services trade crucial to australian...

Services trade crucial to Australian economyMinister for Trade, Tourism and Investment The Hon Steven Ciobo MPOne of the driving forces that will underwrite the continuation of Australia’s record-breaking 26-year run of economic growth is the rise of services exports.

Building the architecture to facilitate growth in services exports is a key component of the Turnbull Government’s economic plan for the transition of our economy to the post-mining boom era.

The growth of global value chains in services and integration of services trade into the global economy is poised today where the growth of manufactured goods sat a generation ago.

Services are at the heart of our economy. In all, services account for three quarters of the Australian economy and, importantly, provide more than four out of five Australian jobs.

However just under a quarter of our exports are services exports, so the scope for growth is huge.

Services exports were up nine per cent last year to $71 billion. Tourism and education led Australia’s services trade with the world, followed by business services, transport and then business travel services.

In 2016, goods and services exports rose eight per cent in real terms, and net exports contributed over half of our real economic growth of 2.4 per cent.

Sophisticated economies rely on services p3

Cables from post Dispatches from Australia’s global diplomatic network

p4

A decade of change: Composition of Australia’s trade in services with our major trading partners –

2006 to 2016 p7

Growth in tourism a shining light for Australia

p10

Enormous potential in Asia Region Funds Passport

p14

Connecting DFAT’s diplomatic network to Australian business

DEPARTMENT OF FOREIGN AFFAIRS AND TRADE • AUGUST 2017

(continued on page 2)

Department of Foreign Affairs and Trade

Services trade crucial to Australian economy(continued from page 1)

2

The star performer was Australia’s services sector. After hitting an all-time record in March of $18.5 billion, the services sector is forecast to grow at least four per cent year on year over the next two financial years. The sector is proving itself to be a reliable driver of export and economic growth.

This edition of business envoy provides information on our booming services sectors including tourism, health and ageing, education, professional, mining and financial services.

The Turnbull Government is determined to see the growth continue. That is why we are pursuing an ambitious trade agenda to support the diversification and growth of our economy. Enhancing services trade is a key component of that agenda.

Our top trade priority for 2017 is concluding an ambitious Indonesia-Australia Comprehensive Economic Partnership Agreement. We continue to push for high-level outcomes from the Regional Comprehensive Economic Partnership negotiations, a regional free trade agreement involving 16 countries. We have updated our free trade agreement with Singapore, have recently launched negotiations with Hong Kong, the Pacific Alliance countries (Mexico, Colombia, Chile and Peru) and Peru, and continue to work towards commencing negotiations with the EU and the UK.

We are also hoping to re-engage as soon as possible on the Trade in Services Agreement negotiations involving 50 countries. You can read more about these trade negotiations on p21-23.

These negotiations will create new markets for our services suppliers, farmers, and manufacturers enabling them to grow and employ more people.

Australia has long recognised that with a small population, we must look to external markets to fuel growth at home and maintain the high standards of living we have come to enjoy and expect.

The Turnbull Government is committed to policies that support economic growth and create new Australian jobs.

Contents Services trade crucial to Australian economy 1

Sophisticated economies rely on services 3

Cables from post Dispatches from Australia’s global diplomatic network

4

A decade of change: Composition of Australia’s trade in services with our major trading partners – 2006 to 2016

7

Growth in tourism a shining light for Australia 10

Enormous potential in Asia Region Funds Passport 14

Engineering services is now a truly global profession 15

International education in Australia – soft power and solid results

16

Our health services are in demand OS 17

Growing Australia’s mining services exports 18

Mutual recognition of Australian professional services abroad

20

OECD review to identify options to enhance competitiveness 20

Hong Kong FTA to boost service exports to Asia 21

Call for submissions on ChAFTA reviews 22

Great untapped opportunities in Indonesia-Australia trade

22

Securing trade agreements for Australia’s future 23

Department of Foreign Affairs and Trade 3Department of Foreign Affairs and Trade 3

Sophisticated economies rely on services

International research confirms that, as countries have become richer, their services sectors have become a more prominent part of their economies. In Australia services is a key component of the economy, representing about 75 per cent of Australia’s gross domestic product and employing four out of five Australians.

The composition of Australian trade in services Australia’s five largest services exports in 2016 were:

$ billion$22

$17.4

$4.8

$4.1

Education-relatedtravel services

Personal travel (excl. education) services

Professionalservices

Business travel services

Technical & other business services

$4.2

A service is a type of economic activity that is more often than not intangible and cannot be stored or transported. Services can be difficult to identify as they can sometimes be closely associated with a physical good. For example, wheat harvesting would be a service and the wheat would be the good. Or a tax agent compiling a tax return would be considered a service. Or a consultant writing a report.

Services are essential to growing, mining, or making things. Businesses need energy, a water supply, and their produce transported to market. Few can survive without modern communications, a bank account, or insurance. Most businesses will consult a lawyer and an accountant when making a contract or obtaining capital.

Australia is a world-class provider of services including professional, education, tourism, financial, telecommunications, energy and mining-related services, environmental services, health and aged care and financial technology (or FinTech). Because of our strengths in these areas, and the potential globally, these are Australia’s priority sectors for improving market access in global services trade reform efforts.

Services play an increasingly important role in our international trade, with volumes of services exports growing by an average of 5.3 per cent over the last five years. In 2016, trade in services accounted for 21.8 per cent of Australia’s overall trade in goods and services. The value of Australia’s services exports are much greater once we take into account the role of intermediate services inputs known as

‘embodied services’, which form part of the value of Australian goods exports because they are used in the production of those products prior to export. Using that earlier example, this would involve the wheat harvesting services that go into the value of the wheat we export. The OECD estimates services contribute a much more significant 40 per cent of our value-added export earnings.

In addition, around two-thirds of Australian services provided to the world are delivered by Australian foreign affiliates abroad, not via direct export. This activity is not included in ABS trade in services statistics, however, it does contribute to Australia’s national income.

Why is it important to open services markets internationally?Services play a major role in all modern economies. Indeed, it would be difficult for any economic activity to take place without services such as telecommunications, banking and freight logistics.

As such, an efficient services sector is critical to broader economic growth and job creation. Encouraging greater international trade in services through open markets and non-discriminatory treatment boosts competition and productivity, lowers prices across the economy and leads to higher employment levels, higher incomes and higher standards of living.

Further statistical information on Australia’s trade in services will be available in the forthcoming DFAT publication ‘Trade in Services Australia 2016’.

Source: ABS

From Jakarta: Australian opportunities in a growing FinTech marketIndonesia has a thriving FinTech sector. This may seem an anomaly in a country where only 22 per cent of the population have an internet connection, and cash transactions account for 80 per cent of wage earners’ payments and 99 per cent of utility bill payments. However, savvy companies are finding ways to reach large segments of the population excluded from the formal financial sector. A number of companies have emerged in recent years, catering to groups not traditionally serviced by Indonesian banks with loans for small business investment,

education, small value consumption and medical treatments. One example, ‘peer-to-peer lending’, utilises risk profile matching on online platforms. Borrowers register information relevant to their loan and the platform provides a risk rating or interest rate, from which savers can select. The online platform takes a cut of the interest to turn a profit, with the lender bearing the full risk of default. Peer-to-peer lending had been unregulated and only covered by the civil code until Indonesia’s Financial Services Authority released Regulation Number 77 in December last year. The regulation, based on an Australian model and supported by Australian technical advice, sets out requirements for business licenses, management and reporting arrangements and other issues, and is designed

to ensure consumers are well informed and protected from unscrupulous practices.

Indonesian President Joko Widodo has been a strong driver of the regulation, which is part of his plan to create 1000 ‘technopreneurs’

by 2020.

