Global Insights Dispatches from the diplomatic network and state and territory offices
From the DFAT Chief Economist
David Woods
Chief Economist David Woods says last year’s trade numbers will be hard to beat, but there’s an upside to the outlook, with services exports likely to grow strongly. 2022 was an extraordinary year for Australian trade. Our total trade reached over a trillion dollars across the calendar year for the first time ever. The value of Australian goods and services exported rose by almost a third to AUD671 billion. These outcomes came mostly from prices. Conditions on both the demand and supply sides combined to drive up prices for our larger resource and agricultural exports. Governments collectively spent USD14 trillion over the last few years on mitigating COVID-19 pressures. Russia’s invasion of Ukraine disrupted and redirected global supply of energy and agricultural commodities. Weather events also put a dent in production volumes of several commodities both at home and from other countries abroad. In volume terms our exports held up well overall, but our exports of several resource and energy commodities actually declined from historical peaks. Looking forward, we are not likely to repeat this year’s record numbers. Rather, the risk for the value of our exports and trade is weighted to the downside. The conditions leading to high prices are in the process of unwinding. While disruptive at the time, markets have largely adjusted to Russia’s invasion of Ukraine and prices in agricultural and resource markets have eased from last year’s peaks. Central banks globally have (with a few exceptions) raised interest rates to fight inflation. While the messaging from central banks suggests this process may be reaching its peak, the effects of increases to date will continue to flow through economies in coming months, reducing consumer activity and new business investment across developed economies. On top of all this, mounting geopolitical uncertainty and a rise in protectionist measures are weighing on trade and the global economy.
The International Monetary Fund (IMF) is predicting a slowdown in global GDP growth in 2023 to 3 per cent, down from 3.5 per cent in 2022. Both are
below the long-term average growth before the pandemic of 3.8 per cent. Alongside economic activity slowing, growth in merchandise trade is also expected to have slowed to 1.7 per cent in 2023. The latest economic activity numbers out of the world’s second largest economy China are reinforcing these expectations. A decline in prices for Australia’s key exports is unlikely to be offset by significantly higher volumes. Agricultural goods export volumes are likely to fall from record highs in the face of drier El Niño growing conditions. The value of agricultural exports is forecast to fall 17 per cent in 2023-24 (Department of Agriculture, Fisheries and Forestry). Meanwhile, export volume of resources like iron ore, lithium, copper, aluminium, and nickel are likely to grow slightly in 2023-24 in response to demand from new infrastructure and energy transition projects (Department of Industry, Science, Energy and Resources). More benign weather conditions may support mining production and freight at the margin. On the plus side, services exports should grow strongly. Volumes are forecast to increase particularly substantially over the next 12 months (Tourism Research Australia), with inbound traveller, student and tourist numbers benefiting from China’s continued reopening. Australia’s economic growth and trade diversification continues to be supported by new export opportunities, including those flowing from Australia’s eighteen free trade agreements with thirty countries. This includes the newly entered-into-force UK-Australia FTA, and the Australia-India Economic Cooperation and Trade Agreement. While we may not reach last year’s highs in 2023, trade will remain a key driver of national prosperity and a pillar underpinning Australian wellbeing.
Perth: Unlocking First Nations business opportunities in SE Asia In July 2023 Australia’s Special Envoy for Southeast Asia, Nicholas Moore, was hosted by Western Australia’s ASEAN Business Alliance and the Noongar Chamber of Commerce and Industry, to discuss the burgeoning opportunities for First Nations businesses in Southeast Asia’s growing market.
Auckland: Agreement to admit the UK to the CPTPP On 16 July 2023 the 11 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) members gathered in New Zealand where they agreed to admit the United Kingdom into this landmark trade agreement. Australia warmly welcomes the UK as a new member, particularly as this development builds on the foundations of the Australia-UK Free Trade Agreement and supports all of our interests in working with partners to realise an open, inclusive and prosperous region. The CPTPP is one of the most comprehensive trade deals ever concluded, eliminating 98 per cent of tariffs in a trade zone representing a combined GDP of $11.8 trillion and a population of over 500 million people. The agreement’s original member economies include Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The Special Envoy welcomed the opportunity to learn more from these two leading business chambers, who have joined forces to explore areas of mutual economic benefit and tap into the region’s youthful and dynamic population of 670 million people and $150 billion two-way trading relationship. On 6 September, Invested: Australia’s Southeast Asia Economic Strategy to 2040 was launched. Nicholas Moore was invited to develop the strategy and make recommendations that will see our economic ties into the region deepen. There was extensive stakeholder consultation during the preparation of the strategy, which will be reviewed regularly. It is published at dfat.gov. ausoutheastasiaeconomicstrategy More opportunities in Southeast Asia will be featured in the next edition of Business Envoy .
Invested: Australia’s Southeast Asia Economic Strategy to 2040 Economic Strategy to
A report for the Australian Government by Nicholas Moore AO
Above: Assistant Minister for Trade Senator the Hon Tim Ayres with New Zealand Prime Minister, Rt Hon Chris Hipkins Image courtesy of Smoke Photography Ltd
20
21
business envoy
Department of Foreign Affairs and Trade
Department of Foreign Affairs and Trade
business envoy
Made with FlippingBook - Online Brochure Maker