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Australian exporters have faced several challenges over the past 18 months.
COVID initially saw global consumption patterns shift, and demand for Australian exports fall. And while Australia’s supply chains proved generally resilient to border restrictions and mobility constraints, they did not go completely unscathed. Several frictions and bottlenecks emerged, particularly where export supply chains relied on imports for production.
Trade tensions between China and Australia also escalated through 2020, further impacting some commodity exports. Anti-dumping tariffs on Australian barley were the first of several trade restrictions introduced by the Chinese government. Subsequent restrictions typically applied to agricultural commodities (e.g. wine, cotton and beef), but in some instances extended to mineral resources like coal.
Together, these factors saw the value of Australian exports of goods fall 21.0% over the five months to August 2020 (Chart 1).
However, as global markets and supply chains adapted through the pandemic, Australian exports responded in turn. Data released last week shows that between August 2020 and April 2021, monthly exports rebounded 28.1% to reach nearly $36.0 billion (the highest value recorded to date).
Chart 1: Monthly value of Australian export of goods, May 2018 to April 2021
What the data also reveals is that the value of Australian exports to China actually remained relatively stable through 2020. In fact, monthly exports to China recorded their highest value ever in April 2021 (about $14.3 billion).
Soaring iron ore prices buoyed exports to China, masking broad declines across other commodities. Discounting the contribution of iron ore, Deloitte Access Economics estimates the value of other Australian goods exports to the China declined steadily from May 2020, falling by an average of 4.7% each month to April 2021 (Chart 1).
So, if the value of exports to China was broadly flat over the past 18 months, where have significant declines been realised? And in which markets have growth opportunities emerged?
In the 12 months to April 2021, Australian exports to Japan contracted sharply, realising a year-on-year decline of $13.5 billion or 24.6% (Chart 2). This was driven largely by reductions in fuel and metal ore exports, as well as sizeable falls in meat and aluminium exports, with Japan’s economy stumbling through the pandemic.
Exports to locked down UK also fell (down $2.5 billion or 15.8%) despite ongoing Free Trade Agreement negotiations. Air and spacecraft (including their parts), mineral fuel and pharmaceutical exports were among those commodities worst affected.
However, offsetting these declines was significant growth across several other markets. In particular, the value of Australian exports to Singapore grew most strongly, realising year-on-year growth of $2.6 billion or 20.8%. This growth was largely driven by metal ore exports to the market, as well as elevated trade in precious stones, precious metals and other articles of jewellery.
Chart 2: Change in value of Australian goods exports to selected geographies, 12 months to April 2020 vs April 2021
For exports of Australian goods, the story has been one of resilience so far in the face of fierce challenges.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.