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Jia Hung, Li Ying, Wen Xuan, Dylan, Jessie 

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Jia Hung, Li Ying, Wen Xuan, Dylan, Jessie 

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Refer to the two horizontal bar charts in Page 78

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Refer to the two horizontal bar charts in Page 78

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Major export : Unprocessed Primary Goods

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Major export : Unprocessed Primary Goods

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Because Australia has an excess of raw materials such as iron ore, gold, meat, wool, wheat and coal.

2008 - 09 about 55% of total exports.

2013 - 14 about 60% of total exports.

The exports of unprocessed primary goods increase about 5% from 2008 - 09 to 2013 -14.

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Because Australia is lacking in intermediate goods to manufacture the final products such as computers, machinery and transport equipment, pharmaceuticals.

2008 - 09 about 69% of total imports.

2013 - 14 about 67% of total imports.

The import of ETMs decreased about 3% from 2008-09 to 2013-14.

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Processed primary goods do not change at 16% from 2008-09 to 2013-14.

STMs decrease from 8% to 5% from 2008-09 to 2013-14.

ETMs decrease from 14% to 10% from 2008-09 to 2013-14.

Other goods decrease from 9% to 8% from 2008-09 to 2013-14.

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Kavenashaa, Zhe En, Jing Yi, Hui Xin, Yee Ling

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Kavenashaa, Zhe En, Jing Yi, Hui Xin, Yee Ling

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Quinn, Rachel, Rebecca, Jia Min, Kim Seng

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Quinn, Rachel, Rebecca, Jia Min, Kim Seng

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Yan Bing, Jia Hui, Yee Jing, Pei Ling, Vanessa

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Yan Bing, Jia Hui, Yee Jing, Pei Ling, Vanessa

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Unprocessed primary goods increase from 10% to 11% from 2008-09 to 2013-14.

Processed primary goods increase from 11% to 13% from 2008-09 to 2013-14.

STMs decrease from 8% to 7% from 2008-09 to 2013-14.

Other goods decrease from 12% to 10% from 2008-09 to 2013-14..

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Comparative Advantage vs. Competitive advantage

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Comparative Advantage vs. Competitive advantage

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Comparative advantage and competitive advantage are not the same, but one influences the other

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Meaning:

A producer in a country who can produce products at a lower opportunity cost than the  producers in other countries.

Refers to given or inherited advantage.

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Producers develop advantages over their competitors.

Meaning:

Producers develop an advantage over their competitors in international markets.

It is what makes you better than the competitors in customers’ mind.

Refers to:

Advantages that have been created rather than given.

How?

Through investment in education, research, infrastructure and capacity

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From the past, Australia’s trade pattern has reflected comparative advantage as their mineral and energy commodities are provided rather than created.

Due to the globalisation, competitive advantage is more vital.

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Factors contributed to Competitive Advantage

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Factors contributed to Competitive Advantage

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1. Comparative Advantage :

Australia is endowed with an abundance of rural, mineral and resources.

2.  Free Trade :

The Australia government promotes free trade through

Regional trade agreements

Forums

Country-to-country agreements

E.g:

China - Australia Free Trade Agreement  (FTA)

Asia Pacific Economic Cooperation (APEC)

Trans-Pacific Partnership

3. Foreign Investment :

Australia is able to attract both portfolio and direct foreign investment.

These investment flows will fund/ support investment in Australia's productive capacity such as mining sector.

These investment flows also allow the transfer of techonology & knowledge into Australia.

4. A well-educated, highly skilled workforce :

Skilled workers are usually more experienced and productive.

They will bring benefits in production such as:

Increase in efficiency

Less time of production

Increase production capacity

5. Non-price competitiveness :

It refers to action to not lower the price, but focus on extensive promotions to highlight the distinctive features of products.

It includes factors such as:

Product design

Innovation

Reliability

After-sales support

Quality of service

It is more profitable than selling for a lower price, and it can avoid the risk of a price war.

6. Strong Institutions :

Due to the current economic crisis, countries need support in areas such as banking and financial systems, a legal system and systems of government.

Financial institutions are able to provide value to their clients in identifying and mitigating risks that are relevant to them.

So, it is very important that every system is stable and honest.

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TRADING PARTNER is one of the two or more participants in an ongoing business relationship.

