Impacts of imports and exports in Australian economy

Impactsof imports and exports in Australian economy


Impactsof imports and exports in Australian economy

Australiais among the world’s largest export economies. According to theAustralian Bureau of Statistics 2014, the country exported goodsworth $243.8 billion and imported $219 billion creating a positivebalance of trade which made Australia the world’s top exporter inthe 21st century. By the end of 2015, Australia sold goods worth USdollars 191.2 billion to the global market. This represents about 29%decline in the volume of exports since 2014 and 20.5% reduction inexports from 2014. Australia is known for exportation of oil, ironore, coal and gold among other products. Australia’s top exportdestinations include China, Japan, South Korea, India and The UnitedStates (Reserve Bank of Australia 2015). The table below representsthe amount of exports to Australia’s top export markets.

Table1: Australia’s volume of exports in A$ million since 2013














United States




South Korea








Source:Australian Bureau of Statistics 2015

Justlike other countries, Australia falls short of other resources andsources them from the foreign market. The primary imports forAustralia include machinery and transport equipment which accountsfor about 40% of the imports. The country also imports other productssuch as petroleum, manufactured goods, chemicals, and food stuffamong other goods and services. The main import partners forAustralia are China, Japan, United States, South Korea and Thailandamong other nations (Jabour,&amp Hemmings, 2013).The table below represents the volume of imports from Australia’stop markets since 2013.

Table2: Australia’s volume of imports in A$ million since 2013














United States




South Korea








Source:Australian Bureau of Statistics 2015

FinancialInstitutions involvement in trading activities

Financialinstitutions form an important part of the buying and selling processand play a crucial role in promoting both domestic and internationaltrade. In this process, financial institutions have a universalfunction in all countries throughout the world. Banks, for instance,play a significant role in the trading process through provision oftrade finance which serves two primary purposes. One, it acts as asource working capital for individual traders and multinationalcorporations which are in need of liquid assets. Second, tradefinance offers credit insurance which helps traders hedge againstunforeseen uncertainties associated with global commerce. Such risksinclude currency fluctuations, political instability and defaultamong others. These two major roles are fulfilled via a set of creditinstruments offered by financial institutions or even the government.

Financialinstitutions are very useful in the provision of supportiveinformation regarding the external markets to both individual tradersand international companies. It may not be easy for merchants tocollect adequate information regarding the business environment on aworldwide basis. However, most financial institutions haveestablished their subsidiaries in almost all countries around theworld and can get access to reliable information from foreignmarkets. In turn, they can give informed pieces of advice to theirclients whose entrepreneurial ventures sells products to theinternational market.

Thefinancial institutions also issue loans to individuals who wish tostart their own business and focus on international trade. They are asource of start-up capital which has enabled many organizations inAustralia go global and focus on international trade. Australianbanks also provide the government with money to allow it to buy goodsand services from other countries which form a part of the country’simports. Domestic borrowing has been one of the primary sources offunding for the government which has resulted in a robust growth inthe financial industry.

Impactsof exports and imports on the Australian economy

Internationaltrade forms the backbone of the Australian economy. Being the world’sleading exporter in the global market, Australia has accrued a greatdeal of national profits from the expanded market. Its Main exportssuch as oil, iron ores, coal, and petroleum have the highest demandin the international market. With increased demand, their prices havebeen rising constantly enabling the country to supply more and more.For a long time, the country has been operating on a positive balanceof trade which makes it be among the richest economies. Revenuesreaped from international trade has been used in the development ofnational infrastructure, expansion of healthcare facilities,electrification, provision of high-quality education and promotion ofa healthy nation among other activities. As a result, Australia canbe classified as one of the nations with a sustained economic growtharising from engagement in the international trade.

Internationaltrade has been a source of foreign currency for Australia.Exportation enables the country to acquire currencies from othernations which increase its reserves for foreign exchange. Similarly,international trade is considered as a source of employment to bothindividual traders and the multinational companies. Throughengagement in the international trade, Australia has been able todispose of their surplus resources and acquire some of the goods andservices they cannot produce locally.

Internationaltrade has enabled the country to advance technologically. Australianshave been able to order products through the online market via theinternet. In the recent past, the country has been able to transitionfrom the old economy to a modernized economy with greaterimprovements in the ICT. Engaging in international trade made it easyfor the country to acquire new ideas regarding possible technologicalimprovements which are an advantage to the nation.

Challengesfacing Australia in the exports and imports market

Importrestrictions:Some foreign countries impose high taxes and quotas on their importswhich make it hard for Australia to export to such nations. This isbecause they find it difficult to gain enough profits while sellingto those states. Some countries have also introduced someanti-dumping laws and regulations which create considerabledifficulties for Australia as an exporter (Stokes,2014).

Politicalenvironment:Australia engages into business with different economies which havedifferent political systems. The political atmosphere is known tohave a direct influence on both imports and exports for any country.Political mayhem and chaos in a host country, for instance, may makeit hard for Australia to continue exporting to such nations whichreduce its profits and the Gross National Product (GNP) (Stokes,2014).

Terrorism:With the increase in globalization, terrorism has become widespreadand almost all nations are on the verge of terrorist attacks. Allover the globe people have been living in constant fear sinceterrorism is a threat to life. This has made it hard to successfullyship goods from one country to another especially due to theincreased sea pirates hence making international trade difficult dayafter day (Stokes,2014).

Fluctuationsin exchange rates:Every country operates on its currency which has to be exchanged withother currencies for other states. Currency trade is a daily businesswhich is subject to changes in the exchange rates. In the case of asudden appreciation or depreciation of the currency, there is alwaysa significant impact on the countries imports and exports. Thiseffect could be both advantageous or disadvantages (Corrêa,2013).Take China, for instance, which is the Australian primary businesspartner. In case China depreciates its currency, it would imply thatimporting from China becomes cheaper than exporting to the samecountry. This poses a setback to the Australian economy in case theimport is massive enough to cause an adverse balance of trade.

Naturalcalamities:Some unforeseen disasters such as earthquakes, floods, and otherfrustrating events have from time to time affected the Australian’sengagement in the international trade (Corrêa,2013).Take, for instance, the Japanese earthquake and tsunami. These twounforeseen events had had their impacts felt within the domesticborders even overseas. Japan forms the second best export destinationfor Australia’s exports. These two countries have engaged inlong-term business contracts which are highly risky. Such calamitiesresult in disruption of business and economic instability. With Japansuffering economic instability, it would be hard for Australia tocontinue engaging in business which is a setback to its economy.

TheImpacts of international trade on the Australian economy have farreaching effects and cannot be ignored. Despite the fact that somechallenges facing the global market cannot be avoided, the countryneeds to put its effort in fighting those that can be curbed andincrease its engagement in the external markets. There is also needto exploit all opportunities that arise in the international marketto maintain Australia as the world’s best exporter.


AustralianBureau of Statistics, (2014). AustralianNational Accounts: Australia:Government Press

Corrêa,F. (2013). Theimplementation of sustainable development in regional tradeagreements.Florence: European University Institute.

Jabour,J., &amp Hemmings, A. (2013). Lookingsouth.Annandale, NSW: Federation Press.

ReserveBank of Australia (2015). ReserveBank of Australia Bulletin,Various Bulletins: Sydney

Stokes,A. (2014). TheNature of the Global Economy and Globalisation.Rochester:Minnesota