Australian international trade wasn’t immune to the global challenges. The volume of Australian goods exports declined for the second consecutive quarter to close out 2023, and Australian import volumes fell in the final quarter in line with weak domestic demand amid the cost-of-living challenges.
Late last year Australian iron ore and coal companies ramped up exports to meet strong global demand during an unanticipated rally in commodity prices. But rising prices weren’t enough to offset weakness elsewhere. A range of global supply issues put significant pressure on agricultural exports, a dry spring brought chaos to livestock markets, and strong global grain supply weighed on export volumes.
Deloitte Access Economics expects international export growth to slow around 1% in 2024. Last year’s late rally in iron ore and coking coal prices has come undone and higher inventory restocking for mining companies are expected in 2024 following a run down on inventories to capitalise on strong demand.
The volume of services exports is expected to stabilise in 2024. Service-related industries disrupted by the pandemic are approaching capacity as international student enrolments have exceeded, and short-term overseas visitors approach, pre-pandemic levels.
In an upside to the Australian export outlook, the Chinese Government has abolished heavy tariffs (taxes applied to import goods) on Australian wine exports as part of a gradual unwinding of the trade barriers placed on Australian goods in 2020 and 2021.
Those trade barriers had differentiated effects across commodity groups. At its peak in late 2020, some 36% of Australian beverage exports went to China, with that share falling to just 2% following the introduction of tariffs on Australian wine. On the other hand, Australian iron ore exporters escaped any additional Chinese trade barriers, with the share of Australian iron ore exports to China increasing to around 85% over this period. The gradual removal of Chinese tariffs is good news for Australian exporters, though capacity won’t be restored overnight as the pipeline rebuilds and the global wine market readjusts.
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