The importance of services trade to Australia

Australia is a world-class provider of a range of services, such as telecommunications, travel, banking and insurance. The services sector is a significant part of our economy and represents about 70 per cent of Australia's gross domestic product (GDP) and employs four out of five Australians.

Services also play an increasingly important role in our international trade, with services exports growing by an average of 3.2 per cent per annum over the last five years. In 2014, total trade in services accounted for 19.6  per cent of Australia's total trade in goods and services, and services exports accounted for 18.4 per cent of Australia's total exports. The value of Australia's services exports are even greater once we take into account the export role of intermediate services inputs ('embodied services').

Australia's priority sectors for market opening in global services trade reform efforts include financial services, telecommunications, professional services, education, mining-related and environmental services.

The composition of Australian trade in services

In 2014-15, Australia's five largest services exports were:

  • Education-related travel services - $18.2 billion
  • Recreational travel services - $14.8 billion
  • Professional services - $4.7 billion
  • Business travel services $4.3 billion
  • Financial services - $3.6 billion

Further statistical information on Australia's trade in services is available from Trade in Services, Australia 2014, report.

Why is it important to open services markets?

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.

An efficient services sector is critical to trade and economic growth.

Encouraging greater trade in services through open markets and non-discriminatory treatment can lead to higher employment levels, higher incomes and higher standards of living.

The opening of certain sectors to competition provides consumers with access to a broader range of services and a greater depth of expertise from here at home and overseas. Freer trade also encourages local providers to be more innovative and efficient in delivering competitive services.

The importance of services to global trade

Trade in services is an important part of global trade. In 2012, global services exports were valued at US$4.4 trillion and accounted for 19.4 per cent of the world's total exports. Given the importance of this sector to the Australian economy, Australia takes a leading role in services negotiations in the WTO, including the Doha Round of negotiations. Australia also promotes improved services exports through APEC and the negotiation of comprehensive Free Trade Agreements.

Services are an important driver of growth, especially in developing countries. Developing countries are increasingly aware that efficient services industries, supported by good domestic regulatory systems, are an integral part of economic growth. Services sectors already make major contributions to the GDP of many developing countries. Services trade, such as tourism, is also an important income source in the economies of the least developed countries. Developing countries have considerable expertise in a number of fields, such as port and shipping services and construction services. With their lower labour costs, developing countries have a comparative advantage in many of the more labour-intensive services.

Services negotiations in the Doha Round offer important opportunities for both developing and developed countries. By opening their own services industries to foreign suppliers, they are able to increase the efficiency of their economy. This is especially important in sectors such as freight logistics, power and financial services, which are all critical to inducing greater foreign investment, and economic growth. Developing countries also benefit from the market access commitments made by other WTO Members.

Last Updated: 11 December 2013