There appears great potential for FinTech startups and foreign entrants in Indonesia, with several foreign firms already having

established a presence. Growing Australian interest

was evident in the 130-strong senior Australian business delegation to the second Indonesia-Australia Business Week, held in Indonesia from

6-10 March 2017, led by Minister for Trade, Tourism and Investment Steven Ciobo. Of the five targeted

sectoral programs on offer to delegates,

Financial Services and Technologies delivered insights into Indonesia’s

regulatory environment, start-up and FinTech ecosystem. It also provided opportunities for networking with senior representatives and executives from some of Indonesia’s leading banks, venture capital funds and incubators. Australian firms interested in more information about the sector are encouraged to contact Austrade Jakarta by email to [email protected]. Australian businesses are also invited to express their interest in participating in ministerial-led business missions (in any sector) here: www.austrade.gov.au/Events/Ministerial-Led-Business-Missions/eoi.

Cables from postDispatches from Australia’s global diplomatic network

Department of Foreign Affairs and Trade44

Department of Foreign Affairs and Trade 5

From Moscow: Ambassador delivers lecture at Russian mining universityAustralian Ambassador to Russia Peter Tesch gave a public lecture on the History and Current State of Russian-Australian Relations at one of Russia’s oldest universities earlier this year. The presentation to the 400-strong audience at the St Petersburg Mining University, portrayed Australia as an attractive investment destination and partner in mining and education. It also provided an opportunity to discuss broadening cooperation between Australian and Russian businesses and universities. The University is home to a new educational and research blast simulation laboratory founded through a joint venture with Australian company Orica (Press Release: http://old.spmi.ru/en/node/15103). Following the presentation and discussions, the University plans to send a delegation to the International Mining and Resources Conference in Melbourne in November. Australian businesses interested in opportunities in Russia are encouraged to contact Austrade by email to [email protected].

From Guangzhou: Business sentiment positive in South ChinaThe business environment in southern China is positive and improving, according to the most recent American Chamber of Commerce in South China member survey. A large majority of the foreign and local businesses surveyed were optimistic about the overall business environment in South China and the Chinese economy. Respondents also suggested their companies were earning substantial business and investment returns, with more than 80 per cent reporting their companies are profitable in China. Furthermore, nearly three quarters of those that were not yet profitable reported they expected to become profitable within two years. The survey focuses on

the business and investment environment in South China, primarily Guangdong Province, with Fujian, Guangxi and Hainan also covered. The report can be downloaded in full at www.amcham-southchina.org/amcham/static/publications/specialreport.jsp.

From Brasilia: First Australian Agritech Innovation Workshop generates interest in BrazilA high-level agriculture delegation from the Graham Centre for Agricultural Innovation at Charles Sturt University, the University of New England, and the Agricultural Business Research Institute visited Brazil from 15 to 19 May to participate in the first Australia-Brazil Workshop on Agritech Innovation. The event was held at the ESALQ Agricultural College in Piracicaba in the state of Sao Paulo, which is recognised as Brazil’s top agricultural tech hub. Austrade Sao Paulo organised the workshop to promote Australian capabilities in agricultural and livestock technology and to explore new approaches to industry-engaged research and collaboration opportunities.

More than 70 people from the Brazilian scientific community and industry attended the workshop and a number of opportunities for collaboration were identified, including joint research in citrus, sugar cane and peanut monitoring with remote sensing, and studies into joint commercial projects in livestock genetics, feedlot optimisation and bio-pesticides. Meetings between the delegation and local officials also generated interest in fields such as research on animal science, plant and livestock genetics and nutrition.

Austrade Brazil sees this as another step towards closer collaboration that leverages the natural synergies of our similar tropical and sub-tropical climates and significant exports of food commodities to Asia. For more information, contact Austrade on 02 9392 2762 or via email to [email protected].



From Islamabad: Launching the Australian Water Program for PakistanOne of Pakistan’s most pressing challenges – water management – is set for a boost with a new Australian whole-of-government water effort, the Australian Water Program. The AWP is the latest development in our long history of cooperation with Pakistan on water management that dates back to the 1980s, with Australia’s own journey towards effective water management of the Murray-Darling Basin providing the ‘fertile ground’ for knowledge exchange. The AWP involves a A$15 million Australian Government aid investment including three on-ground research projects led by the Australian Centre for International Agriculture Research. The AWP is complemented by Pakistan’s private sector beginning to explore avenues for collaboration with Australian companies with water expertise in parallel to the AWP. Australia has over a thousand companies with world-class technologies that can help Pakistan improve water supply in its coastal cities, water recycling in its industrial hubs, municipal water management and agricultural water management systems. For more information on opportunities in water management in Pakistan contact Austrade in-country in Lahore, Karachi and Islamabad by email to [email protected].

From Santiago de Chile: A ‘social licence to operate’ in miningWhile Chile remains Latin America’s mining powerhouse, there is growing recognition that to continue attracting investors there needs to be improved outcomes in community-related disputes. Companies are looking for ways to engage earlier with communities to address grievances and avoid unnecessary delays in obtaining regulatory

approvals. The Australian Embassy in Chile (Austrade) will lead a ‘social licence to operate’ workshop to showcase Australian capability in community consultation and mediation in conjunction with Chilean Mining Ministry. The workshop takes place as Chile is set to capitalise on a turnaround in the mining sector off the back of higher metals prices. This activity will form part of a series focusing on social licence to operate across various sectors, including infrastructure and energy. For further information, contact Austrade on +56 2 2 733 4700 or via email to [email protected].

From Nairobi: Trade and investment mission to RwandaRwanda is now one of the top ten fastest growing economies in Africa. Prudent fiscal and monetary policies, the promotion of good governance and creation of a business-friendly environment contributed to low inflation and average annual economic growth in excess of eight per cent over the last decade. A 20-person business delegation from Australia representing the education, agriculture, ICT and health sectors recently travelled to Rwanda to explore new local trade and investment opportunities. Rwandan officials showcased high-level government access, tax incentives, and a zero tolerance approach to corruption. Delegation members set up four companies in Rwanda during the mission, demonstrating the efficiency of the business registration process. The mission was the first in some years to bring an Australian trade delegation to East Africa and reinforced expanding trade and institutional links. The Rwanda Development Board together with the Honorary Consul to Australia of the Republic of Rwanda organised the program and the Australian High Commission in Kenya, with nonresident accreditation to Rwanda, along with Austrade, supported the visit.


A decade of change: Composition of Australia’s trade in services with our major trading partners – 2006 to 2016Frank Bingham, Office of Economic Analysis, DFAT

Key points:

• Australia’s trade in services have recorded strong growth over the last decade. The composition of this growth however has been varied across our major services trading partners.

• Education-related travel services and personal travel services have accounted for two-thirds of the total growth in Australian services exports over this period.

• The new major players such as China and India have seen education and personal travel services dominate growth while the traditional major partners have seen growth across a broader range of services.

• For Australia’s traditional major services markets, such as the United States, the United Kingdom, Singapore and New Zealand, the changes in growth in transportation and business services have also been significant.

• The strong growth in exports of education-related travel services over the last decade, though dominated by China and India has seen new markets open up for Australia including Brazil, Colombia, Nepal, Pakistan, Saudi Arabia, Sri Lanka and Vietnam. As a group these countries accounted for over a quarter of the growth in education services in the period.

Major contributors to the growth in Australian services to the world, 2006 to 2016

0

4

8

12

16

Financial seriv

ces

Transportatio

n services

TCI services

Royalties &

licence fe

es

Technical & other b

usiness s

ervices

Professional s

ervices

Personal tr

avel (Excl. E

du.)

0

4

8

12

16

Transportatio

n services

Financial seriv

ces

Technical & other b

usiness s

ervices

TCI services

Business t

ravel

Professional s

ervices

Personal tr

avel (Excl. E

du.)

