Trade and Investment -- Australia's potential

Trade and Investment -- Australia's potential

Far-reaching structural reform and opening of the economy to
global competition over the past decade has made Australia a more
competitive exporter of a diverse range of goods and services,
and an increasingly attractive location for foreign investment.

The pattern of Australia's trade has changed markedly over the
past decade. Rural and mineral commodities, partly responsible
for Australia's tag as the "Lucky Country", still make a massive
contribution to Australian exports. However, in the past decade,
Australia has undergone a significant shift towards manufacturing
and services exports.

There have been other changes. Exporting is increasingly
becoming the domain of small to medium enterprises, and Australia
continues to integrate with the Asian region.

Underpinning much of this change reflects Australia's
consistent commitment in bilateral, regional and multilateral
negotiations to the liberalization of trade and investment,
including the reduction of tariff and nontariff barriers to the
free flow of goods and services.

"A leaner, more efficient, domestic economy is making
Australia a more internationally competitive exporter", Deputy
Prime Minister and Minister for Trade Tim Fisher said last August
when addressing the Australian Business in Europe group in
Melbourne.

"The government is establishing a framework for economic
growth for years to come with responsible macroeconomic policy,
the acceleration of microeconomic reform, and by reducing the
regulatory burden on business.

"A key aim of our macroeconomic framework is to improve public
and private savings. In our first term of government we will have
turned an underlying budget deficit of more than A$10 billion
into a surplus of $1.6 billion. By 2000/2001, the budget should
be in the black to the tune of $10 billion."

Australia achieved a surplus of $1.4 billion on the balance of
trade in goods and services in 1996/1997, compared with a deficit
of $2.1 billion in 1995/1996. For the first time, both
merchandise and services trade were balanced or in surplus.

In a statement last February, Fischer told the Australian
Parliament that overseas markets had become more important for
sectors of the Australian economy, which, in days gone by, were
sheltered and could not venture beyond domestic borders.

This is reflected in changes in the type of firms exporting
and the composition of Australia's exports. Once, exporting had
been the domain of large firms but today, more than 4,500 small
and medium enterprises trade overseas and generate earnings of
around $6.5 billion a year.

The value of Australia's exports of manufactures and services
has grown around three times as fast as primary product exports
over the past decade. Australia has developed a competitive edge
in the supply of computing equipment, medical equipment, and
telecommunications and pharmaceuticals.

And rapid growth in services exports has been driven by
sectors such as tourism, international education, music,
information technology, and other advanced industries.

Engineering, construction and mining company PT Petrosea, a
subsidiary of Clough Engineering, is just one example of
successful Australian investment in Indonesia.

International education has also been growing rapidly. In the
four years 1993 to 1996, international student numbers in
Australia increased 69 percent.

Of the international students in Australia in 1996, more than
121,000 were from Asia, 6,090 from Europe, 3,255 from the
Americas, and 1,567 from Africa. This source of income generated
$3 billion for Australia in 1996.

Six of Australia's 10 largest trading partners are in East
Asia. Together, they account for just under 60 percent of
Australia's exports. Australia's closer trade links with Asia
reflects proximity, and our status as a major supplier of raw
materials and intermediate products -- key inputs into Asian
production.

The recent currency instability in East Asia reflects
financial market recognition of structural weaknesses in domestic
financial systems, exposed by the export slowdown in 1996. A
number of factors will determine how severe and prolonged the
slowdown in Asia will be, including responses by regional
governments to underlying problems, investor confidence and the
expected rebound in export growth due to improved
competitiveness.

While the economic adjustments in play will curtail growth in
the next year or two, the medium-term outlook remains sound
provided governments put in place policies to address these
weaknesses.

Australia also continues to increase its investment links with
the world.

Foreign investment in Australia has grown at 11 percent over
the past decade, reaching $438 billion at the end of financial
year 1995/1996. Australian investment abroad stood at $152
billion at the end of financial year 1995/1996, compared with $43
billion at the end of 1985/19986. The East Asia region is the
fastest growing area for Australian investment abroad, with
annual average growth of 18 percent over the past decade.

The government's commitment to further reform and deregulation
will enhance Australia's international competitiveness and
attractiveness as an investment location.