competitiveeness of australia paper

8/10/2019 Competitiveeness of Australia Paper

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UNIVERSITY OF NATIONAL AND WORLD ECONOMY

Case:

Competitiveness of Australia

Sofia, December 2014


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Contents

1. Basic information about Australia ............................................................................................................ 32. General economic background ................................................................................................................. 4

2.1. Real GDP Growth % and GDP per capita ............................................................................................ 5

2.2. Gross fixed capital formation ............................................................................................................. 6

2.3. Annual average inflation rate ............................................................................................................ 7

2.4. FDI ...................................................................................................................................................... 8

3. Foreign Trade Indicators ........................................................................................................................... 9

3.1Trade openness (Exports + Imports as a % of GDP) ............................................................................. 9

3.2 Export per capita ............................................................................................................................... 11

3.3Trade balance (% of GDP) and the export/import ratio .................................................................... 12

3.4. Annual growth rate of export of goods and services ....................................................................... 13

3.5.Structure of exports by 1-digit SITC categories (%) and share of the 3 largest export categories at3-digit SITC level (%) ................................................................................................................................ 13

3.6. High-tech exports (% of total exports) ............................................................................................. 17

3.7. Share of the 3 largest export markets (%) ....................................................................................... 17

4. Science, Social, environmental indicators .............................................................................................. 20

4.1. Level of Internet access ................................................................................................................... 20

4.2. Greenhouse gas emissions ............................................................................................................... 21

4.3. Gross domestic expenditure on R&D by source of funds ................................................................ 21

4.4. Energy intensity of the economy ..................................................................................................... 22

5. Conclusion and recommendations ......................................................................................................... 23


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1. Basic information about AustraliaAustralia is a country comprising the mainland of the Australian continent, the island ofTasmania, and numerous smaller islands. It is the world's sixth-largest country by total area.

Neighbor countries include Indonesia, East Timor and Papua New Guinea to the north, theSolomon Islands and Vanuatu to the north-east, and New Zealand to the south-east.

For at least 40,000 year before the first British settlement in the late 18th century, Australia wasinhabited by indigenous Australians, who spoke languages grouped into roughly 250 languagegroups. After the European discovery of the continent by Dutch explorers in 1606, Australia'seastern half was claimed by Great Britain in 1770 and initially settled through penaltransportation to the colony of New South Wales from 26 January 1788. The population grewsteadily in subsequent decades, the continent was explored and an additional five self-governingcrown colonies were established. On 1 January 1901, the six colonies federated, forming theCommonwealth of Australia. Since Federation, Australia has maintained a stable liberaldemocratic political system that functions as a federal parliamentary democracy andconstitutional monarchy comprising six states and several territories. The population of 23.6million is highly urbanized and heavily concentrated in the eastern states and on the coast.

Australia is a developed country and one of the wealthiest in the world, with the world's 12th-largest economy. In 2012 Australia had the world's fifth-highest per capita income. Australia'smilitary expenditure is the world's 13th-largest. With the second-highest human developmentindex globally, Australia ranks highly in many international comparisons of national

performance, such as quality of life, health, education, economic freedom, and the protection ofcivil liberties and political rights. Australia is a member of the United Nations, G20, Commonwealth of Nations, ANZUS, Organization for Economic Co-operation and Development(OECD), World Trade Organization, Asia-Pacific Economic Cooperation, and the Pacific IslandsForum.

Australia is a constitutional monarchy with a federal division of powers. It uses a parliamentarysystem of government with Queen Elizabeth II at its apex as the Queen of Australia, a role thatis distinct from her position as monarch of the other Commonwealth realms. The Queen residesin the United Kingdom, and she is represented by her viceroys in Australia (the Governor-General at the federal level and by the Governors at the state level), who by convention act onthe advice of her ministers. Supreme executive authority is vested by the Constitution ofAustralia in the sovereign, but the power to exercise it is conferred by the Constitutionspecifically on the Governor-General. The most notable exercise to date of the Governor-General's reserve powers outside the Prime Minister's request was the dismissal of the WhitlamGovernment in the constitutional crisis of 1975.

