Australia faces a serious drought, perhaps the worst on record. Whether this drought is simply a bad drought or a sign of global warming is an important issue. But in the conversation I am talking, about discussion went from drought to water to the need to phase out primary production dependent upon water, especially irrigation crops. Part of the argument was couched in terms of the need for the metro cities to have access to more water, part in terms of the need for the environment to have more water, part on the belief that farming and grazing was no longer viable in many parts of Australia.
Now that got me thinking, because it seemed to me to ignore the importance of agriculture to the Australian economy. So I thought that I would check a few facts. In doing so, I came up with a few nasty answers. The stats that follow are drawn from official statistics. I do not pretend that the analysis is complete or rigorous.
If we start by looking at the overall trade position over the period 1999-00 to 2004-05, we find that with the exception of one year, our exports of goods and services have been consistently less than our imports. So we have been borrowing from overseas.
When I look at the composition of our exports, I see that:
- our exports of primary products including minerals over the period have grown from $A54.8 billion to $A77.7 billion.
- our exports of manufactures were $A32.4 billion in 99-00, $A35.2 billion in 04-05, so have barely grown.
- our exports of services have grown from $A28.6 billion to $35 billion over the period, a reasonable increase, but only a small proportion of the increase in primary products.
On the surface, we appear to have a problem if we are buying more than we sell and at the same time are increasingly dependent on primary products in what we sell. So I then looked in more detail at the composition of exports.
I had some problems here because of data availability. However, a few tentative conclusions:
- Coal exports reached $17.1 billion in 04-05, increasing by 11 per cent per annum over the period. Iron ore exports were $8.1 billion in 04-05, growing at 12 per cent per annum. Coal, a green house problem export, is now by far our largest export. Both coal and iron exports depend upon world demand.
- If we look at our other major primary exports ranked by value we have crude petroleum ($5.7 billion in 04-05 but declining), gold ($5.6 million with a low upward trend), bovine meat ($4.9 billion growing over the period at 6 per cent per annum), aluminium ores including alumina (4.4 billion and growing slowly), aluminium ($4.1 billion but declining), wheat ($3.4 billion and declining), natural gas ($3.2 billion and rising over the period at 6 per cent per annum) and alcoholic beverages ($2.8 billion growing at 13 per cent per annum). I am not sure that this mix gives me great comfort.
- I do not have the data to comment on manufacturing exports except to note that performance does not appear good.
- Finally, the services data is difficult to interpret. However, working from numbers from other sources, our services exports appear to be dominated by tourism, something over over $16 billion, and education services, possibly around $9 billion. This leaves something aroundr $10 billion for everything else. Our net tourism earnings (exports minus imports) appear quite low, our net education earnings high. Given that overall net earning on services were negative in 04-05, our overall performance on the services side would appear to be dangerously dependent on education.
Now I might be wrong in all this, but if the numbers and my analysis of them are in any way right, just at the moment I would be worried about the impact of drought and water shortages on our export performance. To the degree that water is short, and subject to environmental considerations, I would be focusing short to medium term discussions on where we can get the greatest export gains from the water we do have.
But perhaps I am wrong.