 1988-89, export volumes

grew 4.8 per cent per annum. In 2008-09 exports of Resources accounted for 44.8 per cent of exports compared

to 23.0 per cent in 1988-89 (see Chart 1). The significant high growth in Resources exports over the period wasmainly due to the commodity price boom that began in 2000.

Coal (used for steel making and power generation) has remained Australia’s largest export since 1989-90, worth a

record $54.7 billion in 2008-09 compared to $4.7 billion in 1988-89 (when it was ranked 2 nd). Export quantities of

Coal increased from 98 million tonnes to 262 million tonnes over the 20 year period, averaging a rise of

5.0 per cent per annum. Australia’s second largest export since 2004-05, Iron ore & concentrates , also recorded

strong growth in export values, reaching $34.2 billion compared to $1.8 billion in 1988-89 (when it was ranked 8th).

Iron ore & concentrates export quantities rose from 97 million tonnes in 1988-89 to 323 million tonnes in 2008-09,

an annual average increase of 5.9 per cent per annum since 1988-89.

Chart 1: Composition of exports

1988-89

Rural27.3%

Resources23.0%

Gold5.4%

Othergoods4.7%

Services20.2%

Manufactures19.4%

2008-09

Rural10.3%

Resources

44.8%

Gold6.1%

Othergoods4.6%

Services18.7%

Manufactures15.4%


Services

Exports of Services have continued to grow strongly from $11.2 billion in 1988-89 to $53.3 billion in 2008-09,

averaging 7.8 per cent per annum. Export volumes averaged 5.6 per cent per annum growth over the past

20 years. Despite the strong growth, Services’ share of total exports has fallen in 2008-09 as a result of the very

high prices received for Resources , especially Coal and Iron ore & concentrates .

Growth in Services exports in the 10 years to 1998-99 was dominated by Personal travel (excl education), due to astrong rise in Australian tourism during this period. It accounted for 32.4 per cent of export growth while Education-

related travel contributed 16.4 per cent of growth. In the 10 years to 2008-09, with a boom in foreign students

studying in Australia, Education-related travel dominated growth in Services , contributing 52.4 per cent of export

growth. Personal travel (excl education) contributed 11.0 per cent reflecting the fact that this export has become

an established market.

Manufactures

Australia’s exports of Manufactures increased 7.0 per cent per annum since 1988-89. Manufactures rose to

$44.0 billion in 2008-09 compared to $10.8 billion in 1988-89. In volume terms, Manufactures increased

5.8 per cent per annum since 1988-89. It was the fastest growing export sector and occurred over a time of

declining protection4. Effective rates of protection were reduced from about 18 per cent to under 5 per cent over

the period (Source: Productivity Commission ).

4 Excludes the Other goods sector which includes mainly confidential items, the composition of which changes frequently.



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Simply transformed manufactures (STM) —mainly metals (excluding Nickel from 2002)—rose from $5.1 billion in

1988-89 to $14.4 billion in 2008-09, an average growth of 6.0 per cent per annum. Elaborately transformed

manufactures (ETM) grew from $5.8 billion to $29.5 billion respectively, averaging 7.6 per cent per annum since

1988-89. Within ETM exports, Medicaments (incl veterinary) grew 17.7 per cent per annum over the past 20 years

(from $155 million in 1988-89 to $3.6 billion in 2008-09); Passenger motor vehicles rose 15.2 per cent per annum

(from $180 million in 1988-89 to $2.7 billion in 2008-09); and Professional, scientific & controlling instruments grew

11.9 per cent per annum (from $229 million in 1988-89 to $2.3 billion in 2008-09).

Rural

Since 1988-89, the value of Australia’s Rural exports, largely agricultural goods, grew by an average of

3.8 per cent per annum, from $15.1 billion in 1988-89 to $29.4 billion in 2008-09. Export volumes grew 2.9 per cent

per annum over the past 20 years.

Although Rural exports doubled in 20 years, they averaged annual growth at half the rate of total exports. As a

result, Rural exports share of exports fell from 27.3 per cent in 1988-89 to just 10.3 per cent in 2008-09. The

decline in the share of Rural exports was mostly the result of the large increase in percentage share of the

Resources sector. This is still an important sector with reasonable growth, notwithstanding the effects of the

prolonged drought.

Gold

The value of Gold exports has grown strongly from $3.0 billion in 1988-89 to $17.5 billion in 2008-09. The growthin Gold exports was largely due to an increase in gold imported into Australia for refining and re-export, especially

since 1997-98. (Gold imports in 2008-09 accounted for 65.8 per cent of Gold exports.) Since October 2002, all

Australian Gold is now refined in Western Australia and Gold exports have grown at 15.8 per cent per annum

since 2002-03 compared to 5.8 per cent in the period between 1988-89 to 2001-02.