The federal government is separated into three branches:
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%28nominal%29_per_capitahttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29http://en.wikipedia.org/wiki/Developed_countryhttp://en.wikipedia.org/wiki/Eastern_states_of_Australiahttp://en.wikipedia.org/wiki/Urbanizationhttp://en.wikipedia.org/wiki/States_and_territories_of_Australiahttp://en.wikipedia.org/wiki/Constitutional_monarchyhttp://en.wikipedia.org/wiki/Parliamentary_democracyhttp://en.wikipedia.org/wiki/Federalismhttp://en.wikipedia.org/wiki/Liberal_democracyhttp://en.wikipedia.org/wiki/Liberal_democracyhttp://en.wikipedia.org/wiki/Federation_of_Australiahttp://en.wikipedia.org/wiki/Crown_colonieshttp://en.wikipedia.org/wiki/New_South_Waleshttp://en.wikipedia.org/wiki/Penal_transportationhttp://en.wikipedia.org/wiki/Penal_transportationhttp://en.wikipedia.org/wiki/Kingdom_of_Great_Britainhttp://en.wikipedia.org/wiki/Dutch_Republichttp://en.wikipedia.org/wiki/Australian_Aboriginal_languageshttp://en.wikipedia.org/wiki/Australian_Aboriginal_languageshttp://en.wikipedia.org/wiki/Indigenous_Australianshttp://en.wikipedia.org/wiki/History_of_Australia_%281788%E2%80%931850%29http://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/Vanuatuhttp://en.wikipedia.org/wiki/Solomon_Islandshttp://en.wikipedia.org/wiki/Papua_New_Guineahttp://en.wikipedia.org/wiki/East_Timorhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_areahttp://en.wikipedia.org/wiki/List_of_islands_of_Australiahttp://en.wikipedia.org/wiki/Tasmaniahttp://en.wikipedia.org/wiki/Australia_%28continent%29


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The legislature: the bicameral Parliament, defined in section 1 of the constitution ascomprising the Queen (represented by the Governor-General), the Senate, and the Houseof Representatives;

The executive: the Federal Executive Council, in practice the Governor-General asadvised by the Prime Minister and Ministers of State;

The judiciary: the High Court of Australia and other federal courts, whose judges areappointed by the Governor-General on advice of the Council.

2. General economic backgroundAustralia is a wealthy country; it generates its income from various sources including mining-

related exports, telecommunications, banking and manufacturing. It has market economy, arelatively high GDP per capita, and a relatively low rate of poverty. In terms of average wealth,Australia ranked second in the world after Switzerland in 2013, although the nation's poverty rateincreased from 10.2 per cent to 11.8 per cent, from 2000/01 to 2013. It was identified by theCredit Suisse Research Institute as the nation with the highest median wealth in the world andthe second-highest average wealth per adult in 2013.

An emphasis on exporting commodities rather than manufactured goods has underpinned asignificant increase in Australia's terms of trade since the start of the 21st century, due to risingcommodity prices. Australia has a balance of payments that is more than 7% of GDP negative,

and has had persistently large current account deficits for more than 50 years.

Australia hasgrown at an average annual rate of 3.6% for over 15 years, in comparison to the OECD annualaverage of 2.5%. Australia was the only advanced economy not to experience a recession due tothe global financial downturn in 2008 2009.

However, the economies of six of Australia's major trading partners have been in recession,which in turn has affected Australia, significantly hampering its economic growth in recentyears. From 2012 to early 2013, Australia's national economy grew, but some non-mining statesand Australia's non-mining economy experienced a recession. Over the past decade, inflationhas typically been 2 3% and the base interest rate 5 6%. The service sector of the economy,

including tourism, education, and financial services, accounts for about 70% of GDP. Rich innatural resources, Australia is a major exporter of agricultural products, particularly wheat andwool, minerals such as iron-ore and gold, and energy in the forms of liquified natural gas andcoal. Although agriculture and natural resources account for only 3% and 5% of GDPrespectively, they contribute substantially to export performance. Australia's largest exportmarkets are Japan, China , the US, South Korea, and New Zealand. Australia is the world's
http://en.wikipedia.org/wiki/Parliament_of_Australiahttp://en.wikipedia.org/wiki/Australian_Senatehttp://en.wikipedia.org/wiki/Australian_House_of_Representativeshttp://en.wikipedia.org/wiki/Australian_House_of_Representativeshttp://en.wikipedia.org/wiki/Federal_Executive_Council_%28Australia%29http://en.wikipedia.org/wiki/High_Court_of_Australiahttp://en.wikipedia.org/wiki/Australian_court_hierarchyhttp://en.wikipedia.org/wiki/Terms_of_tradehttp://en.wikipedia.org/wiki/Balance_of_payments_of_Australiahttp://en.wikipedia.org/wiki/Current_accounthttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Agriculture_in_Australiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Agriculture_in_Australiahttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Current_accounthttp://en.wikipedia.org/wiki/Balance_of_payments_of_Australiahttp://en.wikipedia.org/wiki/Terms_of_tradehttp://en.wikipedia.org/wiki/Australian_court_hierarchyhttp://en.wikipedia.org/wiki/High_Court_of_Australiahttp://en.wikipedia.org/wiki/Federal_Executive_Council_%28Australia%29http://en.wikipedia.org/wiki/Australian_House_of_Representativeshttp://en.wikipedia.org/wiki/Australian_House_of_Representativeshttp://en.wikipedia.org/wiki/Australian_Senatehttp://en.wikipedia.org/wiki/Parliament_of_Australia


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fourth largest exporter of wine, and the wine industry contributes $5.5 billion per year to thenation's economy.