Education-re

lated travel

$ bill

ion

$ bill

ion

Exports (+ $27 billion) Imports (+ $31 billion)

Source: ABS


Australia’s exports of services to the world have grown from $44 billion in 2006 to $71 billion in 2016 – up by $27 billion or 62 per cent. While imports of services from the world have grown from $44 billion in 2006 to $76 billion in 2016 – growth of $31 billion or 71 per cent.

The main contributors to the growth in the value of Australian export of services during this period have been education-related travel services, up $12 billion to $22 billion, and personal travel services, (excluding education) – mainly for the purposes of recreation, up $6 billion to $17 billion. Combined these two services accounted for two-thirds of the total growth in Australian services exports over this period.

In terms of imports the main contributor to the growth over the last decade was personal travel services (excluding education) up $16 billion to $29 billion, accounting for half of the total growth in services imports over this period.

In terms of our major services trading partners, however, the composition in the growth in services over the last decade can be quite different when compared to the overall Australian picture. Non-travel services such as transportation and business services for some partners were more important than travel services.

The following analysis examines the trends in the composition of Australia’s services trade growth with our top five services trade partners for the period 2006 to 2016.

United StatesThe US was Australia’s largest services trading partner valued at $22 billion in 2016 – up from $13 billion in 2006.

Exports of services have grown from $5 billion in 2006 to

$8 billion in 2016. However, unlike Australia’s overall export growth profile the major contributors to the growth in services exports were mainly business services, with professional services up $851 million to $1.6 billion (mainly management fees1), telecommunication, computer & information services up $569 million to $1 billion (mainly computer consultancy services) and financial services up $428 million to $761 million.

Personal travel (excluding education) services also grew strongly, up $463 million to $1 billion in 2016. These increases were partly offset by a fall in exports of technical & other business services down $231 million to $431 million in 2016, mainly due to a fall in exports of engineering services.

The composition of the growth in imports of services from the United States, up from $7 billion in 2006 to $14 billion in 2016 is more typical of Australia’s overall import growth profile. Growth has been dominated by personal travel services (excluding education) up $3 billion to $5 billion in 2016.

Growth in business services such as professional services (mainly management fees) and telecommunication, computer & information services have also been strong. The United States is also Australia’s major source of imports of personal, recreational & cultural services with film & television royalties growing from $366 million in 2006 to $909 million in 2016.

ChinaChina was Australia’s second largest services trading partner

valued at $14 billion in 2016 – up from $5 billion in 2006. Exports of services have grown from $3 billion in 2006 to $11 billion in 2016.

China is now Australia’s largest services export market. The growth in exports to China is more typical of Australia’s overall export growth profile with the major contributors to the growth in services exports being education-related travel services up from $2 billion in 2006 to $6 billion in 2016 and personal travel services (excluding education) up from $442 million in 2006 to $3 billion in 2016. These two services accounted for 85 per cent of the total growth in services exports to China over the period.

However some business services, such as financial services have shown extremely strong growth rates (up from just $2 million in 2006 to $317 million in 2016).

The composition of the growth in imports of services from China, up from $1 billion in 2006 to $3 billion in 2016 was more broadly based than exports. Transportation services (mainly freight transport services), personal travel services (excluding education) and other business services (mainly professional services and trade related commissions services)2 were the main contributors to overall growth.

United KingdomThe UK was Australia’s third largest services trading partner valued at $12 billion in 2016 – up from $9 billion in 2006.

Exports of services have grown marginally over the period, up

Two-way trade with Australia’s top 5 services partners

0

5

10

15

20

25

20162006

New ZealandSingaporeUnited KingdomChinaUnited States

A$ b

illio

n

0

200

400

600

800

1000

1200

'2016''2006'

VietnamSri LankaSaudi ArabiaPakistanNepalColombiaBrazil

A$ m

illio

n

20162006

Source: ABS


just $25 million to $5 billion. However, the composition of Australia’s exports of services to the United Kingdom has changed significantly with some services growing strongly such as telecommunication, computer & information services up $345 million to $439 million in 2016 and other business services3 up $338 million to $794 million.

These rises have been mostly offset by a decline in transportation services down $447 million to $249 million over the period and financial services down $269 million to $543 million.

The composition of the growth in imports of services from the United Kingdom, up from $4 billion in 2006 to $7 billion in 2016 was mainly due to personal travel services (excluding education) and other business3 services.

SingaporeSingapore was Australia’s fourth largest services trading partner valued at $10 billion in 2016 – up from $7 billion in 2006.Exports of services have grown by $2 billion over this period to $5 billion in 2016.

Like the United States, growth in services exports to Singapore has been dominated by business services. The largest items recording growth over the period were technical & other business services which grew by $1 billion to $2 billion (mainly trade-related commissions) and professional services up $390 million to $629 million (mainly advertising services and management fees).

Personal travel services (excluding education)

exports also grew strongly over this period, up $311 million to $667 million in 2016. Partly offsetting these gains, transportation services exports fell $527 million to $645 million, mainly due to a fall in passenger transport services – in part due to Qantas routes to Europe now flying via the Middle East rather than Singapore.

As with exports, the growth in imports of services from Singapore was also mainly due to business services with total imports growing from $4 billion in 2006 to $5 billion in 2016. Strong rises were recorded in professional services (mainly management fees) up $793 million to $930 million in 2016 and technical & other business services which grew by $367 million to $442 million. Personal travel services (excluding education) also rose over the period up $375 million to $666 million. Most of these gains were offset by a large fall in transportation services (mainly freight and passenger services) down $1 billion to $2 billion in 2016.

New ZealandNew Zealand was Australia’s fifth largest services trading partner valued at $9 billion in 2016 – up from $5 billion in 2006. Exports of services have grown by $1 billion over this period to $4 billion in 2016. Growth in services exports over this period has been fairly broad based, with transportation services, travel services, business services all contributing significant growth.

Imports of services from New Zealand grew from $2 billion in 2006 to $4 billion in 2016. Growth in imports of services

from New Zealand has been dominated by personal travel services (excluding education) which grew $1 billion to $2 billion over the period and accounted for over 50 per cent of the total growth in services imports.

Emerging marketsGrowth in Australia’s services exports has not just been restricted to our major markets. The strong growth in education-related travel services, over the last decade, though dominated by China and India has seen other new markets open up for Australia. Countries such as, Brazil, Colombia, Nepal, Pakistan, Saudi Arabia, Sri Lanka and Vietnam have all recorded significant growth in exports of education-related travel services. As a group these countries accounted for over a quarter ($3 billion) of the $12 billion growth in education services in the period 2006 to 2016.

ConclusionAustralia’s trade in services have recorded strong growth over the last decade. The composition of this growth however has been varied across our major services trading partners.

The new major players such as China and India have seen education and personal travel services dominate their growth while the traditional major partners have seen growth across a broader range of services. A number of emerging markets have also grown strongly over this period, mainly due to education-related travel services.

For more detailed information, go to http://dfat.gov.au/about-us/publications/Pages/recent-trade-statistical-articles-and-information-papers.aspx

Emerging markets for Australian exports of education-related travel services

0

5

10

15

20

25

20162006

New ZealandSingaporeUnited KingdomChinaUnited States

A$ b

illio

n

0

200

400

600

800

1000

1200

'2016''2006'

VietnamSri LankaSaudi ArabiaPakistanNepalColombiaBrazil

A$ m

illio

n

20162006 Source: ABS

1 Management fees are charges between related enterprises representing a contribution to general management costs such as corporate computer systems, and accounting that cannot be split to a specific service category.

2 Data on the split between professional, technical, and other business services is not available for the full time period (2006 to 2016). For this section of the analysis these services types have been grouped together.

