Countries all over the world have struggled to recover their economies after suffering the Covid-19 pandemic for the last two years. As a result of trade restrictions during the pandemic, the import and export industries were hit the hardest, globally.
Among the most severely affected countries was Australia, whose GDP comprises around 45% of exports and imports. However, since the import and export curbs are being lifted slowly, Australia’s industry is expected to return to normal and even grow higher than before the pandemic.
In this report, we will take a look at the performance of Australia’s exports and imports so far in 2022.
In today’s globalized economy, exports are an essential factor in the growth and development of countries worldwide since they account for a significant part of the GDP.
According to the World Bank, Australia’s export accounts for almost 24.11% of its gross domestic product. Moreover, Australian exports have been steadily increasing since 2012, indicating increased demand for its goods and services.
Among the top export goods from Australia, the list includes ores and metal scrap, which alone contributed to AUD 40 Billion. Other imports like Coal, Coke, and Briquettes combined contributed to another AUD 22 Billion.
Australia’s mining and energy exports had hit a record $310 billion in 2021, which stabilized the economy despite a tumultuous period marked by a worsening trade spat with China and a global pandemic.
In addition, China fueled a surge in demand for steel by implementing aggressive stimulus programs that emphasize infrastructure development. This helped Australia, whose most significant export is iron ore, reach a record $230 a tonne.
While iron ore prices have increased, the situation involving coal, the country’s second-largest export, is more uncertain. With the Coronavirus epidemic weighing on energy demand and Chinese prohibitions echoing across the industry, Australia’s coal miners lost a combined $20 billion on their exports last year.
Due to the markets reopening and fewer restrictions, the exports of vegetables and fruit were around AUD 11 Billion.
During the pandemic, resource export volumes remained relatively steady, and the value of exports was at a historical high in the second half of 2021. However, maintenance and weather-related disruptions affected production at the time.
According to a report published by the government, Australia’s resource and energy exports hit a record $296 billion in 2020-21, which was seen as a strong reaction to the COVID-19 pandemic. In addition, the value of Australia’s iron ore exports reached a new all-time high of $136 billion during the same year. As a result of strong demand for iron ore and disrupted supply from Brazil, iron ore prices soared in late 2020, which even helped Australia more.
Till January 2022, the most contribution to the exports was mainly from Western Australia, Queensland, New South Wales, Victoria, and South Australia. At the same time, Australia desired to export to China, Japan, Korea, Taiwan, and India.
With the economy recovering further from disruptions caused by the Covid-19, Australia’s imports of goods and services rose 12% to a record high of AUD 41.31 billion in just February 2021. In the year 2021, Australia imported a record $248.4 billion worth of goods from around the world. This is a 22.8% increase over 2020.
The most significant Oceanian country’s total import in 2021 translates to approximately $9,700 per person in yearly product demand. In 2010, the per-capita average was $7,900 per person after the Delta outbreak restrictions were eased. This resulted in a surge in household spending in December—spurred by a rebound in domestic economic activity.
Among Australia’s top 10 imports of 2021, machinery, including computers, accounted for over 14.8% of total imports, which is around $36.8 billion worth of imports. After which, vehicle imports accounted for over $33.3 billion, followed by electric machinery and equipment, which accounted for $28.1 billion.
Among the top 10 imports of Australia, the mineral fuels industry rose to 51.2%, followed by vehicles, which rose 39.9% compared to 2020.
A recent report published by oec.world shows Australia is the world’s largest importer of Sodium or Potassium Peroxide and Horsehair Fabric.Till January 2022, New South Wales, Victoria, Queensland, Western Australia, and South Australia contributed to most of Australia’s imports. At the same time, the biggest imports in Australia were from China, the United States, Japan, South Korea, and Singapore.
As we mentioned earlier, COVID’s impacts on Australia trade vary greatly by sector. For instance, the agricultural sector has weathered the storm well (foreign exports excepted). Food commodities are essential to everyday life, even during a crisis. At worst, prices have softened, but domestic demand, generally speaking, has remained stable.