2.1. Real GDP Growth % and GDP per capita

Graph 1: Real GDP growth

Over the past decade, inflation has typically been 2 3% and the base interest rate 5 6%. Theservice sector of the economy, including tourism, education, and financial services, accounts forabout 70% of GDP. Rich in natural resources, Australia is a major exporter of agricultural

products, particularly wheat and wool, minerals such as iron-ore and gold, and energy in theforms of liquified natural gas and coal. Although agriculture and natural resources account foronly 3% and 5% of GDP respectively, they contribute substantially to export performance.Australia's largest export markets are Japan, China , the US, South Korea, and New Zealand.Australia is the world's

fourth largest exporter of wine, and the wine industry contributes $5.5 billion per year to thenation's economy

Source: World Bank

Graph 2: GDP per capita in USD

0

0,5

1

1,5

2

2,53

3,5

4

4,5

2002 2004 2006 2008 2010 2012 2014

Real GDP Growth %

Real GDP Growth %
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Source: World Bank

The Real GDP growth rate and the GDP per capita give the most precise information on the levelof growth and productivity of an economy. For Australia both of the indicators are rising throughthe selected period, meaning that there is an increasement in the production of goods andservices. The GDP growth if varies from 1,7% (2009) to 4,2% (2004). The GDP per capitaendured a significant growth over the last decade, going from 30 464$ to 67 468$, growing morethan two times. Growth in GDP per capita is often used as the measure of economic progress of acountry, indicating the rate at which living standards are changing. Growth of GDP per capitacan be described as a combination of the growth of labor utilization and the growth of labor

productivity.

2.2. Gross fixed capital formation

Graph 3: Gross Fixed Capital Formation , percents of GDP

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10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

2002 2004 2006 2008 2010 2012 2014

GDP per capita inUSD


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Source: OECD

Gross fixed capital formation measures the value of acquisitions of new or existing fixed assets by the business sector, governments and households less disposals of fixed assets. GFCF is acomponent of the expenditure on gross domestic product (GDP), and thus shows somethingabout how much of the new value added in the economy is invested rather than consumed. Fixedassets include land improvements (fences, ditches, drains, and so on), plant, machinery andequipment purchases, and the construction of roads, railways, schools, offices, hospitals, privateresidential dwellings and commercial and industrial buildings.

2.3. Annual average inflation rate

Graph4: Percentage of inflation rate

26,5

27

27,5

28

28,5

29

29,5

2002 2004 2006 2008 2010 2012 2014

Gross Fixed Capital Formation % ofGDP

Gross Fixed CapitalFormation % of GDP
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Source: IndexMundi

The inflation rate is calculated using the price increase of a defined product basket. This product basket contains products and services, on which the average consumer spends money throughoutthe year. They include expenses for groceries, clothes, rent, power, telecommunications,recreational activities and raw materials (e.g. gas, oil), as well as federal fees and taxes.

One of the Australian governments key economic aims is to achieve the goal of low inflation(also called stability of the currency). This is defined by the Reserve Bank of Australia (RBA) asa desirable situation where inflation is slow and general prices are rising by an average of around2 3 per cent a year over the duration of the business cycle.

Rates in excess of this government target would undermine various aspects of the economys performance (e.g. it could weaken equity in the distribution of income, undermine theinternational competitiveness in trade), while even lower inflation than this 2 3 per cent per yeartarget could mean that the rate of economic growth is too slow, resources are lying idle and partof Australia's productive capacity is being wasted.

2.4. FDI

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

2002 2004 2006 2008 2010 2012 2014

Inflation Rate %

Inflation Rate %


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Table 1: FDI in USD at current prices and current exchange rates in millions

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

41 944,48 -24 859,7 30 352,34 44 661,82 47 162,34 27 191,76 35 799,33 65 209,3 55 517,65 49 826,23

Source: UNCTAD

Australia continues to be a top global destination for both inward and outward foreign directinvestment (FDI), due to the countrys robust economy, strategic location, strong global tradeand investment ties and proven track record of innovation, which continues to position it as anideal investment destination. For instance, inflows as well as outflows in Australia turnedsharply negative in 2005 because of corporate restructuring that triggered disinvestment in both

directions.