3 Data on the split between professional, technical, and other business services is not available. For this section of the analysis these services types have been grouped together

Growth in tourism a shining light for AustraliaGeoff Bailey and David Smith, Strategic Research and Analysis, Tourism Research Australia


Australian tourism is going through a purple patch. Total visitor expenditure rose strongly last year, up 6.4 per cent to $120 billion, following growth of 7 per cent in 2015.Consistent with this increase in overall tourism expenditure, Australia’s international tourism sector also grew strongly in 2016. International visiors to Australia reached a record 8 million – up 11 per cent on 2015. This calendar year growth in arrivals was the highest in two decades, a period which included the pinnacle international event, the 2000 Olympic Games in Sydney.


Double digit growth in expenditure for many key markets in 2016Total trip expenditure by international visitors travelling to Australia increased strongly, up 7 per cent to a record $39 billion last year. Expenditure by Chinese visitors, now Australia’s leading market by value, rose 11 per cent to $9 billion in 2016.Seven other markets recorded even stronger double-digit growth, including Japan (up 29 per cent) and South Korea (up 17 per cent). Other large markets to perform strongly include India (up 9 per cent), Germany (up 8 per cent) and the United States (up 7 per cent) (Figure 1a).

Holiday sector performing strongly, education not far behindAfter a sluggish period in the early part of 2010s, international holiday visitor expenditure has recorded double digit growth in three of the past four calendar years. In 2016, holiday expenditure rose by a record 16.5 per cent to $17 billion (Figure 1b). This growth is underpinned by a 21 per cent increase in the number of international visitors coming to Australia for a holiday.

In addition to the strong growth in the international holiday sector, there was also strong growth in international education travel. The number of education visitors who stayed in Australia for less than one year, rose by 10 per cent in 2016, and their expenditure increased 13 per cent.

Tourism Research Australia survey statistics also show that there is a strong complementary relationship between growth in international tourism to visit friends and relatives and growth in international education for Asian markets. For example, 35 per cent of Indonesian visitors said the main purpose of their trip was for education reasons, but that they had a friend or family member visit them from overseas whilst studying in Australia. Other leading international education markets reporting a high share of visitation by friends or relatives were Malaysia (48 per cent), Singapore (47 per cent), China (22 per cent) and India (14 per cent).

With this high rate of growth occurring across the board, Australian tourism is well on the way to achieving its objective under Tourism 2020 – the National Strategy for Tourism – to increase the overnight domestic and international visitor expenditure to between $115 billion and $140 billion.

With four years to go, this combined expenditure has already reached over $100 billion and is tracking above the lower range of this objective.

We are also punching above our weight internationally. The United Nations World Tourism Organisation indicates that the 14 per cent growth in 2016 in the Australian visitor economy (a grouping that includes longer-staying visitors) was the third highest globally, after India (15 per cent) and Thailand (15 per cent).

The economic impacts of tourismWith domestic tourism performing strongly in recent years, tourism’s contribution to the Australian economy is increasingly important. This manifests itself in different ways:

Tourism’s contribution to gross domestic product is growing: In 2015-16, tourism gross domestic product increased 7.4 per cent compared to the previous 12 month period – a rate more than triple the growth rate for Australia’s nominal GDP (of 2.3 per cent). As a result its contribution to national GDP continues to increase. In 2015-16, the direct effects of tourism accounted for a 3.2 per cent share of GDP in 2015-16, up by 0.2 percentage points on 2014-15 estimates.

Total visitor expenditure, Australia, Change - 2016 on 2015, %Figure 1a: Top 10 markets, other countries and all markets Figure 1b: Main reason to travel

Source: Tourism Research Australia’s International Visitor Survey

-5 0 5 10 15 20 25 30

United Kingdom

Hong Kong

New Zealand

Singapore

Other countries

All markets

USA

Malaysia

India

China

Korea

Japan

-20 -15 -10 -5 0 5 10 15 20

Employment

Other reason

Business

Visiting friends or relatives

Education

Holiday

Imag

e co

urte

sy o

f Tou

rism

Aus

tralia


Tourism is a major employer of Australians: With 580 200 people in Australia working in the industry in 2015-16. This equates to one in 20 jobs in Australia.

Tourism is gaining an increasing share of exports: Tourism exports were a strong performer in 2015-16, with the value of exports increasing 11 per cent, while in the same period, the value of Australian exports contracted slightly. This result meant that tourism’s share of Australian exports increased from 9.7 per cent in 2014-15 to 11 per cent in 2015-16.

The economic benefits of tourism are widespread: Unlike many other industries, which are concentrated in specific geographic areas, tourism provides a source for growth across Australia’s capital cities and regional areas. TRA estimate that 44 per cent of all tourism expenditure in Australia (or in excess of $47 billion) occurred outside Australian capital cities and the Gold Coast in 2016.

Strong growth to continueThe prospects for further strong growth for Australia’s tourism industry is strong. In its latest

Forecast publication (released July 2016), TRA forecasts that growth in international visitor arrivals and expenditure will continue, with total visitor expenditure in Australia projected to increase at around 6.8 per cent per year on average over the 10 years to 2024-25.

These forecasts for the tourism export sector are expected to be underpinned by continued solid growth on international air routes servicing Australia, both from international visitors coming here and Australians travelling overseas. Other short-term supportive factors include solid economic growth in Australia’s key markets in Asia, the United States and New Zealand, although growth in Europe will remain more moderate.

In the longer term, the predicted strong growth in Asia’s middle class households is likely to lead to an increasing propensity to travel overseas, including to Australia. A young highly-educated population in emerging Asia, alongside Australia’s current strong reputation as a place to study, should result in an additional boost in the big-spending education market, but also leveraging off this visitation with more friends and relatives coming to Australia to visit these students.

Consumer InsightsTo ensure that tourism continues to grow strongly, Australia will need to hold its own in an increasingly competitive global environment. An important element of this is understanding people’s motivations for travel.

Tourism Australia has identified that the key aspects of a destination that influence an individual’s decision to travel to our shores include food and wine, aquatic and coastal experiences, natural beauty and wildlife.

Tourism Australia’s Consumer Demand Project demonstrates that among international consumers from our key tourism markets, Australia has an edge with respect to natural beauty, aquatic and coastal and wildlife experiences.

Insights from the Consumer Demand Project have been used extensively to inform and support development of Tourism Australia’s strategic direction, campaign development, as well as to inform the tourism industry of potential opportunities to build the value of Australian tourism.

Tourism accounts for one in 20 jobs in Australia


More tourism infrastructure investment needed to meet forecast demandIncreased infrastructure will also be essential to support the strongly-growing tourism industry.

TRA estimated as at the end of 2015, pipeline investment in airport infrastructure was estimated at $9 billion. This estimate excludes the recent announcement by the Australian Government to build Sydney’s second airport, the Western Sydney Airport at Badgerys Creek at a cost of around $5 billion.

The accommodation pipeline was making progress in meeting tourist demand but more investment is needed. TRA estimated that projects solely

to build tourist accommodation were worth $8 billion in 2015, with this investment to build 15 900 rooms. On top of this investment, TRA estimated that a range of mixed developments which included tourist accommodation is expected to result in an additional 24 000 rooms.

If fully realised, this would increase Australia’s room stock by 16 per cent (or 39 900 more rooms) above the estimated 248 800 rooms in Australia as at December 2015.

Beyond this, more rooms are needed to meet the strong forecast demand for accommodation in Australia with TRA estimating that in 2024-25 international and domestic visitor nights in hotels, motels, guesthouses and serviced apartments will be 36 per cent greater than in 2016.

These growth prospects are creating a positive environment for investment, particularly in Australia’s capital cities. Sydney is an especially good example in this respect, with STR Global statistics showing room revenue increased by 8 per cent in 2016 while occupancy rates remained high at around 85 per cent.