However, Australia’s resource industries have fared the best by fare. China was the first nation to experience the effects of COVID-19. As a result, they were the first to emerge from its initial wave. To kick start their economy, Beijing is implementing aggressive stimulus measures.
Because of this, demand for raw materials has surged back to life after plunging early in 2020. Back in February, iron ore exports plunged to 66.01 billion AUD. However, by June, those exports skyrocketed 50% to 99 billion AUD.
Then, we have the travel sector. Throughout the world, the spread of a lethal virus has made international travel a non-starter for most people. In Australia, the government has compounded this issue by imposing draconian measures.
The federal government hasn’t just banned discretionary travel into the country – they’ve barred outbound travel as well. The coup de grace – many state authorities have imposed internal travel restrictions. The result? Many tourism operators have reported revenue drops of 80-90% YoY. Were it not for government bailout programmes, most would have gone out of business by now.
COVID impacts on secondary industries (i.e. manufacturing) have also hurt machinery imports. Known in economics-speak as capital goods, the value of these imports fell 15% YoY. However, more significant is the inability of manufacturers to spur economic growth, thanks to reduced spending on machinery.
These impacts have also severely affected the service economy. In particular, business foreign exchange transactions have been hard hit. With businesses processing fewer orders across international borders, money transfer providers are bringing far less in commissions.
Currency fluctuations have only compounded their misery. The AUD has not done well in 2020 global currency markets. Among advanced economies, only the CAD has taken a worse beating. As a result, it now takes more AUD to conduct transfers to UK and elsewhere.
Consequently, capital outflows have gotten progressively worse. In Q2 2020, 18.63 billion AUD flowed out of Australia. These numbers could be why some are sitting by, waiting for AUD exchanges rates to improve. This hesitance to trade is only further hurting Australian transfer providers, who have suffered mightily this year.
Things were looking dire at the start of the pandemic. As China locked down hard, the unthinkable happened – its powerhouse economy ground to a halt. Consequently, exports of iron ore, Australia’s highest value commodity, tanked by nearly 30% from December 2019.
And yet, as we write this article, this nation has somehow managed to maintain a positive trade balance. As we inferred earlier, iron ore has played a big role in Australia’s post-lockdown recovery. The mining sector comprises 9.5% of Australia’s GDP – so, when iron ore came back to life, so did this nation’s fortunes.
Trouble does appear to be on the horizon (i.e. impacts of a 2nd wave), but the mining industry has single-handedly boosted the Australia trade surplus. When you compare the first eight months of 2020 to the same period in 2019, this figure expanded 20% YoY.
We can thank Asia’s alpha tiger for this remarkable turnaround. After emerging from lockdown, China’s economy returned to life fairly quickly. After contracting at an annualised rate of 6.8% in Q1 2020, they posted GDP increases of 3.2% and 4.9% in Q2 and Q3 respectively.
According to S&P Global Market Intelligence, both industrial production and real estate investment have experienced V-shaped recoveries. Both sectors make use of copious amounts of iron ore, which explains Australia’s exports resurgence.
Australia exports 80% of its iron ore to China. While its dependence in Beijing is troubling, this relationship is mostly responsible for this nation’s trade balance recovery.
In the first half of 2022, manufacturing exports are expected to grow at a subdued pace because of ongoing disruptions in global supply chains. However, due to good growing conditions and pastures and strong global demand for grains and meat, rural exports are expected to continue growing in the near term.
Another government report forecasts that energy and resource export earnings will rise 7.7% to $334 billion in 2022, driven by global infrastructure spending.
In response to the increase in local demand and the reopening of the international border, import volumes are expected to rise sharply. However, increased world prices for traded products will partially offset this.
An increase in energy-related export prices, including LNG and thermal coal, will be offset by the rise in import prices.
There are still opportunities for Australian businesses in China even though there is a decidedly icy relationship between the two countries. In addition, developing a presence in emerging markets like India and Indonesia could contribute to long-term sustainability in Asia, even if it does not immediately make up for lost opportunities in China.
With the pandemic and China’s ban on trade with Australia, it may take the country time to get back on track, but the Australian economy had established a solid momentum by the end of 2021.