3. Foreign Trade Indicators

3.1Trade openness (Exports + Imports as a % of GDP)

Table 2: Import as % of GDP

2004 2005 2006 2007 2008 2009 2010 2011 2012 201320 21 21 21 22 22 20 20 21 21

Source: World Bank

Table 3:Export as % of GDP

Source: World Bank

Table 4: Trade Openness as % of GDP

2004 2005 2006 2007 2008 2009 2010 2011 2012 201337 39 41 41 42 45 39 41 42 41

2004 2005 2006 2007 2008 2009 2010 2011 2012 201317 18 20 20 20 23 19 21 21 20


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Source: World Bank

The trade-to-GDP ratio is frequently used to measure the importance of internationaltransactions relative to domestic transactions. This indicator is calculated for each country as thesum of exports and imports of goods and services relative to GDP. Low ratio does not

necessarily imply high (tariff or non-tariff) barriers to foreign trade, but may be due to factorssuch as size of the economy and geographic remoteness from potential trading partners. Theaggregate value of international trade in goods and services reflects countries' integration into theworld economy. Small countries are generally more integrated: their exports tend to be in alimited number of sectors and they need to import more goods and services than larger countriesin order to satisfy domestic demand. Also other factors help to explain differences acrosscountries: geography, history, culture, trade policy, structure of the economy and integration inglobal production chains, where measured trade may include a significant proportion of re-exports and intra-firm trade linked to the presence of multinational firms.

International trade has historically played a very significant role in the development of theAustralia economy. Despite Australia's geographic isolation from the rest of the world, trade hasalwa ys represented a high proportion of Australias economic activity. In part this is becausethere have always been overseas markets for Australias primary commodities, such as mineralsand agricultural products. It is also partly because Australia has needed to trade in order to obtainnew technology and items that are not produced in Australia because of its relatively small

population size. In the context of the global economy, Australia is sometimes referred to as asmall, open economy. It is small by global standards, producing around 2 per cent of gross world

product. But while the Australian economy makes up only a small proportion of the globaleconomy, trade is central to the Australian economy. The country export around one fifth of its

production, and import the equivalent of around one fifth of gross domestic product. As a result,although the Australian economy does not have much influence on developments in the globaleconomy, world economic developments can have a very significant impact on Australia.

Empirical estimation suggests that a countrys population is the most significant determinant ofopenness, with a negative correlation between the two variables. In other words, countries withsmaller populations have higher levels of external trade and vice versa. Countries with smaller

populations have fewer opportunities for trade within their own borders and are therefore likelyto trade more externally, for example like Luxemburg, Ireland and Belgium.

Despite having a substantially lower opennes s ratio than the OECD average (51%) , Australiasopenness ratio has been about the level one would expect for a country with its characteristics.The factors that best explain Australias relatively low openness are its remoteness from largeeconomies and its large land mass. The first of these can be viewed as a natural disadvantage,while the second can be viewed as an advantage because of the natural diversity of the largeland mass, Australia is able to produce many goods internally and does not need to trade forthem externally. The trade openness of the country is constantly growing, which a trend is started


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since the late 80 due to the lowering of barriers to the import of goods and services and capitalflows. The peak of 45% in 2009 is by a slump to 39% in 2010, which is a reflection of the Globaleconomic crisis.

3.1 Share in world exports (%)

Table 5: Share of Australia in world exports in %

2004 2005 2006 2007 2009 2009 2010 2011 2012 20130.939 1.010 1.018 1.008 1.160 1.229 1.390 1.475 1.393 1.343Source: UNCTAD

With its relatively low share in the world export of around 1% for the last decade, Australia issituated in the top 30 countries by export. With an increase of 0.4%, the country moved from 27-th place in 2004 to 21-st place in 2013. Despite a noticeable reorientation of Australias exportstoward the rapidly expanding economies of developing Asia, export volumes have grown onlymodestly this decade, in comparison with the country's largest economic partner- China, whichnow is the top exporting country in world with share of almost 12%. The slow increase of theexport share over recent years can be explained by the rise in global resource commodity prices,which contributed to appreciation of the Australian dollar.

3.2 Export per capita

Table 6 :Export per capita in USD:

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

6,038 $ 6,764 $ 7,633 $ 8,782 $ 11,026 $ 8,992 $ 11,810 $ 14,473 $ 13,686 $ 13,302 $

Source: UNCTAD and World Bank

The export per capita is the amount of US dollars per habitant of the country for one year period.

For the last couple years Australia is positioned at 24 place in the list of "List of countries byexports per capita". Overall through the decade Australia has endured substantial growth of thisindicator with more than two times. Apparently this is caused by the growth of export over theyears, but it should be taken into consideration the fast growth of the population from 20 millionin 2004 to 23,5 millions at the end of the period.