All images courtesy Tourism Australia.

Photography by: p10, 12, and top left, Anson Smart; top right Masaru Kitano; left Greg Snell.


Enormous potential in Asia Region Funds PassportSally Loane CEO, Financial Services Council

Australia has a huge opportunity to increase exports of funds management services, adding significantly to domestic economic growth, when the Asia Region Funds Passport comes online at the end of 2017.Australia, Japan, Korea, Thailand and New Zealand are currently leading this regional initiative aimed at creating better connections between financial markets in the Asia region. Each of these five countries have signed onto a Memorandum of Cooperation which came into effect on 30 June 2016. It is expected that other APEC economies will follow once the regime is operational.

The Passport will allow fund managers to sell investment funds between participating jurisdictions through a streamlined regulatory framework. Consumers will benefit from a wider range of investment products and managers will benefit from market access into jurisdictions they could not previously operate in without a full local presence and licence – something that is often not possible for a foreign entity to achieve.

Fund managers in participating jurisdictions will be able to

access the regime once they satisfy a number of threshold criteria, which will ensure only experienced managers with appropriate capital backing can enter. The initial range of products will be focussed on equity, fixed income and bond portfolios but is likely to be broadened as the regime progresses.

For Australian managers there are significant opportunities in Japan and Korea, where investors are grappling with a low return environment and an ageing population that is living considerably longer. Australian expertise can help investors to better manage risk and will enable a broader range of investment options for investors looking to build their portfolio.

The potential for the funds management sector to drive the next wave of Australia’s export successes was first identified in the 2009 report by Mark Johnson AO, Australia as a Financial Services Centre – building on our strengths. The report identified that despite having a strong, skilled, completive, well-regulated and highly regarded financial services sector, our exports of funds management services are low by international standards.

The story is telling when you compare the size of the funds management markets

of Australia, the UK, Hong Kong and Singapore. They are all roughly the same size, between US$1.5 trillion and US$1.8 trillion. Yet Australia lags behind in exports, sourcing only 3.4 per cent of its domestically-managed funds from offshore investors, compared to the 31 per cent the United Kingdom sources from offshore, 68.5 per cent for Hong Kong, and 80 per cent for Singapore.

Research by Deloitte Access Economics found that if Australia could grow overseas-sourced funds under management equal to that of Hong Kong over the next decade, that is to around 68 per cent, our GDP would grow by more than $4.2 billion, tax revenue would increase by $1.2 billion and nearly 10 000 jobs would be created.

The opportunity for exports of financial services and in particular, our world class expertise in managing funds and developing products, to drive domestic economic growth as Australia transitions from a resources based economy to a services based economy, is unlimited and very exciting.

The Financial Services Council will lead a delegation of Australian funds management CEOs to Tokyo and Seoul in October to further explore opportunities arising out of the Passport.


Engineering services is now a truly global professionEngineers Australia

Exporting Australia’s high-value engineering services contributes to nation building.A globalised profession, engineering is a service that Australia sometimes imports when large amounts of infrastructure needs to get built and major projects must get off the ground.

Engineers Australia analysis of the last 12 years highlights this. On average, 18 000 positions needed filling over this period, while only 7600 local bachelor degrees were awarded.

Interestingly, although the country is a net importer of engineering services, Australia still exports critical, high-value engineering services, and these have grown in value from $311 million in 1998 to $1.3 billion in 2016.

An OECD analysis concluded engineering services exports have soared within countries surveyed. Engineering firms have a particularly strong export orientation, owing to services that are of a highly technical and universal nature.

“It’s probably one of the most mobile professions you can have,” offers Carl Willis, GHD’s Country Manager for the Philippines.

GHD operates in 135 countries, beginning its international expansion in 1978. It is a professional services firm dealing in engineering, architecture, environmental and construction services.

It entered the Philippines in 1998, when Manila privatised water utilities. Its Philippine operations branched out into mining about eight years ago. Its energy business has expanded significantly in the last five years.

“We’re mainly involved in renewable energy – wind, solar, biomass, hydro, geothermal,” says Mr Willis.

The firm’s Philippines operation is split between two sites and split into projects. It has a technical services consultancy, including developing local employees who will work on local and international projects.

“This part of the business has grown sharply,” says Mr Willis, adding “I could keep 200 people busy tomorrow if I could get them.”

The three areas the company focusses on – mining, water and energy – will need plenty of technical help.

Austrade lists these as areas of opportunity within the Philippine economy, which is estimated to grow by 6.7 per cent in 2017. Urbanisation is fast-paced so a lot of infrastructure will need to be built to keep up with the rate of growth. Those building it will come from, or have worked, all over the world.

Winning projects requires the demonstration of local experience as well as international experience, according to Mr Willis.

Training local consultants, who will then deploy their skills at home and abroad, will keep things moving.

“We’re also here to contribute to the nation-building of a developing region, and that involves sharing the highly-skilled resources we have in other parts of the business to encourage and mentor people in the local industries to come up to speed,” he said.

“If you do it correctly, it not only builds expertise and helps the country develop, but it also generates a nearly-unbeatable value proposition when competing in other jurisdictions.”


Our health services are in demand OSShelley JacksonTrade Manager, International Health, Austrade

Australian health exports have traditionally been thought of in terms of pharmaceuticals, medical devices, biotechnology or consumables. Health and aged care services, however, are some of the fastest-emerging areas of international opportunity.

As governments and private providers race to meet booming demand for health and aged care – driven by factors like population ageing, rising rates of chronic disease and ever-growing numbers of middle-class consumers seeking access to quality care – Australia is well placed to leverage its expertise in health and aged care delivery.

Australia has an excellent track record of providing high-quality health and aged care services to an ethnically and geographically diverse population for decades. In global terms, this – and the successful blend of public and private funding models behind it – is a significant competitive advantage.

Austrade is working with a growing number of services exporters in the health and aged care sector. Across ASEAN, China and the Middle East, there are growing opportunities for providers of standards and accreditation development and training, healthcare systems policy design, and workforce skilling and education services.

In China, Indonesia and India, healthcare providers are looking to Australian expertise for remote and rural care solutions and in-home community care business models. In the advanced biotechnology sectors, contract research organisations and technical service providers are finding new opportunities in Korea, Japan, Taiwan and China.

China’s demand for aged care services, in particular, is growing rapidly and interest in Australian aged care education and training solutions is strong. In April this year, Austrade delivered the Australian Aged Care Training Masterclass, an industry roadshow that took 34 Australian delegates to meet over 300 potential partners and customers in Beijing, Chengdu and Shanghai. The roadshow received sponsorship from the Victorian Government as part of its commitment to support Victoria-China relationships and Victorian health and senior living training providers.The delegation included registered training organisations, TAFEs, public and private aged care training service providers with programs for carers, nursing and hospital staff, and healthcare professionals in aged care, hospital operation and management.The China-Australia Free Trade Agreement, which entered into force in December 2015, locks in place the ability for Australian service suppliers to establish wholly Australian-owned hospitals in some provinces and aged care facilities throughout China.Sapphire Group, a senior living, home care and nursing care provider group headquartered in Victoria, is one of the Australian organisations turning opportunity into reality. In May this year, Sapphire signed a joint venture agreement with a subsidiary of the Hong-Kong listed Fosun Group to operate a new aged care project in Beijing. This project will be managed under Australian quality standards and meet the culture and care needs of China’s high-end senior living market.Brisbane-based Ethos Orthodontics is another Australian company seizing

opportunities for service delivery in China. Ethos Orthodontics is one of Australia’s largest privately owned and operated orthodontic groups, with 10 practices and more than 80 staff. After researching opportunities in the China market, the group was granted registration approval to open the first Australian dental clinic in China (Shanghai), staffed by Australian-trained dentists and orthodontists. It was one of the first Australian-owned healthcare practices to open in China after the conclusion of ChAFTA negotiations. Their Shanghai-based practice, Ethos World, provides premium orthodontic and general dental services, with plans to provide training services to local orthodontists. After a ‘soft launch’ in 2015, Ethos World hosted an official opening ceremony and reception during Australia Week in China 2016 as part of the Health and Aged Care program. As a country with a history of breakthrough medical research, world-class education and training, population health outcomes amongst the best in the world and health professionals with expertise across all therapeutic areas, Australian health and aged care capabilities are creating new partnership opportunities overseas. Austrade is working with industry to deliver targeted trade promotion initiatives to support Australian exporters via activities planned across Asia, the Middle East and other markets throughout 2017. For more information please contact Dugald Anthony, Trade Adviser, International Health on (07) 3364-7721 and email: dugald.anthony@ austrade.gov.au



