title moment

    PPT - Trade

    do not study international competitiveness.

    Australia's Linkages between economies, including trade, investment, tourism and migration

    • Four trends have affected the relationship between trade and development since 2000
      1. Economic growth of developing countries
      2. Growing integration of global production through supply chains
      3. Higher prices for agricultural goods and natural resources
      4. Increasing interdependence of the world economy, which causes shocks to reverberate more quickly globally

    Linkages between economies

    • Always think flows - move in both direction (e.g. tourism to Australia and to China)

    • There are four key linkages between economies. these definitions are my own

      1. Trade - The exchange of goods and services between countries
      2. Tourism - Persons travelling to and staying in places outside their usual environment for any purpose such as personal or business
      3. Migration - The movement of people from their place of residence to a new host country for the purpose of settling there in the long term
      4. Investment - the purchasing of assets from another country for future financial return or benefit

    • Linkage with Singapore

      • Trade. Singapore is Australia's largest investment and trading partner in southeast Asia, and the fifth largest overall ($59.2B$ in 2022). top export from singapore is refined petroleum. top export from australia to singapore is gold.
        • There is a free trade agreement between Singapore and Australia; this includes the elimination of tariffs.
        • Also, the geographical proximity between Australia and Singapore aids in trade.

    Composition and Direction of Australia's trade

    • Trade Patterns refer to the composition and direction of goods and services in a country's trade
      • The composition of goods refers to the different categories of goods and services that a country can import or export
        • reflects the nation's natural resource wealth - Australia is rich in natural resources
      • the direction refers to the export destination and the origin of imports in terms of countries or groups of countries
        • reflected in its close proximity to asia
    • Trends refer to HOW and WHY the composition and direction of exports and imports have changed over time

    Trade Intensity

    • Trade Intensity
      • Measures an economy's integration with the world economy. A higher trade intensity means an economy is more susceptible to external shocks in the world economy.
      • It is the sum of exports and imports over real GDP - $$(\frac{X+M}{GDP})\times 100$$ (in Australia it is $40%$)inf
    • Factors that determine a country's trade intensity
      1. Relative size of the economy
      2. Location relative to foreign markets (proximity)
      3. Extent of barriers to trade (natural and artificial)
    • Factors that influence economic transactions between economies
      1. Exchange rates
      2. World Economic Growth - if the rest of the world is booming, there would be more demand for exports
      3. Domestic Economic Growth - if we are booming, we will demand more, so imports increase
      4. Relative inflation rates - higher inflation rates would lead to higher demand for imports, and less for exports
      5. Relative interest rates - higher interest rates lead to more investment in Australia
      6. Productivity and Cost efficiency - if a country is better at producing things, they will be more competitive, and the demand for their goods would increase

    Composition

    • Exports

      • Primary Industries dominate Australian exports

        • Manufactured goods have been Australia's most important import category
        • Changes to composition have been associated with rapid increase in mineral and energy exports and the decline in rural exports

      • The composition of Australia's trade will reflect its comparative advantage

        • Traditionally Australia has been a major exporter of primary commodities

        • we have a large resource/population ratio and substantial mineral wealth

        • We have enjoyed a comparative advantage in the production of primary goods - specifically agricultural and resources

        • However, over the past few decades there has been a significant increase in the relative importance of mineral and energy resources and a decline in the importance of rural exports

          • agriculture is still large

      • Reasons for change

        • Rapid growth in China and other Asian economies that resulted in a major resources boom in Australia from 2001-2012
        • Even with the end of the mining boom, resources are likely to remain dominant
        • So, for exports,
          1. Dramatic decline in rural exports
          2. A significant increase in resource (minerals and fuels) exports
          3. A relative decline in manufacturing exports
          4. The increasing importance of services exports (especially tourism and education)

    • Imports

      • For imports, the largest category is intermediate goods, consisting mainly of fuels and processed industrial goods
      • our most important service export is education
      • our largest import is personal travel (greater than even motor vehicles!)
        • this is how much Australians spend overseas

    • The composition of our trade is a reflection of the structure of the economy

      • Australia has a very efficient and internationally competitive primary sector, due to both mining and agriculture (at least compared to manufactured products)
      • The services category is growing for both imports and exports
      • We are heavily dependant on other economies for manufactured and capital goods

    Direction

    • Europe $\rightarrow$ Asia over time
    • China, Japan and the USA are responsible for 46% of two way trade

    POWERPOINT WAS YAPPERVESCENT , SEE CHPTR. SUMMARY

    Extent and Importance of trade

    • **Australia:
      • World's largest exporter of iron ore, coal and wool
      • Without trade this would not be possible
    • Reasons:
      • Proportion of Growth: Trade represents 46% of GDP for Australia
      • Driver of growth: Over the last 30 years the Australian economy has doubled, with exports accounting for over a quarter of this growth
      • Liberalisation: over the last 30 years this has contributed to higher real GDP
      • Employment: One in five Australians are employed in a trade related activity
      • Consumer welfare: Access to a wider variety of goods and services at more competitive prices, improving standard of living
      • Competition: from overseas markets, compels Australian firms to innovate and adopt more innovative methods

    Historically Australia has been more comparative advantage but is shifting to competitive.