Trade openness (Exports + Imports as a % of GDP)

Import
2004
20

2005
21

2006
21

2007
21

2008
22

2009
22

2010
20

2011
20

2012
21

2013
21

2004
17

2005
18

2006
20

2007
20

2008
20

2009
23

2010
19

2011
21

2012
21

2013
20

2005
39

2006
41

2007
41

2008
42

2009
45

2010
39

2011
41

2012
42

2013
41

Export

Trade Openness
2004
37

The trade-to-GDP ratio is frequently used to measure the importance of international

transactions relative to domestic transactions. This indicator is calculated for each country as the
sum of exports and imports of goods and services relative to GDP. Low ratio does not necessarily
imply high (tariff or non-tariff) barriers to foreign trade, but may be due to factors such as size of
the economy and geographic remoteness from potential trading partners. The aggregate value of
international trade in goods and services reflects countries' integration into the world economy.
Small countries are generally more integrated: their exports tend to be in a limited number of
sectors and they need to import more goods and services than larger countries in order to satisfy
domestic demand. Also other factors help to explain differences across countries: geography,
history, culture, trade policy, structure of the economy and integration in global production chains,
where measured trade may include a significant proportion of re-exports and intra-firm trade linked
to the presence of multinational firms.
International trade has historically played a very significant role in the development of
the Australia economy. Despite Australia's geographic isolation from the rest of the world, trade has
always represented a high proportion of Australias economic activity. In part this is because there
have always been overseas markets for Australias primary commodities, such as minerals and
agricultural products. It is also partly because Australia has needed to trade in order to obtain new
technology and items that are not produced in Australia
because of its relatively small population size. In the context of the global economy, Australia is
sometimes referred to as a small, open economy. It is small by global standards, producing around 2
per cent of gross world product. But while the Australian economy makes up only a small
proportion of the global economy, trade is central to the Australian economy. The country export
around one fifth of it's production, and import the equivalent of around one fifth of gross domestic
product. As a result, although the Australian economy does not have much influence on
developments in the global economy, world economic developments can have a very significant

impact on Australia.
Empirical estimation suggests that a countrys population is the most significant
determinant of openness, with a negative correlation between the two variables. In other words,
countries with smaller populations have higher levels of external trade and vice versa. Countries
with smaller populations have fewer opportunities for trade within their own borders and are
therefore likely to trade more externally, for example like Luxemburg, Ireland and Belgium.
Despite having a substantially lower openness ratio than the OECD average (51%) ,
Australias openness ratio has been about the level one would expect for a country with its
characteristics. The factors that best explain Australias relatively low openness are its remoteness
from large economies and its large land mass. The first of these can be viewed as a natural
disadvantage, while the second can be viewed as an advantage because of the natural diversity of
the large land mass, Australia is able to produce many goods internally and does not need to trade
for them externally. The trade openness of the country is constantly growing, which is a trend
started since the late 80's due to the lowering of barriers to the import of goods and services and
capital flows. The peak of 45% in 2009 is by a slump to 39% in 2010, which is a reflection of the
Global economic crysis.

Share in world exports (%)

2004
0.939

2005
1.010

2006
1.018

2007
1.008

2009
1.160

2009
1.229

2010
1.390

2011
1.475

2012
1.393

2013
1.343

With its relatively low share in the world export of around 1% for the last decade,
Australia is situated in the top 30 countries by export. With and increase of 0.4%, the country
moved from 27-th place in 2004 to 21-st place in 2013. Despite a noticeable reorientation of
Australias exports toward the rapidly expanding economies of developing Asia, export volumes
have grown only modestly this decade, in comparison with the country's largest economic partnerChina, which now is the top exporting country in world with share of almost 12%. The slow
increase of the export share over recent years can be explained by the rise in global resource
commodity prices, which contributed to appreciation of the Australian dollar.

Export per capita

Trade balance (% of GDP) and the export/import ratio

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

-2,7

-2,71

-1,8

-1,6

-2,59

-0,97

0,10

0,99

-0,20

-1,31

The trade balance is the difference between a country's imports and its exports. Balance
of trade is the largest component of a country's balance of payments. Debit items include imports,
foreign aid, domestic spending abroad and domestic investments abroad. Credit items include
exports, foreign spending in the domestic economy and foreign investments in the domestic
economy. The negative trade balance is referred also as a trade deficit in which there is increased
dependence of the country's economy. The government have to finance it usually by FDI's or by
selling assets, or directly by loans to cover it. The trade deficit also means that foreign nations hold
amounts of the country's national currency, which can be sold at any time and drive the value of the
currency down, making it more costly to purchase imports.
All of these statements can apply to Australia's current debt situation. Australia has been in deficit
for more than thirty years, starting from the early 80's. For the last decade, the balance was
negative, except the surpluses in 2010 and 2011 due to the high prices of commodities. However in
2012, the trade balance is back in deficit due to sharp increase in value of exports and rising capital
imports. Metals, coal and oil and natural gas account for 54 percent of total exports, but the country
is a major importer of machinery and transport equipment, computers and office machines and
telecommunication lasers.
On one hand trade deficit is not necessarily a bad thing. It raises the standard of living
of a country's residents, since they now have access to a wider variety of goods and services for a
more competitive price. It can reduce the threat of inflation, since the products are priced lower. A
trade deficit can also indicate that the country's residents are feeling confident, and wealthy, enough
to buy more than the country produces. But on the other hand, over time a trade deficit can cause
outsourcing of jobs. That's because, as a country imports certain goods rather than buying
domestically, the local companies start to go out of business. The domestic business itself will lose
the skills needed to produce that good competitively. As a result, fewer jobs in that industry are
created in the home country. Instead, the foreign companies hire new workers to keep up with the
demand for their exports.

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0,79

0,84

0,88

0,85

0,93

0,93

1,05

1,10

0,98

0,99

The export/import ratio shows if a country's imports are fully paid by exports in a given
year. If the value is 1 or above it, then the import is fully paid by the export and also there is
positive trade balance, which for the past decade occurs in 2010 and 2011.

Annual growth rate of export of goods and services

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

8.22

23.00

22.56

16.34

32.47

-17.58

37.78

27.16

-5.16

-1.47

As a member of numerous organizations such as APEC, the G20, WTO and OECD, Australia has
multiple free trade agreements with numerous countries such as the US, Singapore, Chile and
Thailand. Australias recent economic progress has been heavily reliant on trade with China. In
2009, China became Australia's largest export market, surpassing Japan

http://www.rba.gov.au

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