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3.3Trade balance (% of GDP) and the export/import ratio

Table 7: trade balance as % of GDP

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-2,7 % -2,71% -1,8 % -1,6% -2,59% -0,97% 0,10% 0,99% -0,20% -1,31%Source:Unctad

The trade balance is the difference between a country's imports and its exports. Balance of tradeis the largest component of a country's balance of payments. Debit items include imports, foreignaid, domestic spending abroad and domestic investments abroad. Credit items include exports,foreign spending in the domestic economy and foreign investments in the domestic economy.The negative trade balance is referred also as a trade deficit in which there is increaseddependence of the country's economy. The government have to finance it usually by FDI's or byselling assets, or directly by loans to cover it. The trade deficit also means that foreign nationshold amounts of the country's national currency, which can be sold at any time and drive thevalue of the currency down, making it more costly to purchase imports.

All of these statements can apply to Australia's current debt situation. Australia has been indeficit for more than thirty years, starting from the early 80's. For the last decade, the balancewas negative, except the surpluses in 2010 and 2011 due to the high prices of commodities.However in 2012, the trade balance is back in deficit due to sharp increase in value of exportsand rising capital imports. Metals, coal and oil and natural gas account for 54 percent of totalexports, but the country is a major importer of machinery and transport equipment, computersand office machines and telecommunication lasers.

On one hand trade deficit is not necessarily a bad thing. It raises the standard of living of acountry's residents, since they now have access to a wider variety of goods and services for amore competitive price. It can reduce the threat of inflation, since the products are priced lower.A trade deficit can also indicate that the country's residents are feeling confident, and wealthy,enough to buy more than the country produces. But on the other hand, over time a trade deficitcan cause outsourcing of jobs. That's because, as a country imports certain goods rather than

buying domestically, the local companies start to go out of business. The domestic business itselfwill lose the skills needed to produce that good competitively. As a result, fewer jobs in thatindustry are created in the home country. Instead, the foreign companies hire new workers tokeep up with the demand for their exports.


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Table 8: Import/Export Ratio

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130,79 0,84 0,88 0,85 0,93 0,93 1,05 1,10 0,98 0,99Source Unctad

The export/import ratio shows if a country's imports are fully paid by exports in a given year. Ifthe value is 1 or above it, then the import is fully paid by the export and also there is positivetrade balance, which for the past decade occurs in 2010 and 2011.

The current account deficit could further deteriorate if exports keep surpassing imports , althougha widening trade deficit would eventually result in currency depreciation, which would helpimprove the trade balance over time. The current account could also deteriorate if internationalinterest rates rose. Through the use of hedging instruments, Australia effectively pays domesticinterest rates on most of the external debt.

3.4. Annual growth rate of export of goods and services

Table 9: Annual growth rate of exports

2004 2005 2006 2007 2008 2009 2010 2011 2012 20138.22% 23.00% 22.56% 16.34% 32.47% -17.58% 37.78% 27.16% -5.16% -1.47%

Source: Unctad

The average growth rate of export of goods and services for the period 2004-2013 is 17%. Thegrowth is positive except in 2009 which is a result of the global crysis and in the last two years,

because of the rised prices of commodities.

3.5.Structure of exports by 1-digit SITC categories (%) and share of the 3 largest exportcategories at 3-digit SITC level (%)


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Table 10: Product groups, exports in thousands of dollars

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

SITC( 0 + 1)

17 151 986 16 523 867 17 409 726 17 146 341 20 702 007 18 997 250 20 879 920 27 268 945 28 273 838 28 195 855SITC(2 + 3 +4) 33 972 375 49 429 932 58 703 918 65 901 703 106 750 266 85 090 010 126 653 576 172 871 456 160 241 147 162 319 481SITC (5+ 6 + 7 +8) 32 072 860 36 408 615 43 602 437 51 889 231 54 890 358 45 705 635 54 797 817 63 931 941 62 628 482 56 768 809Total:

83 197 221 85 838 547 119 716 081 134 937 275 182 342 631 149 792 895 202 331 313 264 072 342 251 143 467 247 284 145Source: UNCTAD

Table 11: Share of product groups, exports in share of total exports2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

SITC( 0 +1) 21% 16% 15% 13% 11% 13% 10% 10% 11% 11%SITC(2 + 3+ 4) 41% 48% 49% 49% 59% 57% 63% 65% 64% 66%SITC(5 + 6

+ 7 +8) 38% 36% 36% 38% 30% 30% 27% 25% 25% 23%Total: 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%Source: UNCTAD

The raw materials have the largest share in the period 2004-2013, with an increase of 62% . Thefood and beverages in the beginning of the period are 21% and they have decreased almost indouble in the end of the period. There is also a decrease in the share of the manufactured goodsfrom 38% to 23%. The decrease in manufactured goods and food and beverages are in favour ofthe raw materials. Raw materials are the product group with the least added value; therefore fora country's economy is better that this group is wit the lowest share. In 2013 the Australian shareof this group is 2/3 of the total export, which means that it is not much diversified and it'sdependent of other economies.

