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Export growth for Australia

  • General News
  • 28th May 2017

Sydney_skyline_at_dusk_-_Dec_2008

A new year provides us with time to reflect on the past twelve months and the Australian export industry has done just that. Findings show that the second half of 2015 was a great one for Australia’s export industry.

The economy grew by 2.5% in three months to September, compared to last year when the previous quarter was 1.9% and forecasted as 2.4%.

Despite a slowdown from its biggest trading partner, China and falling commodity prices, exports have surprisingly risen and provided an economy boost. In fact, exports jumped 4.6% adding one percentage point to Australia’s GDP (Gross Domestic Product).

This was surprisingly during the time the Australian dollar dropped 9% a record low as the central bank tried to boost economy activity.

However, Paul Dales, Chief Australian economist at research from Capital Economics warns that the strong exports are unlikely to be sustained. “With overseas demand soft, we are not convinced that net trade can completely fill the hole…This is the main reason why we doubt that economic growth will accelerate significantly next year.” He said.

Australia’s economy has seen moderate growth in recent years after the investment in the mining sector, which had been a key driver of growth over a decade ago.

The mining boom began after a rise in demand of raw commodities in fast growing economies such as Asia, China and India.

In the past decade high commodity prices created massive mining investment and large increases in mineral exports, whilst creating thousands of jobs within the sector.

Australia’s commodity exports rose significantly during the boom with minerals, fuels and agricultural produce accounting to around two thirds of total exports. Australia’s top three mining exports are iron ore, coal and LNG (liquified natural gas).

The mining boom also strengthened Australia’s terms of trade (the ratio of prices received for commodity exports compared to prices paid for imports). This meant a rise in Australia’s purchasing power over foreign produced goods and services.

This was reflected in the exchange rate that made imported goods and service significantly cheaper for Australian consumers. However, the downside of the boom meant that the car industry and tourism were made to compete on the international market which contributed to the ‘Dutch Disease’.

The ‘Dutch Disease’ theory states that the real exchange rate appreciation worsens the international competiveness of the economy’s traditional tradable industries, especially the manufacturing sector.

It’s safe to say that an economy boost is always a good thing but it also pose challenges within industries as we can see here; but whatever may lie ahead for Australia’s economy in 2016, they’re off to a good start.

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