Table of Contents
1.0 Introduction 1
2.0 The importance of international trade 1
2.1 Imports 1
2.1.1 Direction of imports 2
2.2 Exports 4
2.2.1 Direction of exports 5
3.0 Balance of payments 6
4.0 Exchange rates 7
5.0 Foreign investment 8
6.0 Trade blocs 8
7.0 Conclusion 10
Trade 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 trade
The 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).
About 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...