The Department of Industry, Innovation & Science has released the second in its series of three Industry Insights reports for 2018 - Globalising Australia. The report, which comes from the department’s Office of the Chief Economist, concludes that future growth opportunities will come from manufacturing industry moving towards higher-value processes like research and development, and product design and marketing.
Specifically, the report points to the nation’s current low levels of exporting of professional, scientific and technical services. In 2015 just 3.6% of activities in these areas were exported. This compares unfavourably with the USA at 7% and the UK at 23%.
With production processes increasingly globally interconnected, the report concludes that Australian companies should concentrate on exporting these higher value activities and capitalise on new market opportunities to remain competitive.
Releasing the report, Acting Chief Economist David Turvey said it 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,” said Turvey.
“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 added.
“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 third edition of Industry Insights will be released later this year, and will examine how Australia can capitalise on new technologies to improve productivity into the future.