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TRADING PARTNER is one of the two or more participants in an ongoing business relationship.

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1.  China - 30%

2.  Japan - 20%

3. South Korea - 8%

4. India - 6%

5. Singapore-3%

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How can Australia's exports and imports be classified? 

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How can Australia's exports and imports be classified? 

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By the extent or level of processing (value adding) involved in production.

Primary sector-- come directly from natural resources of economy.

They can be processed (mineral ores) or semi-processed (such as beverages and frozen foods).

Secondary or manufacturing sector - creation of processed, finished and usable products.

Classified as STMs and ETMs.

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Refers to the countries we export and import to.

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Australia's direction of trade has changed from European countries to Asian countries.

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As countries developed, the demand for the primary goods (resources) increased . They were able to supply capital and consumer goods.

1960s and 1970s :
Japan bought resources from Australia then supplied Australia with their finished goods such as cars and electrical goods.

2000s :
Japan entered into stagnation (slow economic growth)where focus of trade of Australia switched to China, Republic of Korea, and countries within ASEAN as they were growing fast.

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The "Mineral and Fuels" (33.6%) is the largest sector of the exports.

This proves that Australia is indeed well skilled and efficient in mining and producing mineral and fuels.

The second largest sector of exports will be "Services" which contributed 17.3%.

The third largest sectors of exports will be "Manufacturers" which contributed 12.9%.

The percentage of exporting "Rural" was 11.9% which is the fourth largest sector for exports.

The percentage of exporting "Gold' was 4.7% which is the smallest sector for exports.

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Before Japan emerged as a major trading partner, European nations were the main importers of Australia’s rural goods (Australia used to sell exports to European countries).

In 1973 , European Common Market (ECM) was created. Australia was non-member, thus a common tariff will be imposed on Australian goods by ECM.

After creating ECM, UK could not continue to import rural commodities from Australia on preferential term as no preference was allowed.

Hence, a developing trade blocs against Australia has caused Australia's exports to Europe to fall. Therefore, Australia had to look for a major importer elsewhere.

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The largest sector of imports is the "intermediate and other goods" contributed 33.6%.

The second largest sector for imports is "consumption goods" contributed 24.2%.

The percentage of importing services is 21.2% which is the third largest import sector for imports.

The percentage of importing capital goods is 19.6 % which is the fourth largest import sector for imports.

The percentage of importing gold is 1.4 % which is the smallest sector for imports.

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1.  China  (18%)

2. United State (12%)

3. Japan (8%)

4. Singapore (6%)

5. Germany (5.5 %)

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Why do we import so many 'intermediate and other?

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Why do we import so many 'intermediate and other?

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Australia only specialise in primary goods (mineral and agricultural products).

Intermediate goods are the component parts of other goods and will be assembled to create part of 'value chain'.

Value chain

Step by step process of adding value to a product

Through designing, marketing, etc.

Value chains have become global for a number of reasons:

Increasing information and communication technology

Changing production costs

Lower trade and transport costs and improved international logistics

Fewer barriers to trade

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Why are global value chains significant?

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Why are global value chains significant?

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Producers can source production inputs from many country.

These trades provide incentive to cut barriers of trade (such as tariffs) to improve international competitiveness.

Being a part of the GVCs are significant for the Australian economy.

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Globalisation and the development of GVCs mean that products are no longer made in one country but are made across the world.

Countries increasingly rely on foreign inputs for their own exports,which may then be further processed in partner countries.

Between 30% and 60% of G20 countries’ exports consist of intermediate inputs traded within GVCs.

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ETMs means elaborately transformed manufactures.

ETMs are finished or final goods with unique features that permit their identification as differentiated products on world market.

Examples could be cars and computers.

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China is the BIGGEST importer and exporter of Australia.

It is stated that China export A$101,590 mil goods and services to Australia in the year 2013-14.

Australia import A$49,329 mil goods and services from China.

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STM means simply transformed manufactures.

STMs consist mainly of basic metal manufactures, chemicals and other immediate manufactured goods.

Examples could be aluminium, sulfuric acid and components.

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Why is the degree of processing important?

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Why is the degree of processing important?

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Processing adds value, contributing to economic growth and creates income and employment.

Processing gives a competitive edge in market because without processing the unprocessed commodities are homogeneous.

E.g. Iron ore in Brazil is similar to Iron ore in Australia.