Table 12: Three largest exports in thousands of dollars from 2004 to 2009


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Source: UNCTAD

Table 13: Share of the three largest export categories from 2004 to 2009

2004 2005 2006 2007 2008 2009[321] Coal,

whether or not pulverized, notagglomerated 12% 16% 15% 13% 21% 21%[281] Iron ore andconcentrates 5% 8% 9% 10% 14% 16%[971] Gold, non-monetary(excluding goldores andconcentrates) 5% 4% 5% 7% 7% 8%Total :

22% 28% 29% 30% 42% 45%

Source: UNCTAD

Table 14: Three largest exports in thousands of dollars from 20010 to 2013

2004 2005 2006 2007 2008 2009

[321] Coal,whether or not

pulverized, notagglomerated

9 827 070 16 643 649 17 557 394 17 208 980 39 252 661 30 939 787

[281] Iron oreandconcentrates

4 471 105 8 386 722 10 895 385 13 280 638 25 379 001 23 573 322

[971] Gold,non-monetary(excluding goldores andconcentrates)

4 146 036 4 441 813 6 902 488 9 401 890 12 040 145 11 807 017

Total of allcategories: 83 197 221 102 365 933 119 716 081 134 937 275 182 342 631 149 792 895


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2010 2011 2012 2013

[281] Iron oreandconcentrates

44 290 173 66 216 909 56 726 866 67 208 986

[321] Coal,

whether or notpulverized, notagglomerated

38 571 820 48 234 952 42 698 410 38 422 821

[971] Gold,non-monetary(excludinggold ores andconcentrates)

12 970 833 15 575 506 16 076 778 13 404 799

Total of allcategories: 202 331 313 264 072 342 251 143 467 247 284 145

Source: UNCTAD

Table 15: Share of the three largest export categories from 2004 to 2009

2010 2011 2012 2013

[281] Iron oreand concentrates

22% 25% 23% 27%[321] Coal,whether or not

pulverized, notagglomerated 19% 18% 17% 16%[971] Gold, non-monetary(excluding goldores andconcentrates) 6% 6% 6% 5%Total :

47% 49% 46% 48%

Source: UNCTAD

In terms of largest export categories in Australia are distinguished two periods. The first is

between 2004-2009 when in the first place is the Coal [281], in second is Iron ore [321] and inthird is the Gold [971] . The second period is between 2010 and 2013, where Coal and Iron oreare shifting places in the share of the largest categories. The share of these categories in the totalexport share of the country have doubled through the period, from 22% to 48% . The shares ofthe Gold remained the same, but of the two other groups have risen significantly. This share of48% of those three commodities is bad for the country, because it's export is not diversified, andif some global problems occur with these commodities, Australia could take severe losses.


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3.6. High-tech exports (% of total exports)

Table 16:Percentage of high-tech exports from total exports

2004 2005 2006 2007 2008 2009 2010 2011 2012 20133% 2% 2,3% 1,7% 1,6% 1,6% 1,4% 1,4% 1,6% 2%

Source: UNCTAD and IndexMundi

High-technology exports are products with high R&D intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery. These commodities are highvalue added, so they are considered as an important factor for sustainable economic growth for acountry. One of the most important factors for high tech manufacturing and export is technologyownership. Technology ownership can be gained through technology transfer by the way ofinward foreign direct investments (FDI). Although many scholars emphasize foreign directinvestments as a cheap and easy way of technology transfer, the role of human capital of the hostcountry is considered as an important factor in this process. Another important aspect iseconomic freedom level (EFL) of the host country which is associated with FDI attraction of thehost country. High technology competency is seen as one of the principle driving forces ofeconomic development, especially, in countries practicing export-led growth strategies.Capability to manufacture and export hig h technology products in today s competitive global

markets basically is an indication of innovation power of a country. There is also a positivecorrelation between high-tech exports and GDP growth.

The high-tech export of Australia for the last decade fluctuates between 3% in 2004 and 2% in2013, where the most sensitive decrease was after the post global crysis years - 1,4%. Now thetrend is positive and the outlook for the forthcoming years is to surpass the levels of 2004.

Increasing the share of high technology products is one of Australia's main objectives of in orderto compete in new and high technology segments of industries of todays fast growingenvironment.

3.7. Share of the 3 largest export markets (%)


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Graph 5: Share of the 3 largest export markets

Source: OECD

The share of the export of the three largest export markets through the period 2004-2014has significantly fallen from 5,4% to 2,2%. The outlook is that this share remains the samearound 2-3 %.The three top export markets are: China, Japan and Republic of Korea.

