Linkages Between Economies
In today's age, globalisation has seen economies more integrated and interconnected.
Global trade is evident in Australia, as our commodities 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:
What is China Buying in Australia | CNBC Explains
The following CNBC video provides an insight to the level of Chinese investment into Australia in areas including property, commercial and other assets.
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 $17.037 billion to the Australian economy.
Personal tourism, that is visits to Australia for leisure reasons, is Australia's 5th largest export, bringing in a total $14.227 billion to the Australian economy.
Tourism is also Australia's largest import, with many Australians choosing to travel overseas, causing an outflow of $24.597 billion from the Australian economy.
Immigration has played a crucial role in Australian history, with European migrants coming to Australia after World War 2. In 2016-17 the ABS estimates 29% of Australians are born overseas.