Other goods

Other goods (mainly wine and confidential items of trade) were valued at $2.5 billion in 1988-89 increasing to

$13.0 billion in 2008-09. On average, over this 20 year period, Other goods rose 10.3 per cent per annum. Since

1988-89, export volumes grew 8.0 per cent per annum.

Imports

Over the past 20 years, imports of goods and services increased 7.7 per cent per annum, up from $62.6 billion in1988-89 to $279.0 billion in 2008-09. Import volumes grew 7.6 per cent per annum since 1988-89 (see Table 1).

In 2008-09, imports of Intermediate & other goods accounted for over a third of Australia’s imports. Consumption

goods were the second largest import category, followed by Services and Capital goods .

Chart 2: Composition of imports

1988-89

Capitalgoods18.4%

Gold0.2%

Services24.6%

Consumptiongoods

18.3%

Intermediate& other goods

38.5%

2008-09

Gold4.1%

Services20.2%

Intermediate& other goods

35.2%

Capitalgoods18.4%

Consumptiongoods

22.0%




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Intermediate & other goods

The value of Australia’s Intermediate & other goods imports has grown strongly from $24.1 billion in 1988-89 to

$98.1 billion in 2008-09, averaging 7.3 per cent per annum since 1988-89. Import volumes grew on average

6.4 per cent per annum over the 20 year period. In 2008-09 imports of Intermediate & other goods accounted for

35.2 per cent compared to 38.5 per cent in 1988-89 (see Chart 2 ). Intermediate & other goods are used as inputs

into goods for domestic consumption and for export.

In 2008-09, Fuels & lubricants (mainly Crude petroleum —ranked 2nd

and valued at $14.5, and Refined petroleum —valued at $12.2 billion and ranked 3rd) increased to $28.2 billion from $1.9 billion in 1988-89, an

average of 14.2 per cent growth per annum. Parts for capital goods averaged 6.1 per cent per annum (from $7.0

million in 1988-89 to $24.0 million in 2008-09).

Consumption goods

Australia’s imports of Consumption goods increased 9.4 per cent per annum over the past 20 years. The import

value of Consumption goods rose to $61.4 billion in 2008-09 compared to $11.5 billion in 1988-89. In volume

terms, imports averaged a growth rate of 8.9 per cent per annum since 1988-89.

Non-industrial transport (passenger and goods vehicles) was a main contributor to this growth, increasing from

$2.5 billion in 1988-89 to $13.2 billion in 2008-09, an average increase of 11.0 per cent per annum since 1988-89.

Textiles, books & leisure goods also rose strongly (9.1 per cent per annum since 1988-89), up from $1.4 billion to

$8.3 billion in 2008-09.

Services

Imports of Services grew 6.2 per cent per annum since 1988-89, from $15.4 billion in 1988-89 to $56.5 billion in

2008-09. Services import volumes averaged a growth of 4.3 per cent per annum over the past 20 years.

During the 20 year period Personal travel (excl education) has been a significant import for Australia as

Australians increasingly took overseas holidays and business trips. In 2008-09, it was Australia’s largest import

valued at $18.4 billion compared to $2.9 billion in 1988-89.

Personal travel (excl education) dominated imports of Services , contributing 37.7 per cent of growth over the past

20 years. Transport (which includes passenger fares and freight costs) and Other services ( mainly professional,

technical & other business services) were, however, still strong contributors (25.4 per cent and 31.1 per cent

respectively). Within Services , the share of Personal travel (excl education) rose from 19.0 per cent in 1988-89 to32.6 per cent in 2008-09. Transport’s share declined since 1988-89, falling from 37.3 per cent to 28.6 per cent in

2008-09. Other services imports accounted for 35.1 per cent in 1988-89 falling to 32.2 per cent in 2008-09.

Capital goods

The value of Capital goods imported into Australia rose from $11.5 billion in 1988-89 to $51.5 billion in 2008-09,

averaging 7.8 per cent per annum growth since 1988-89. Import volumes averaged an annual increase of

12.2 per cent since 1988-89. Capital goods imports accounted for 18.4 per cent of imports in both 1988-89 and

2008-09.

Within the broad economic category of Capital goods, the average growth rate of Industrial transport equipment

accelerated on the back of the commodity boom in the 10 years since 1998-99 (up from 1.1 per cent in the first

10 years to 9.3 per cent), especially for Queensland, Western Australia and the Northern Territory.

Imports of Machinery & industrial equipment rose from $4.5 billion in 1988-89 to $18.5 billion in 2008-09,averaging 7.1 per cent per annum growth since 1988-89. Telecommunications & computer equipment averaged a

9.2 per cent per annum rise over the past 20 years, up from $2.7 billion in 1988-89 to $13.7 billion in 2008-09. In

volume terms Telecommunications & computer equipment strongly increased 25.4 per cent per annum since

1988-89 rising from $256 million to $14.6 billion in 2008-09.

Direction of exports

Over the past 20 years Australia’s expanding trade with Asia has taken on an important role in increasing the

national income of Australians.

