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A decade of change: The remarkable rise of Australia’s trade in services

A decade of change: The remarkable rise of Australia’s trade in services article image

Australia’s trade in services with its major trading partners has recorded strong growth over the last decade.

The composition of this growth however has been varied across our major services trading partners.

A recent report by Frank Bingham from the Office of Economic Analysis, DFAT, reveals education-related travel services and personal travel services have accounted for two-thirds of the total growth in Australian services exports over the period from 2006-2016.

The new major players such as China and India have seen education and personal travel services dominate growth while the traditional major partners have seen growth across a broader range of services.

For Australia’s traditional major services markets, such as the United States, the United Kingdom, Singapore and New Zealand, the changes in growth in transportation and business services have also been significant.

The strong growth in exports of education-related travel services over the last decade, though dominated by China and India has seen new markets open up for Australia including Brazil, Colombia, Nepal, Pakistan, Saudi Arabia, Sri Lanka and Vietnam. As a group these countries accounted for over a quarter of the growth in education services in the period.

Imports of services

Australia’s exports of services to the world have grown from $44 billion in 2006 to $71 billion in 2016 – up by $27 billion or 62 per cent.

While imports of services from the world have grown from $44 billion in 2006 to $76 billion in 2016 – growth of $31 billion or 71 per cent.

The main contributors to the growth in the value of Australian export of services during this period have been education- related travel services, up $12 billion to $22 billion, and personal travel services, (excluding education) – mainly for the purposes of recreation, up $6 billion to $17 billion.

Combined these two services accounted for two-thirds of the total growth in Australian services exports over this period.

In terms of imports the main contributor to the growth over the last decade was personal travel services (excluding education) up $16 billion to $29 billion, accounting for half of the total growth in services imports over this period.

Non-travel services

In terms of our major services trading partners, however, the composition in the growth in services over the last decade can be quite different when compared to the overall Australian picture. Non-travel services such as transportation and business services for some partners were more important than travel services.

The following analysis examines the trends in the composition of Australia’s services trade growth with our top five services trade partners for the period 2006 to 2016.

United States

The US was Australia’s largest services trading partner valued at $22 billion in 2016 – up from $13 billion in 2006.

Exports of services have grown from $5 billion in 2006 to $8 billion in 2016. However, unlike Australia’s overall export growth profile the major contributors to the growth in services exports were mainly business services, with professional services up $851 million to $1.6 billion (mainly management fees), telecommunication, computer & information services up $569 million to $1 billion (mainly computer consultancy services) and financial services up $428 million to $761 million.

Personal travel (excluding education) services also grew strongly, up $463 million to $1 billion in 2016. These increases were partly offset by a fall in exports of technical & other business services down $231 million to $431 million in 2016, mainly due to a fall in exports of engineering services.

The composition of the growth in imports of services from the United States, up from $7 billion in 2006 to $14 billion in 2016 is more typical of Australia’s overall import growth profile. Growth has been dominated by personal travel services (excluding education) up $3 billion to $5 billion in 2016.

Growth in business services such as professional services (mainly management fees) and telecommunication, computer & information services have also been strong. The United States is also Australia’s major source of imports of personal, recreational & cultural services with film & television royalties growing from $366 million in 2006 to $909 million in 2016.

China

China was Australia’s second largest services trading partner valued at $14 billion in 2016 – up from $5 billion in 2006. Exports of services have grown from $3 billion in 2006 to $11 billion in 2016.

China is now Australia’s largest services export market. The growth in exports to China is more typical of Australia’s overall export growth profile with the major contributors to the growth in services exports being education-related travel services up from $2 billion in 2006 to $6 billion in 2016 and personal travel services (excluding education) up from $442 million in 2006 to $3 billion in 2016. These two services accounted for 85 per cent of the total growth in services exports to China over the period.

However some business services, such as financial services have shown extremely strong growth rates (up from just $2 million in 2006 to $317 million in 2016).

The composition of the growth in imports of services from China, up from $1 billion in 2006 to $3 billion in 2016 was more broadly based than exports. Transportation services (mainly freight transport services), personal travel services (excluding education) and other business services (mainly professional services and trade related commissions services) were the main contributors to overall growth.

United Kingdom

The UK was Australia’s third largest services trading partner valued at $12 billion in 2016 – up from $9 billion in 2006.

Exports of services have grown marginally over the period, up just $25 million to $5 billion.

However, the composition of Australia’s exports of services to the United Kingdom has changed significantly with some services growing strongly such as telecommunication, computer & information services up $345 million to $439 million in 2016 and other business services up $338 million to $794 million.

These rises have been mostly offset by a decline in transportation services down $447 million to $249 million over the period and financial services down $269 million to $543 million.

The composition of the growth in imports of services from the United Kingdom, up from $4 billion in 2006 to $7 billion in 2016 was mainly due to personal travel services (excluding education) and other business3 services.

Singapore

Singapore was Australia’s fourth largest services trading partner valued at $10 billion in 2016 – up from $7 billion in 2006. Exports of services have grown by $2 billion over this period to $5 billion in 2016.

Like the United States, growth in services exports to Singapore has been dominated by business services. The largest items recording growth over the period were technical & other business services which grew by $1 billion to $2 billion (mainly trade-related commissions) and professional services up $390 million to $629 million (mainly advertising services and management fees).

Personal travel services (excluding education) exports also grew strongly over this period, up $311 million to $667 million in 2016. Partly offsetting these gains, transportation services exports fell $527 million to $645 million, mainly due to a fall in passenger transport services – in part due to Qantas routes to Europe now flying via the Middle East rather than Singapore.

As with exports, the growth in imports of services from Singapore was also mainly due to business services with total imports growing from $4 billion in 2006 to $5 billion in 2016.

Strong rises were recorded in professional services (mainly management fees) up $793 million to $930 million in 2016 and technical & other business services which grew by $367 million to $442 million. Personal travel services (excluding education) also rose over the period up $375 million to $666 million. Most of these gains were offset by a large fall in transportation services (mainly freight and passenger services) down $1 billion to $2 billion in 2016.

New Zealand

New Zealand was Australia’s fifth largest services trading partner valued at $9 billion in 2016 – up from $5 billion in 2006.

Exports of services have grown by $1 billion over this period to $4 billion in 2016. Growth in services exports over this period has been fairly broad based, with transportation services, travel services, business services all contributing significant growth.

Imports of services from New Zealand grew from $2 billion in 2006 to $4 billion in 2016. Growth in imports of services from New Zealand has been dominated by personal travel services (excluding education) which grew $1 billion to $2 billion over the period and accounted for over 50 per cent of the total growth in services imports.

Emerging markets

Growth in Australia’s services exports has not just been restricted to our major markets. The strong growth in education-related travel services, over the last decade, though dominated by China and India has seen other new markets open up for Australia.

Countries such as, Brazil, Colombia, Nepal, Pakistan, Saudi Arabia, Sri Lanka and Vietnam have all recorded significant growth in exports of education-related travel services. As a group these countries accounted for over a quarter ($3 billion) of the $12 billion growth in education services in the period 2006 to 2016.

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