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This report presents an in depth analysis of the importance of services in the Australian economy, the regulatory environment for services in Australia and the performance of Australian services trade internationally. It builds on the OECD’s 2016 publication Services Trade in the Global Economy, and its findings and recommendations that national administrations should consider adopting whole-of-government strategies to capitalise on the demonstrated potential of co-ordinated services trade policy and regulatory reforms to help make trade work for all.
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The ongoing structural transformation towards a services economy, across all countries and at all levels of development, has immense potential to improve the well-being of Australians. Technology has reduced trade and transaction costs for both goods and services, thereby facilitating more complex and services-intensive production networks. Telecommunications, audio-visual and computer services constitute a digital network at the heart of the world trading system. Transportation, courier, logistics and distribution services form the backbone of global supply chains. Legal, accounting, insurance and banking services are essential enablers of trade and finance. Architectural, engineering, mining and constructions services are a fundamental foundation of physical infrastructure. Health, education and tourism services are at the heart of better lives.
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Chapter 1 assesses the role of the services sector within the overall economy of Australia. It presents a statistical overview and breakdown of the Australian sector, identifying the sectors and partner countries that most contribute to Australia’s services trade balance and setting out the main drivers of Australia’s services growth, competitiveness and productivity.
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Chapter 2 examines the measures affecting foreign investment and trade found in Australia’s domestic regulatory regime. The chapter presents a short introduction of the OECD’s Services Trade Restrictiveness Index (STRI) and a brief methodological overview of the project, and draws on the indices and database to benchmark Australia’s regulations in strategic services sectors relative to those of other countries.
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Chapter 3 identifies the global and regional strengths of Australian services trade based on analytical evidence from services trade data and micro-data. The chapter sets out opportunities for Australians in global markets, examining sectoral strengths and relative export performance with main trading partners, including with regard to Australia’s comparative advantage, bilateral export patterns and the demand-side role of regional value chains.
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Chapter 4 looks at the various factors that particularly influence the ability of Australian firms to compete internationally in key services markets. In Australia’s main destination markets, various obstacles may inhibit the entry of new firms or restrict the expansion of Australian exporters already engaged there. This chapter presents the main trade barriers found in some of Australia’s major trading partners for services exports emerging from an analysis of the OCED STRI database.
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Chapter 5 extends the analysis of Australian services exports. This chapter focuses on five key sectors that contribute significantly to Australia’s services exports (education and tourism), have linkages to Australia’s traditional comparative advantage (METS), are important to modern economies and have a high tradability (ICT) or have potentially rising levels of tradability in the future (health). Individual sections in this chapter are in the form of case studies, providing data on the economic importance of the respective sector as well as key information on regulatory regimes in Australia and abroad.
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Chapter 6 provides an overview of current Australian government initiatives and policies for promoting Australia’s services competitiveness and exports. The chapter sets out activities and programs to fostering innovation through research and development, examines the regulatory environment for the digital economy, and delineates efforts in place to encourage SME participation in global markets. Export promotion strategies are reviewed and compared to the approaches of certain trading partners, and feedback from exporters based on structured consultations is reported.
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The analysis carried out in this report highlights the importance of services in the Australian economy. Evidence demonstrates the relative strength of Australia’s services trade and productivity performance, and the opportunities arising from Australia’s proximity to the world’s most dynamic region. The report also highlights the challenges faced by Australian services exporting firms, including the risk of losing ground in stronghold sectors such as education and tourism. Furthermore, the empirical evidence included in the report highlights how services trade restrictions in foreign countries prevent Australia from exploiting its full export potential.
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The input-output analysis describes the sale and purchase relationships between producers and consumers within an economy. One key component of input-output data is the intermediate transaction table that records the sales and purchases of intermediate inputs between different sectors of the economy. The intermediate transaction table allows tracing the various inputs that flow into the supply chains (or value chains) of an economy. For instance, how much financial services are purchased by the mining industry, which in turn supplies ores to manufacturing companies.
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