The typical view of Australia’s export market is that of wool, wheat and meat. However, anyone paying attention to the figures knows that Australia’s rural export sector has been in decline since the 1970s. In 1963-64, wool alone made up 34.5% of Australian exports, and in 1969-70, agricultural products represented 42.4% of total exports. In the twenty-first century, however, it is a vastly different landscape, with agricultural exports only holding a 12% share in 2013-14.
The reasons behind this shift are numerous, with the movement towards minerals and iron ore beginning in the 1980s and the recent mining boom solidifying their position as one of Australia’s top earners on the export market. As well as that, who Australia exports to has drastically changed. As shown in Figure 1, as Australia has shifted from being Euro-centric to a more Asia-focused nation, so too has its export markets. The United Kingdom over a 50-year period went from Australia’s largest trading partner at 23.5% of total trade in 1963-64, to one of it’s smallest in 2013-14. Conversely, China has increased from 7.7% to 36.7% within the same period and other Asian nations (not including Japan) now represent 28.3% of trade. 83% of Australian exports are now to Asian countries.
Figure 1
However, perhaps most significant in the changing landscape of Australian exports is the shift towards services. This change within the Australian economy can be attributed in part to rising real incomes, with Australia experiencing over 25 years of continuous economic growth. As this growth has occurred, households have spent proportionately more income on services, such as education, as opposed to goods. On the macro level, the service sector accounts for 80% of jobs and over 75% of national output, and in 2015 global service exports were valued at US$4.8 trillion.
Australia’s main service exports include professional services, work-related travel, tourism, financial services and education. In 2016 education exports were equal to an AUD$22 billion injection into the Australian economy, making them our largest service export and third largest export overall, behind iron ore and coal.
This growth in the services sector is no accident, with the government hoping that the decline of the mining boom will be offset in economic terms by a boom in services, particularly education, with the federal government looking to double onshore enrolments by 2025. It is a plan that so far appears to be working, with a record 685 000 international students enrolling in courses in 2017, representing a 15% increase on the previous year. This injection is not only causing growth for education but related sectors as well. International students are spending money in new ways, including domestic holidays and having their family and friends visit them while they’re here.
While this all seems fantastic, there are some distinct drawbacks to the current education boom. Specifically, the boom driving a two-speed economy, where most of the revenues flow to Melbourne and Sydney. This is because a small group of prestigious institutions, namely Monash University, The University of Melbourne and The University of Sydney, are drawing in the majority of these students, with ANU, UNSW and UQ also managing to hold their ground. Of the net increase in the higher education sector between 2010-15, these six universities alone accounted for 60%.
Therefore, it will be essential for the Australian government to correctly navigate this next transition in the Australian economy to ensure that some states are not left behind and that all Australians continue to enjoy the economic prosperity that has led to 25 years uninterrupted economic growth.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.