3.8. Revealed comparative advantage index by SITC categories

Table 16: RCA for 2004

2004 RCA[286] Ores and concentrates of uranium orthorium

69,41894197

[268] Wool and other animal hair (incl. wooltops)

39,75272784

[285] Aluminium ores and concentrates(incl. alumina)

37,67394565

[321] Coal, whether or not pulverized, notagglomerated

32,41200148

Source Unctad

Table 17: RCA for 2007

0

1

2

3

4

5

6

7

2002 2004 2006 2008 2010 2012 2014

Series1


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62,92178679

[268] Wool and other animal hair (incl. wooltops)

38,19369704

[285] Aluminium ores and concentrates(incl. alumina) 35,66212738

[321] Coal, whether or not pulverized, notagglomerated

32,88145728

Source: Unctad

Table 18: RCA 2010


63,7643865

[351] Electric current 39,7643567[281] Iron ore and concentrates 30,65664023[321] Coal, whether or not pulverized, notagglomerated

27,67538675

Source: Unctad

Table 19: RCA 2013

2013 RCA[351] Electric current 67,2567654[281] Iron ore and concentrates 35,81018654

[268] Wool and other animal hair (incl. wooltops) 27,74401396[285] Aluminium ores and concentrates(incl. alumina)

26,44881711

Source: Unctad

Table 20: RTB for the period 2004-2013

Year Product group2004 [351] Electric current

2007 [351] Electric current

2010 [286] Ores and concentrates of uranium orthorium

[351] Electric current

2013 [286] Ores and concentrates of uranium or


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thorium

[351] Electric current

Source: Unctad

The revealed comparative advantage RCA is an index used in international economics forcalculating the relative advantage or disadvantage of a certain country in a certain class of goodsor services as evidenced by trade flows. The relative trade balance RTB is an index showing ifnational production is considered to be competitive in both foreign and domestic markets. Bothindexes must be above 1.

The RCA for Australia shows that the country have comparative advantage in Ore, Woll,Aluminium and Coal for 2004 and 2007, in Electric current, Wool, Aluminium, Iron and Coal in

2010 and 2013 .In terms of relative trade balance, Australia have comparative advantage in both foreign anddomestic markets for Electric current in 2004 and 2007, and for Ores and Electric current in2010 and 2013.

4. Science, Social, environmental indicators

4.1. Level of Internet access

Graph 6: Level of households to internet access and broadband access

Source: Australian Bureau of Statistics

The number of households with access to the internet at home continues to increase, reaching 7.3million households in 2012 13 and representing 83% of all households (up from 79% in 2010
http://en.wikipedia.org/wiki/Index_%28economics%29http://en.wikipedia.org/wiki/International_economicshttp://en.wikipedia.org/wiki/International_economicshttp://en.wikipedia.org/wiki/Index_%28economics%29


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11). More than three quarters (77%) of all households had access to the internet via a broadbandconnection. Almost every household with children under 15 years of age had access to theinternet at home (96%), as compared to 78% of households without children under 15 years ofage in 2012 13.

4.2. Greenhouse gas emissions

Australia generates about 1.5% of global greenhouse gas emissions. However, on a per capita basis, Australia is one of the world's largest polluters. For the year to June 2012, our nationalinventory emissions per capita were about 24.4 tones carbon dioxide equivalent (CO 2e) per

person. Only a few countries in the world rank higher Bahrain, Bolivia, Brunei, Kuwait andQatar. Australia's per capita CO 2 emissions are nearly twice the OECD average and more thanfour times the world average.

Chart 1: Sources of pollution:

Source: Australian government

4.3. Gross domestic expenditure on R&D by source of funds


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Table 21: Gross domestic expenditure on R&D by source of funds

Source: Australian Bureau of Statistics

Gross expenditure on R&D (GERD) represents the total expenditure devoted to R&D by theBusiness, Government, Higher Education and Private Non-Profit sectors. A method of estimatingor modeling the 'missing' Government and Private Non-Profit sectors has been developed that

provides the best estimate of the 2010-11 Government and Private Non-Profit expenditure onR&D. This approach utilizes a combination of directly collected information, budget papers andannual reports. The methodology centers on the major contributing organizations from eachsector which demonstrate a consistent share of total R&D expenditure over time. Theirexpenditure for 2010-11 is then extrapolated to represent an estimate for the whole sector. Themodeled estimate calculated for the R&D expenditure of the Government and Private Non-Profit

sectors was $4,747 million for 2010-11. Combining the modeled estimate for Government andPrivate Non-Profit with the Business and Higher Education sectors has produced a 2010-11estimate of GERD for Australia of $30.8 billion, an increase of $2.5 billion (or 9%) over 2008-09.