Recently the USA, with a population of 325 million people, achieved one million international student enrolments across its higher education institutions. Australia, with a population of only 24 million, is predicted to surpass its one million enrolment goal by 2025. Within our current 554 000 overseas student cohort, Chinese students comprise 28 per cent and Indians 11 per cent. However, in recent years there has been substantial growth from Colombia, Brazil, Nepal and Malaysia. Having a diversity of student source countries will be crucial to the success of this dynamic sector going forward.

While overseas students and their families place a strong emphasis on the quality of Australia’s education institutions, there are many other factors that determine where they will choose to study abroad. Safe, affordable accommodation, a welcoming culturally diverse local community and even ready access to their country of origin’s cuisine are all key factors.

Increasingly, course related employability opportunities are also a primary enrolment motivator. Australia provides international students with the opportunity to undertake 20 hours per week of paid employment while they are studying. If they graduate with a bachelor degree, they can then stay and work full time in the local economy for two years before returning home.

There are some exciting examples of where international students are making strong contributions to the success of Australian

businesses. An Adelaide based winery, Wines by Geoff Hardy, employed Chinese marketing student Yuan Yuan as an intern while she was completing her degree at the University of Adelaide. Yuan was able to open the Chinese market for the company. As a result they are now selling large quantities of premium wine into this market and she is employed as a full-time marketing manager.

There are many other aspects to Australia’s international education industry. Our education and training providers are currently teaching over 110 000 students offshore. Many of these providers are actively assisting our neighbours with their workforce capacity building requirements. Importantly, through Foreign Minister Julie Bishop’s determined efforts, we are now supporting 17 500 young Australian undergraduates to study, work and live in the Indo-Pacific through Federal Government New Colombo Plan scholarships and student mobility grants. Business is central to offering students meaningful, course-related work experiences to complement their formal studies. The New Colombo Plan works closely with the private sector to identify and provide its students with diverse work-based learning opportunities.

International education is serving Australia well as both an innovative contributor to our economy and a great catalyst for better integrating our nation into the global community.

International education in Australia – soft power and solid resultsHon Phil HoneywoodCEO International Education Association of Australia and New Colombo Plan Reference Group member

Richard Dolan, General Manager of Wines By Geoff Hardy and Export Manager Yuan Yuan.

International education has very much flown under the radar as an industry sector. Most Australians have little idea that it now contributes $22 billion annually to the national economy. Far more than its financial inputs, this is a sector that is using soft power to actively engage Australia with its Indo-Pacific neighbours.


Growing Australia’s mining services exportsBrendan Pearson, Chief Executive, Minerals Council of Australia

When people think of Australian mining exports, the images which come to mind are mountains of iron ore or conveyor belts of coal being loaded onto ships bound for Australia’s export markets in Asia.

The sheer physical bulk of Australia’s main minerals exports is matched by their enormous economic value.

Iron ore and coal are Australia’s two largest exports, forecast to be worth $71.7 billion and $55.5 billion respectively in 2016-17.1

Exports of other resources commodities like gold, oil and gas, and other minerals and metals are forecast to be worth an extra $87.9 billion, with the total value of Australia’s resources and energy export earnings forecast to be worth $215 billion2.

All up, minerals and energy resources account for around two-thirds of Australia’s total merchandise exports.

Beyond the export earnings, Australian resources are helping to build infrastructure, provide power to households, and grow economies in important partner countries.

So the growth in our mining exports has been a win-win for Australia and our partners.

But we now have an opportunity to build on this trade in goods success story by carving out a strong role for mining services exports.

Australia has a proud mining history that goes back to the first gold rushes of the 1850s.

While early prospectors may have been lucky enough to find gold nuggets on the ground, Australian mining operations today are high-tech

1 Department of Industry, Innovation and Science, Office of the Chief Economist, Resources and Energy Quarterly, March 2017

2 Ibid

operations utilising sophisticated exploration and geological techniques and highly efficient and cost-effective mining and extraction methods.

They follow world’s best practice environmentally-sustainable mining practices, engage with local communities, and build advanced infrastructure and logistics.

This is only possible with a highly skilled labour force, investment in technology and equipment and partnerships with specialist mining services firms.

Australian mining companies are now world leaders in the mining equipment, technology and services (METS) sector. For example, Rio Tinto was recently awarded the 2017 Austmine Miners Innovation Award for its use of Mine Automation System and RTVis™ technologies. Rio Tinto now uses these data technologies at more than 95 per cent of its open cut mines, which has boosted productivity and helped to save costs.3

Earlier this year, the Minerals Council of Australia released a report by Deloitte Access Economics that analysed the significance of mining and METS to Australia’s economy and future prosperity.

This report, Mining and MET: engines of economic growth and prosperity for Australians, found that the economic contribution of Australia’s mining and METS sector in 2015-16 was $236.8 billion, representing around 15 per cent of the Australian economy. The mining and METS sector supported 1.14 million jobs across Australia, representing around one in every ten Australian jobs.

3 Rio Tinto, Rio Tinto wins ‘gold medal’ at awards for innovative mine technologies, 29 May 2017


Growing Australia’s mining services exportsBrendan Pearson, Chief Executive, Minerals Council of Australia

According to the report, Australia’s future success in mining will not simply be a matter of natural endowments but will require improving comparative advantage through continuing innovation.

Innovation is an iterative process; the report notes that innovation is about unlocking individual ideas and improving what workers do every day. Australia’s mining industry is increasingly focused on integrating new technology and ideas into its operations.

A highly-skilled mining services industry is integral to the continuance of Australia’s mining industry export success and trade performance.

There are strong synergies and linkages between Australian extractive mining, mining services and mining investment in our domestic market. These synergies can also be the source of export opportunities for our mining services firms – and they can help drive Australian outward-bound investment in mining projects in other countries.

Recently concluded free trade agreements are helping to give Australia’s METS sector access to new export markets. For example, the China-Australia Free Trade Agreement provides that mining-related services can be delivered through commercial presence in China. ChAFTA further improves access to the Chinese market for technical consulting and field services linked to local coal bed methane and shale gas extraction.4

Free trade agreements currently being negotiated have further potential to open up opportunities for Australian mining service exports. For example, Australia’s largest exports to Peru currently include metals products, minerals additives and specialised

4 Minerals Council of Australia, China, minerals and energy and the China-Australia Free Trade Agreement, June 2015, pages 26 - 27

mining equipment and machinery, including vehicles and technical instruments. Australia’s mining services sector would likely benefit further from further market opening under the proposed Peru-Australia Free Trade Agreement.5

Similarly, the METS sector stands to benefit from the Regional Comprehensive Economic Partnership currently being negotiated between Australia, New Zealand and several Asian economies. RCEP aims to remove restrictions and discriminatory measures related to trade in services, and Australia is seeking outcomes for the mining engineering services sector.6

In negotiating new bilateral, regional and multilateral free trade arrangements, the challenge for government will be to open up opportunities for Australia’s METS sectors.