Japan remained Australia’s largest goods & services export market over the period, rising from $13.7 billion to

$55.0 billion in 2008-09. After growing rapidly in recent years, China became Australia’s 2nd largest export market

increasing from $1.4 billion in 1988-89—ranked 10th —to $44.4 billion in 2008-09, followed by the Republic of

Korea (up from $2.3 billion to $21.1 billion), the United States (up from $6.1 billion to $17.4 billion) and the

United Kingdom (up from $3.0 billion to $15.9 billion) (see Chart 3 ). India has become an important market for

Australia’s exports since 2003-04 and was ranked 4 th in 2008-09.



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The share of Australia’s exports with APEC members has risen from 66.9 per cent, worth $37.1 billion, in 1988-89

to 70.2 per cent, worth $200.0 billion, in 2008-09. The members of the European Union5 accounted for

16.5 per cent of Australia’s exports in 1988-89, valued at $9.1 billion, falling to 11.5 per cent in 2008-09, worth

$32.8 billion. Australia’s exports to the ASEAN members accounted for 9.1 per cent in 1988-89, worth $5.0 billion,

rising to 10.4 per cent in 2008-09, valued at $29.5 billion.

The onset of the global economic crisis in late 2008 has dampened the outlook for exports. The economies of

eight out of Australia’s 10 largest trading partner countries are expected to contract in 2009. A global recovery

appears to be underway, but is expected to be weak. Following a global economic contraction in 2009, global

growth in 2010 is expected to be less than 3 per cent. Stronger growth in China may lessen the impact of this

slow-down on Australia.

Chart 3: Australia’s export markets

NZ6.3%

EU1516.5%

Other18.8%

US11.0%

1988-89

Asia47.4%

Japan24.6%

China2.6%

ROK4.2%

ASEAN9.1%

Other Asia6.9%

US6.1%

NZ4.2%

EU27

11.5%

Other14.2%

2008-09

Asia64.0%

Japan19.3%

China15.6%

ROK7.4%

India6.6%

ASEAN10.4%

Other Asia4.7%


5 In 1988-89 services data is for the European Union15. In 2008-09 services data is for the European Union 27.



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Direction of imports

Over the 20 year period to 2008-09, China has emerged as a strong source of imports, not only to Australia, but to

the world. In 2008 China was ranked 3rd as an import source for the world (accounting for 7.9 per cent of world

imports) compared to 17th as an import source in 1988 (accounting for 1.5 per cent of world imports)6.

Until recently, the United States had been Australia’s largest goods & services import source increasing from

$13.4 billion in 1988-89 to $35.6 billion in 2008-09. Imports from China rose strongly from $1.2 billion in 1988-89—

ranked 13th

—to $38.6 billion in 2008-09, which saw China overtake the United States to become Australia’s largestimport source. Japan was Australia’s 3rd largest import source (up from $10.9 billion to $20.3 billion), followed by

Singapore (up from $1.9 billion to $17.7 billion) and the United Kingdom (up from $6.2 billion to $14.1 billion) (see

Chart 4 ).

Chart 4: Australia’s import sources

NZ4.5%

EU1527.0%

1988-89

US

21.4%

Other13.0%

Asia34.2%

China1.8%

Japan17.5%

ROK2.2%

ASEAN7.1%

Other Asia5.7%

US12.8%

NZ3.6%

EU2720.6%

Other16.6%

2008-09

Asia46.5%

China13.8%

Japan7.3%

ROK2.5%

ASEAN19.2%

Other Asia3.8%


6 Source: World Trade Organization.



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Australia’s imports from the APEC members accounted for 61.2 per cent, valued at $38.3 billion in 1988-89, rising

to 65.5 per cent, worth $182.7 billion, in 2008-09. The members of the European Union7 accounted for

27.0 per cent of Australia’s imports in 1988-89, worth $16.9 billion, compared to 20.6 per cent in 2008-09, valued

at $57.5 billion. Imports from the ASEAN members accounted for 7.1 per cent, valued at $4.4 billion in 1988-89,

increasing to 19.2 per cent in 2008-09, worth $53.5 billion.

Conclusion

Australia has further integrated into the world economy over the past 20 years. Manufactures exports have beenbuoyant and were the strongest export in volume terms during a period when Australia was rapidly liberalising its

trade regime. Australia’s economic relationship with Asia, one of the fastest growing regions in the world, have,

and will continue to, drive Australia’s trading performance.

Author: Julie-Anne Andrew

Trade Competitiveness & Advocacy Branch

[email protected]

This article has also benefited from comments and suggestions made by Paul Gibbons & Frank

Bingham, Trade Competitiveness & Advocacy Branch and Mike Wight, G20 & International

Economy Branch.

7 In 1988-89 services data is for the European Union15. In 2008-09 services data is for the European Union 27.

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Australias Trade Performance 1988 89 to 2008 09