4.4. Energy intensity of the economy

Australia has abundant, high quality and diverse energy resources, which include both renewable

and non- renewable resources. Australia is the worlds ninth largest energy producer, accountingfor around 2.5% of world energy production and 5% of world energy export. The energyindustry is a significant contributor to the Australian economy, accounting for around 5% of totalGVA in 2009-10 .Demand for energy products has risen in recent years, driven by growingexports and domestic use, which can in turn affect the price and security of supply.Understanding developments and trends in the energy sector, therefore, helps policy makers tomake better decisions about how the nation should invest for future energy demands.


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Black coal remains the largest product contributor , accounting for almost half (49%) ofAustralias net energy supp ly at the end of the period, even after a fall in production due to theQueensland floods between 2009-10 and 2010-11. A strong support for black coal productionhas been from strong overseas demand, particularly from China. Production of uranium, thesecond largest component of the net domestic energy supply, has fallen sharply from 25% in2009-10 to 18% in 2010-11. In contrast, both natural gas and crude oil increased their share, to13% from 10%, and to 12% from 10% respectively.

5. Conclusion and recommendations

Today Australia is one of the fastest growing advanced economies in the world, economic

resilience and potential provide a safe, low-risk environment in which to do business. TheAustralian economy has enjoyed a period of 23 years of uninterrupted economic growth anaverage of 3.3 percent in real GDP growth annually, boosted by the strength of its services andresources industries.

One of the key assets that Australia poses is the geographical location, close to the fastestdeveloping economy in the world- China, and the increasing connections with other fast-growing economies in Asia. In 2009, China became Australia's largest export market,surpassing Japan. Resources continue to underpin Australias exports to China. Australiaexported 266.2 million tons of iron ore to China in 2009, an increase of 45.2 per cent over the

same period. The vast scale of trade with China has seen massive investments by Chinesecompanies in Australia. From 2007 to 2010, Chinese investment in Australia amounted tonearly US$60 billion. Australias mineral exports also grew by 55 percent to US$139 billion in2010 and are projected to reach US$180 billion i n 2011, thanks to Chinas strong economic

performance. Chinese companies have also started to lease land from the Australian governmentto mine resources on their own. Along with the relationship with China, Australia holds multiplefree trade agreements with numerous other countries such as the US, Singapore, Chile andThailand. Australia is also a member of numerous organizations such as APEC, the G20, WTOand OECD .

Australias mining industry has been the catalyst for economic growth in the past decade. Large quantities of minerals and resources can be found in Australia. Australia has the worldslargest resources of recoverable brown coal, lead, rutile , zircon, nickel, tantalum, uranium andzinc, and ranks second in the world for bauxite, copper, gold, limonite and silver. Iron ore isanother extremely valuable asset, with high demand from China.

The Australian labour force is one of the most educated, multicultural and multilingual in theworld. The country has the worlds highest secondary education enrolment rate, also almost 40


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% of the workforce holding a tertiary qualification or advanced diploma. It is expected thatAustralia will outperform many other developed countries for labour productivity growth interms of GDP per person employed.

Australia is a world-class innovation destination, with solid foundations of modern ICT

infrastructure, high levels of investment, generous R&D tax incentives for businesses and strongintellectual property protection. Australia is a leader in the development of new technologies likethe bionic eye. Billions of people around the world rely on Australian discoveries, such asGoogle Maps, high-speed WiFi, spray-on skin for burns victims, cervical cancer vaccine,ultrasound, cochlear implants and civilian use of penicillin.

Australia has strong mining sector, which contribute to the increase in export and theshare of 66% of the raw materials from the total export. Also a leverage is the undisputablecomparative advantage in Ores and Electrical current on both foreign and domestic markets. Butunfortunately commodity prices, particularly those important to Australia such as iron ore and

coal, have fallen over the past two years with shifts in both supply and demand. This has resultedin weaker terms of trade, reducing Australian incomes and weighing on household and businessspending. However, the significant fall in oil prices, which are now at their lowest level in aboutfour years, will assist businesses by lower costs of production and improve real householdincomes. That's why Australia should have more diversity in its exports, in order to be moreindependent from macro environmental factors, which will hinder its economic growth.


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Sources:

http://www.rba.gov.au

http://www.carbonneutral.com.au

http://www.oecd-ilibrary.org/sites

http://stats.oecd.org/

http://www.abs.gov.au/

http://www.worldbank.org/

http://www.imf.org

http://www.australia.gov.au/topics/economy-money-and-tax/statistics

http://www.nationmaster.com/country-info/profiles/Australia

http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx?sCS_referer=&sCS_ChosenLang=en

competitiveeness of australia paper

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