Service barriers to trade are not always as straightforward to identify as traditional barriers to goods trade, especially where they relate to recognition of professional skills and qualifications. There is especially true of the METS sector, where skillsets and innovative practices are multidisciplinary and do not always neatly fit into a single category.

That is why the MCA is working with the METS sector to identify market access barriers and other issues for the mining services trade negotiation agenda. Tackling these barriers will help our mining services sector to open up new provinces for Australian exports – and this, in turn, will build on the minerals commodity exports that form the bedrock of Australia’s international economic success.

5 Minerals Council of Australia, Mining Stands to Benefit from FTA with Peru, 24 May 2017

6 DFAT, Regional Comprehensive Economic Partnership


Mutual recognition of Australian professional services abroadProfessional services are an increasingly important component of Australia’s export economy.The Australian Government established the Professional Services Mutual Recognition Unit in DFAT to increase market access for Australian professionals overseas. This recognises the sector’s growing importance and builds on earlier efforts under various FTAs and APEC initiatives.

The Unit provides assistance to Australian professional associations and regulators in addressing behind-the-border barriers and negotiating the international recognition of Australian qualifications and licensing.

This recognition enables Australian professionals to more easily provide their services to international clients and Australian clients with international operations.

Established in November last year, the Unit is currently working with a number of professional bodies to advance the recognition of Australian professional qualifications in various jurisdictions. The Unit is also working with free trade agreement negotiation teams to identify further opportunities for recognition of Australian professional qualifications and to follow up on commitments made in existing trade agreements.

DFAT would welcome further contact from industry bodies interested in exploring these opportunities. The Professional Services Mutual Recognition Unit can be contacted via email at [email protected] or by phone on +61 2 6261 1581.

OECD review to identify options to enhance competitivenessOffice of Economic Analysis, DFAT

The OECD is undertaking a detailed study to review the Australian services sector and the role it plays in the economy. A major aim of the study will be to identify issues relevant to the international competitiveness of the sector.

With the end of the mining investment boom, Australia must maintain globally competitive service offerings. Identifying areas of advantage – and prioritising opportunities to address our services competitiveness – has never been more important.

The study will focus primarily on services that make a sizeable contribution to Australian exports or have the potential to do so. These include education, tourism, professional, financial, information technology, healthcare, mining, agricultural, environmental and transport services. It will assess constraints on the capacity of these sectors to access international markets.

The OECD is working with the Australian Bureau of Statistics and the University of Melbourne to complete the project.

DFAT has established a reference group of industry and government representatives to inform the study. Commonwealth agencies, state and territory governments and business will be provided with an opportunity to provide input.

It is envisaged that the study will include findings for future action.


Hong Kong FTA to boost service exports to Asia

DFAT’s trade negotiators are preparing for the second round of negotiations of the Australia-Hong Kong Free Trade Agreement, expected to be held in August. Following the successful conclusion of the first round in Canberra in June, the Australian Government is hoping to conclude a high quality, comprehensive FTA swiftly.

Trade, Tourism and Investment Minister Steven Ciobo launched FTA negotiations with Hong Kong in May, saying an FTA with Hong Kong would help Australian exporters take advantage of the opportunities in this dynamic market, helping create more Australian jobs, particularly for Australian service providers.

Australian business is already capitalising on Hong Kong’s position as a gateway between China and the world. The city is Australia’s leading business base in East Asia, with over 600 Australian businesses operating in-market.

What is particularly exciting about this FTA is its potential to secure our services exports to contribute to the diversification of Australia’s export capabilities following the mining investment boom. Hong Kong is already our seventh largest services export market, worth $2.5 billion in 2016. Our services exports grew at over 11 per cent between 2015 and 2016.

An FTA with Hong Kong could build upon this strong growth in bilateral services trade by ensuring non-discriminatory access in the Hong Kong market and creating greater regulatory certainty for Australian businesses.

This would be of particular benefit for exports of Australian financial services to Hong Kong, which have increased by 35 per cent in the last five years. An FTA would deliver certainty for Australian service providers already in the Hong Kong market, and a possible framework for further collaboration, such as more partnerships for Australian education service providers.

By delivering a guarantee to Australian business that Hong Kong’s services and investment regime would remain open, this FTA will give the legal comfort so critical in underpinning the future of our expanding services export markets, including in architecture and design, education, finance, legal and health services.

An FTA could also guarantee access to Hong Kong’s government procurement market, including access to an independent body to take complaints about procurement processes and seek remedies, assuring Australian service providers that their tenders would be treated fairly and impartially.

As two high performing service economies, an FTA could see enhanced collaborative ties, building upon the depth of expertise in Australia and Hong Kong. It would allow us to springboard off our relative economic capacities, such as in digital innovation and FinTech, where our complementary strengths are bringing bold new ideas to the financial sector.

An FTA could further improve conditions for investment, so that Australian business can invest with confidence. Hong Kong is the tenth largest destination for Australian investment, with stocks of $52.9 billion in 2016.

DFAT invites written submissions on the potential opportunities and impacts of an FTA with Hong Kong. Submissions are welcome during the course of negotiations, however early submissions will ensure the Government’s consideration of an FTA with Hong Kong is well-informed. Further information on how to make a submission is available at www.dfat.gov.au/a-hkfta.

0

1

2

3

4

5

6

20162015

20142013

20122011

20102009

20082007

20062005

20042003

20022001

20001999

19981997

19961995

19941993

19921991

19901988

1987

A$ b

illio

n

Australia's trade in services with Hong Kong (SAR of China)

Sour

ce; A

BS


Great untapped opportunities in Indonesia-Australia tradeFree Trade Agreement Division, DFATThe Government’s top trade priority is the Indonesia-Australia Comprehensive Economic Partnership Agreement.Prime Minister Malcolm Turnbull and Indonesia’s President Joko Widodo have called for IA-CEPA’s conclusion by the end of the year, to capitalise on the great potential between our two economies. With a population of more than 258 million and an economy approaching US$1 trillion annual turnover, there is enormous scope to expand our trade and investment with Indonesia – our 13th largest trading partner. An ambitious IA-CEPA will increase coverage for Australian exporters beyond our existing trade agreement with Indonesia, the ASEAN Australia New Zealand Free Trade Agreement. We want IA-CEPA to establish a framework for an enduring and dynamic partnership, to help us trade better with Indonesia into the future.

IA-CEPA aims to be more than a traditional free trade agreement. It will broaden and deepen the economic relationship particularly in services trade. Education will make a strong contribution to IA-CEPA, with a focus on skills acquisition including in vocational education and training (VET). It is a compelling example of the complementarities between the two economies. President Widodo has called for broad VET reform to improve the education outcomes for Indonesia’s burgeoning youth and middle class. Australia has world-class expertise in the provision of VET with a flexible, industry-led system that has effective quality control.

Negotiations of IA-CEPA have already delivered early outcomes that will help Australian services providers gain better access to the Indonesian market. A memorandum of understanding between the Australian Centre for Financial Studies and Indonesia’s financial services authority, called OJK, is facilitating joint research between Australia and Indonesia into best-practice financial services regulation. This project will help improve the regulatory environment in Indonesia for Australian financial services providers.

The early outcomes epitomise the value of know-how. Some notable initiatives have fostered better understanding of each other’s systems that enable us, in turn, to realise opportunities, including in services trade. The scope of such activities includes industries such as IT design and fashion, red meat and cattle, and herbal and well-being products.

