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Industry International Trade and Investment

World trade is an important factor for the Australian economy. It allows Australian consumers and industry to buy a greater variety of goods and services compared to that available from domestic production alone. It also opens up new markets and new customers for Australian exporting industries.

Exports measure the amount of goods or services produced domestically sent to another country for sale or trade, while imports measure the goods or services brought into Australia from a foreign country. Australia’s top 10 goods and services exports and imports are available on the Department of Foreign Affairs and Trade (DFAT) website.

Foreign investment occurs when a foreign based entity invests in a domestic business venture or purchases property or shares in an Australian-owned business. There are two main ways in which foreign investment can occur:

Portfolio Investment – this is the purchase of Australian securities (e.g., stocks or bonds) or equity and debt transactions which do not offer the investor any control over the operation of the enterprise (e.g., the purchase of shares in Australian companies or Government Bonds).

Foreign Direct Investment – this occurs when an individual or entity from outside Australia establishes a new business, or acquires 10 per cent or more of an Australian enterprise, giving them some control over the business operations.

Foreign investment is an important provider of capital for Australian industry and has been a significant contributor to Australia’s development for over 200 years.

The real effective exchange rate measures the value of a country’s currency relative to a basket of other major currencies adjusted for the effects of inflation. It is a way to track the international competitiveness of a country with respect to other countries.

An increase in the real effective exchange rate decreases a country’s international competitiveness, while a decrease in the real effective exchange rate increases a country’s international competitiveness.

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