Why Australia trades with the world

Why Australia engages in international trade

Australia conducts trade with the rest of the world in goods and services (including financial and labour services) because these transactions enable a country to boost living standards.  It does this in the following ways:

  • A wider range or selection of goods and services are available for consumption;
  • Potentially cheaper goods and services are available for consumption, which not only provides a direct boost to living standards, but helps to create additional competitive pressures (boosting incentive to innovate and improve quality) and further reduce prices;
  • Australian businesses have access to foreign physical capital (such as machinery) that may not be available in Australia, or cannot be acquired cheaply enough;
  • Australian businesses have access to foreign human capital (i.e. workers) that may be in short supply in Australia;
  • Australian businesses have access to foreign financial capital (i.e. money) in the form of either debt or equity that helps them to expand their businesses via Investment;
  • Australian businesses will be better able to take advantage of the benefits of economies of scale, where larger production volumes (for a global market) result in lower average costs of production and lower prices; and
  • Australia as a country can use foreign funds to finance expansion or consumption (which are the reasons for our CAD and NFD).