29 Apr 2016
AUD: Lower commodity prices mask improved trade integration with East Asia - NAB
Research Team at NAB surveyed Australian business integration with East Asia in September 2014 and China in December 2015 and noted that the recent headline trade data indicate a reversal in the decades-long process of growing integration with our region as exports have declined.
Key Quotes
“However, as the series of product line case studies presented here shows, the headline export numbers give an unduly gloomy picture. As the stimulus of record export prices inevitably passed, commodity revenues fell. This masked ongoing progress in lifting commodity export volumes, diversifying the commodity base and lifting earnings in services trade. The fall in the $A (from above US dollar parity) that accompanied falling commodity prices has lifted our competitiveness in manufactures and services, helping support trade volumes.
Paradoxically, therefore, long term fundamentals for increased integration have improved at the time export earnings have shrunk. The lower $A is boosting market opportunities in key sectors like agribusiness and tourism, already facing favourable prospects as income growth across East Asia changes dietary and leisure patterns. There is still work to be done on removing market access restrictions, despite free trade agreements, improving our efficiency to out-compete low cost rival suppliers and diversifying our product and market export profile in East Asia to limit reliance on a limited range of markets and products.
The bottom line: Export revenues have been hit by the withdrawal of the sugar hit of the commodity price boom but the deeper process of integration continues.”
Key Quotes
“However, as the series of product line case studies presented here shows, the headline export numbers give an unduly gloomy picture. As the stimulus of record export prices inevitably passed, commodity revenues fell. This masked ongoing progress in lifting commodity export volumes, diversifying the commodity base and lifting earnings in services trade. The fall in the $A (from above US dollar parity) that accompanied falling commodity prices has lifted our competitiveness in manufactures and services, helping support trade volumes.
Paradoxically, therefore, long term fundamentals for increased integration have improved at the time export earnings have shrunk. The lower $A is boosting market opportunities in key sectors like agribusiness and tourism, already facing favourable prospects as income growth across East Asia changes dietary and leisure patterns. There is still work to be done on removing market access restrictions, despite free trade agreements, improving our efficiency to out-compete low cost rival suppliers and diversifying our product and market export profile in East Asia to limit reliance on a limited range of markets and products.
The bottom line: Export revenues have been hit by the withdrawal of the sugar hit of the commodity price boom but the deeper process of integration continues.”