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Linkages Between Economies

Economics (Year 12) - Global Interdependence

Christian Bien

CNBC Explains - What is China Buying in Australia

The above CNBC video provides a brief explanation of the trade interdependence of China and Australia with an overview of the significance of the value of key Australian exports to China.



Global trade is evident in Australia, as our bulk commodities (think Iron Ore, Coal and grain) are exported to countries such as China, Japan and the United States. 

Other countries rely on our commodity exports to build infrastructure, goods and provide services, particular services of a professional nature. In addition, we rely on other countries for imports such as cars, electrical goods and clothing textiles as Australia cannot produce these on their own, or it is too costly to produce. Australia suffers from an expensive and small labour force which makes it uncompetitive to produce large scale, low value goods and services.


Australia relies on foreign investment to finance large capital projects. This is because Australia's small population means we cannot produce a sufficient level of savings to meet our investment needs, hence relying on outside sources of finance. 

Countries such as China and Japan have large populations with high savings ratios, providing a surplus in savings which is reinvested into capital poor countries such as Australia. The Foreign Investment Review Board reviews proposals for foreign investments such as the purchase of Australian property from an oversea resident. Without foreign investment, Australia would not be able to achieve its high levels of investment, with many mining projects unable to access sufficient capital to develop. 

Examples of Recent Australian Foreign Investment: 


Tourism is an essential component of Australia's exports. Education related travel, that is overseas students studying at Australian educational institutions, makes up Australia's 4 largest export bringing a total $39.6b (2019-20, Source: DFAT) to the Australian economy. 

Personal tourism, that is visits to Australia for leisure reasons, is Australia's 5th largest export, bringing in a total $16.3B (2019-20, Source: DFAT) to the Australian economy. However, this value has been declining in recent years as the cost of travel to Australia remains high. Tourism is also Australia's largest import, with many Australians choosing to travel overseas, causing an outflow of $46.3B (2019-20, Source: DFAT) from the Australian economy. However, it will be expected this will significantly decline due to COVID-19.


Image: Percentage of Australians Born Overseas, Australian Bureau of Statistics.

Immigration has played a crucial role in Australian history and economic growth. Immigration has been critical in filling labour gaps in the Australian economy. With the recent COVID-19 outbreak, the importance of immigration has been seen with labour shortages in unskilled workers in farming and regional areas which relied on backpackers all the way to skilled professions, such as audit and assurance which relied heavy on imports of skilled labour.

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