The keys to unlocking new export opportunities for Australia lie in building advanced manufacturing capability and capitalising on Australia’s highly-skilled professional service industries, according to a new report from the Department of Industry, Innovation and Science.
The Industry Insights: Globalising Australia report, released today by the department’s Office of the Chief Economist, shows that future growth opportunities will come from Australia’s manufacturing industry moving towards higher-value processes like research and development, and product design and marketing.
The report shows that as production processes become increasingly interconnected globally, Australian firms must move towards these higher value activities and capitalise on new market opportunities to remain competitive.
The report also reveals that Australia’s professional and finance industry services, often embedded in our commodities and advanced manufacturing exports, make up almost half the value of all Australian exports.
This is because conventional statistics often understate the economic contribution of services like value chain logistics and coordination, accounting advice to exporters or other business services.
Increasing demand for these services from China and elsewhere in Asia is likely to present significant growth opportunities and high-skilled jobs into the future.
Acting Chief Economist David Turvey said the report confirmed the importance of supporting industry transition, removing trade barriers, and encouraging innovation to ensuring Australia’s place in the global trade environment.
“Australia is an outlier amongst developed nations when it comes to global trade, mainly supplying raw materials with limited participation in the production of final goods,” Mr Turvey said.
“This is partly due to geography. Australia is on the periphery of trading blocs, while an economy like Taiwan is in the middle of a manufacturing hub surrounded by China, Japan and Korea. But it also reflects our competitive advantages and resource endowments,” he said.
“The report shows the Australian economy is adapting to global trade patterns to our benefit. Australian manufacturing is restructuring to focus on the high value-add processes like R&D, design and marketing, while lower value-add production activities are offshored to lower wage countries.
“In addition, the conventional trade statistics understate the importance of services to Australian exports. The statistics show that products exported across Australia’s border are mostly commodities like iron ore or manufacturing products. Yet services make up nearly half of value added in all Australian exports. Put another way, the contributions of Australia’s highly-skilled professional services and finance industries are embedded in the lumps of rock that we export.”
The next edition of Industry Insights, a three-part publication by the Office of the Chief Economist in the Department of Industry, Innovation and Science, will examine how Australia can capitalise on new technologies to improve productivity into the future.