6.3 Measurement of Australia’s international transactions

KEY KNOWLEDGE

Use each of the following points from the VCE Economics Study Design as a heading in your summary notes. • the definition of the selected economic issue, including relevant measures and statistical indicators • the reasons the issue is of importance to the economy at a local, national and international level • the economic factors influencing the extent of the selected economic issue • the different perspectives of households (consumers and workers), business, government and other relevant economic agents regarding the selected economic issue KEY SKILLS • define key economic concepts and terms and use them appropriately • gather, synthesise and use economic information from a range of sources to analyse economic issues • identify trends, patterns, similarities and differences in economic data and other information to draw conclusions • evaluate the economic responses undertaken to address economic issues Source: VCE Economics Study Design (2023–2027) extracts © VCAA; reproduced by permission. Resourceseses Resources Digital document Key terms glossary (doc-37950) UNCORRECTED PAGE PROOFS

KEY KNOWLEDGE

• the definition of the issue of the economics of international trade

Source: VCE Economics Study Design (2023–2027) extracts © VCAA; reproduced by permission.

International economics looks at the global forces at work that help to shape domestic economic conditions. We will start our investigations with a definition of international trade before looking at a snapshot of Australia’s main exports and imports, and our major trading partners. 6.2.1 Definition of international trade International trade refers the the two-way exchange of goods (products) and services across national borders. It involves Australia exporting or selling goods and services to other countries, as well as us buying imports of goods and services from abroad. Goods and services are traded around the world, mostly because of differences in the types of productive resources available in various countries. They are also traded because sometimes it is cheaper to buy things from elsewhere if overseas producers are more efficient or have access to cheaper resources. Sometimes, too, the quality of foreign made goods is better quality, or they are more readily available. These factors affect the international competitiveness of sellers in different countries. 6.2.2 The composition of Australia’s exports and imports The composition of trade has to do with the types of goods and services exported and imported. As mentioned, this largely depends on the resources available for production, and on the international competitiveness of its businesses. As a result, Australia exports goods including minerals such as coal and iron ore, rural commodities like wool, wheat and meat, and services including education, health and transport. Figure 6.2 shows our most important exports and imports of goods and services. 6.2.3 Australia’s main trading partners — the direction of trade The direction of trade identifies the the countries with whom we trade. Australia trades its goods and services with over 180 countries around the world. Our top trading partners are also shown in figure 6.3. Notice the importance of China, Japan, South Korea, India and the United States as major customers for our exports. UNCORRECTED PAGE PROOFS

Australia’s top exports of goods and services by value ($ billions)

Gold, $25.7 Other goods, $12.4

Rural (e.g. meat, wool, grains), $46.7

Manufactures (e.g. equipment, mineral Mineral fuels (includingconcentrates, clothing, oil, but not gold), $245.8petroleum), $52.3 Services (e.g. transport, travel, financial, education), $92.3 Australia’s top imports of goods and services by value ($ billions) Intermediate and other (rawFinished capital materials and componentsgoods, $73.3 used by local firms to make other goods), $125.4 Services, $87.1 Consumption goods (purchases such as cars, electrical appliances, clothing), $103.2

Gold, $8.9 Source: Data derived from Australian Government, Department of Foreign Affairs & Trade, Trade & Investment at a Glance, 2019–20, pages 19 and 41. UNCORRECTED PAGE PROOFS