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Austarlia's Current Trading Position Essay

1790 words - 7 pages

Table of Contents1.0 Introduction 12.0 The importance of international trade 12.1 Imports 12.1.1 Direction of imports 22.2 Exports 42.2.1 Direction of exports 53.0 Balance of payments 64.0 Exchange rates 75.0 Foreign investment 86.0 Trade blocs 87.0 Conclusion 10References 111.0 IntroductionTrade is of vital importance to Australia. It now accounts for around 40% our national income with exports of goods and services generating around $1452.2 billion in income for Australia in 2001-02 (D.F.A.T. 2003). The purpose of this paper is to examine the nature and importance of trade to the Australian economy. In particular, the scope of this paper will be confined to the benefits of trade followed by an analysis of changes in Australia's trading patterns.2.0 The importance of international tradeThe importance that Australia places on trade can be attributed to the fact that Australians are not able to produce all the goods and services required by Australian consumers (DFAT, 2003). International trade is geared around the concept of mutually beneficial exchange. So by trading Australia is able to focus on producing goods and services in which it is most competitive, ultimately enabling Australian consumers to gain from having a wider choice through importing of products and services that they are unable to produce for themselves. That is Australia gains from trade the ability to import things it wants (Krugman 1993).2.1 ImportsAbout one-tenth of Australia's merchandise imports consist of primary products such as food and beverages and crude petroleum while the remainder of manufactures consists mainly of elaborately transformed manufactures (ETM's) such as computers, machinery and transport equipment. The main service imports consist of transportation, travel, communication and insurance (DFAT 2003). A list of Australian imports by broad categories can be seen in Table 1.Table 1. Australia's import trade by broad categoryMerchandise A$ Million % SharePrimary Products 16,505 10.9Manufacturers 100,342 66.0STM's 11,157 7.3ETM's 89,185 58.7Other 2,807 1.8Total Merchandise Exports 119,654 78.7ServicesTransportation 10,876 7.1Travel 11,043 7.2Other 10,338 6.8Total Services Exports 32,257 21.2Total Exports 151,911 100.00(Source: DFAT 2003, p.42)2.1.1 Direction of importsThe Direction of Australia's merchandise imports has changed dramatically over the past 50 years showing a decrease on the reliance of the United Kingdom as a major importer, with importance shifting to Pacific countries such as Japan and the United States (DFAT 2003). An outline of the changes in Australia's Direction of trade imports can be seen in the graphs below.Graph 1 Merchandise imports 1951Graph 2 Merchandise imports 2001(Source: DFAT, 2003)2.2 ExportsAustralia's exporting structure has changed considerably over the past 15 years. Once considered a small exporter of commodities Australia's industries have moved away from a commodity-based export culture to one more focused toward...

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