Friday, March 26, 2021

Australia's continuing trade surpluses conceals weaknesses

One of the things I have been monitoring is the impact of covid on international trade with a particular focus on Australia. This also links to the relationship between Australia and China.

On 4 March  2021, the ABS released the latest trade data showing that Australia was maintaining a trade surplus in terms of goods and services. This is set out in the following graph from the ABS.

As Greg Jericho pointed out in an interesting Guardian article, Australia's economy is more reliant on iron ore than ever, the pandemic reduced both exports and imports, leaving a trade still making a positive contribution to GDP.  

The following graph by Greg refers to merchandise trade, but service exports and imports both declined dramatically, leaving the position broadly unaltered. 

Greg also noted the growing importance of iron ore exports, offsetting declines across the board in other export areas.  

China gives and it takes away. Iron ore exports have grown because China presently still needs Australian iron ore. This growth has been sufficient to offset an average  40% decline in most other Australian exports to China, with some exports blocked entirely.

Greg suggests that the growing dependence on iron ore reveals and conceals a narrowing of and potential fragility in Australia's export base. I agree with him.  


marcellous said...

Short and punchy is good, Jim. Declines in imports and exports of services are largely travel (by us) and tourism and education (of students coming to us) respectively, I guess?

Jim Belshaw said...

Thanks, marcellous. Other service exports and imports have declined too because of travel restrictions, but those are the big ones. We import more travel and tourism services than we export because so many Australians travel. Here the balance on services probably improves! Education is the big net export activity.