There is potential for greater collaboration to expand our broader services trade including in financial services, health, tourism and hospitality, professional services, telecommunications and e-commerce. We will be crystallising these opportunities in the coming months. DFAT invites written submissions from individuals and organisations on the potential opportunities and impacts of IA-CEPA throughout the negotiations. Further information on how to make a submission is available at www.dfat.gov.au/trade/agreements/iacepa/

Call for submissions on ChAFTA reviewsDFAT is calling for submissions from individuals and groups on the reviews of the services and investment chapters of the China-Australia Free Trade Agreement as well as the review of the associated Investment Facilitation Arrangement Memorandum of Understanding.

Submissions can focus on one or all of these reviews. Especially helpful would be information on specific barriers to investment and services trade faced by business in China, and priorities for any possible future negotiations.

The information stakeholders provide will assist the Government in determining Australia’s key priorities as we progress these reviews.

To assist preparations, submissions would be appreciated by 1 September, 2017. Written submissions may take a number of forms, from an email to a more comprehensive analytical paper. These should be forwarded to [email protected].

ChAFTA already supports increased services trade and investment flows by providing improved access and increased regulatory certainty for Australian business. Following these reviews, the Australian Government will work with China to further reduce barriers to trade in services, agree on additional protections for investors and open up new commercial opportunities.

Both parties agreed to bring the investment review forward by one year, reflecting the priority both countries attach to enhancing two-way investment.

This agreement with China to commence the reviews builds upon the success of ChAFTA. After only one year, the benefits of ChAFTA are clear. For example, in 2016, bottled wine sales were up 38 per cent to $470 million, certain skin care products by 82 per cent, and the value of fresh lobster exports quadrupled.

Business is booming for those who have taken advantage of the preferential access the agreement offers. The results we are seeing are fantastic and they are only going to get better as many tariffs continue to fall, before almost all are eliminated altogether.


Trade and investment statistics

TOP FIVE EXPORT DESTINATIONS (GOODS & SERVICES)

2016 $b

2016 growth %

1 China 93.0 uu 8.9

2 Japan 38.5 uv 8.7

3 United States 20.7 uv 6.5

4 Republic of Korea 20.2 uu 1.2

5 United Kingdom 15.0 uu 71.6

Total 330.3 uu 4.6

- ASEAN (a) 38.1 uv 0.8

- EU28 (a) 30.5 uu 30.9

TOP FIVE IMPORT SOURCES (GOODS & SERVICES)

2016 $b

2016 growth %

1 China 62.1 uv 3.3

2 United States 43.6 uv 9.4

3 Japan 22.5 uv 1.2

4 Thailand (a) 16.6 uu 7.0

5 Germany (a) 16.4 uu 5.8

Total 342.4 uv 2.9

- ASEAN (a) 55.1 uv 4.2

- EU28 (a) 67.6 uu 2.4

AUSTRALIA’S TRADE BY BROAD SECTOR

2016 $b

2016 growth %

Exports 330.3 uu 4.6

Rural 42.5 uv 5.8

Resources 140.4 uu 5.3

Manufactures 43.7 uv 1.8

Other goods 12.4 uu 2.0

Gold 20.1 uu 30.6

Services 71.2 uu 9.2

Imports 342.4 uv 2.9

Two-way trade 672.7 uu 0.7

Balance of trade -12.1 uv 67.3

TOP EXPORTS OF GOODS & SERVICES

2016 $b

2016 growth %

1 Iron ores & concentrates 53.7 uu 9.4

2 Coal 42.3 uu 14.3

3 Education services 22.0 uu 17.7

4 Gold 18.9 uu 30.0

5 Natural gas 17.9 uu 8.9

Total 330.3 uu 4.6

TOP IMPORTS OF GOODS & SERVICES

2016 $b

2016 growth %

1 Personal travel services 28.6 uu 5.1

2 Passenger motor vehicles 21.4 uu 7.7

3 Refined petroleum 14.8 uu 1.9

4 Telecom equipment & parts 12.0 uu 8.2

5 Freight services 8.8 uu 1.7

Total 342.4 uv 2.9

Securing trade agreements for Australia’s futureUpdate on the Australian Government’s ambitious trade negotiating agenda.Minister for Trade, Tourism and Investment Steven Ciobo launched new free trade agreement negotiations with Hong Kong and Peru in May, and negotiations with Pacific Alliance countries in early July.Hong Kong is not only a major export market for goods and services, but a valuable source of investment. Australia is seeking a modern FTA with Hong Kong, focused on securing access for our services exports. As our seventh largest services market, worth $2.5 billion in 2016, Australia’s services export industries, including legal and financial services, as well as education and transport services, will benefit from the even greater certainty we expect an FTA to bring. An FTA with Hong Kong will also complement our existing FTA with China, and deepen our economic integration in Asia. You can read more about these negotiations on page 21.Over the last decade, Peru has been one of the fastest growing economies in Latin America, and the world. An FTA with Peru will help Australian exporters compete with other exporters like the US, the EU and Canada, who already have preferential access to this growing market. It will provide another gateway to the Latin American market and enable Australian businesses to tap into value chains between the Americas and Asia. An FTA with Peru will also be a step towards capturing the benefits of the Trans-Pacific Partnership. Free trade agreement negotiations between Australia and the Pacific Alliance – the Latin American trading bloc made up of Mexico, Chile, Peru and Colombia – were launched in July. An FTA with the Pacific Alliance will create new export opportunities for Australian farmers, miners, manufacturers, educators, service providers and investors in some of Latin America’s major economies. Importantly, this FTA will open the door to Mexico for Australian exporters. The Pacific Alliance is a significant trade bloc. Its GDP was worth more than USD $1.8 trillion in 2016 and the four countries account for 38 per cent of Latin America’s population and 57 per cent of its total imports. Pacific Alliance members imported goods and services worth more than USD $600 billion in 2016. Australia and the EU concluded a joint FTA scoping exercise in April, with the launch of formal negotiations expected later this year. The European Union is Australia’s second largest market, behind China, for services exports ($10.5 billion in 2016), with total two-way trade valued at $29 billion. The potential to improve our services trade with the EU is also substantial, and the Australian Government is committed to maximising our access to this sizeable market. Australia is also in separate talks with the UK to prepare the ground for a future FTA, once the UK has exited the EU. The UK is Australia’s fourth largest individual market for services exports, driven by strong tourism links and a developed market in professional, technical and other business services.For Australia, better servcies access across the EU – where rules currently vary across Member States – would assist our education, professional, distribution, transport, energy and mining-related service suppliers in particular. There is also the potential to improve the mutual recognition of qualifications, streamline licensing requirements and improve transparency.These new and prospective FTA negotiations are in addition to Australia’s ongoing bilateral, regional and multi country initiatives that include the Regional Comprehensive Economic Partnership and the Trade in Services Agreement negotiations. For more information go to www.dfat.gov.au/fta

(a) Excludes some confidential items of tradeSource: ABS

AcknowledgementsBusiness envoy brings insights from Australia’s global diplomatic network to the Australian business community. It considers global geopolitical events and trends, their economic implications and what they might mean for Australian business.

Business envoy is produced in the Free Trade Agreements Division of the Department of Foreign Affairs and Trade. Any views expressed within are those of DFAT officers and not the views of the Australian Government.

DFAT does not guarantee, and accepts no legal liability arising from or connected to, the accuracy, reliability, currency or completeness of any material contained in this publication. DFAT recommends that readers exercise their own skill and care with respect to their use of this publication and should obtain professional advice relevant to their particular circumstances.

With the exception of the Commonwealth Coat of Arms and where otherwise noted, all material presented in this publication is provided under a Creative Commons Attribution 3.0 Australia licence. Material in this publication can be shared or adapted for any purpose in accordance with the licence terms available on the Creative Commons website.

Contactemail: [email protected]

To subscribe to business envoy and for more on DFAT’s engagement with business see the DFAT business portal.

web: www.dfat.gov.au/business

Subscribe to business envoy: dfat.gov.au/business

services trade crucial to australian...

Documents