No Country Is An Island

As the largest island in the world, Australia relies on imports and exports from other countries and holds many free trade agreements with countries such as US and Chile. It is their relationship with China that appears to be the most significant and is the largest source of both imports and exports, as seen in the diagrams below from the Australian Government, Department of Foreign Affairs and Trade. The growth in its economy has provided a lot of support to Australia through the global economic crisis and there appears to be a close trade relationship and even the recent slowdown in China's growth is reflected in Australia’s economy.

Australia's Export Market, 2010 ($ billion)

Australia's Import Market, 2010 ($ billion)

Resources such as iron ore and coal are Australia’s main exports and the mining and resource sector faced a major boom due to investment from China. According to the RBA Australia’s output growth in the latter months of 2011 was above trend due to mining. The outlook for mining continues to look good, it has also helped to increase business investment and along with agriculture continues to be a lucrative source of employment for those emigrating from Ireland.

But what about the other sectors in Australia? Although agriculture appears to be recovering well from some extreme weather conditions in the recent years, other sectors including retail do not appear to be as encouraging. The overvalued Australian dollar has not helped, adding extra pressures on exporters. While on a visit to Best’s Great Western Winery, Victoria, Viv Thomson (owner, wine expert and unfortunately no relation!) described how the current exchange rates were essentially making his product less competitive.

Although Australia may seem relatively safe with its strong trade relationships with Asia, it needs to be aware of what is happening globally. The reduced business and consumer confidence in other countries may become contagious - no country is an island!