The services sector is a significant part of the Australian economy, representing about 70 per cent of Australia's gross domestic product (GDP) and employing four out of five Australians.
Australia is a world-class provider of a range of services, such as professional services, education and tourism, financial services, energy and mining-related services, environmental services and financial technology (FinTech). These are Australia's priority sectors for improving market access in global services trade reform efforts.
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 2015, total trade in services accounted for 21.3 per cent of Australia's total trade in goods and services, and services exports accounted for 20.9 per cent of Australia's total exports. The value of Australia's services exports are much greater once we take into account the role of intermediate services inputs ('embodied services'), which are captured in the value of Australian goods exports. Using a value-add methodology [PDF 56 KB], services contribute 40 per cent of our value-added export earnings.
The composition of Australian trade in services
In 2015-16, Australia's five largest services exports were:
- Education-related travel services - $19.9 billion
- Recreational travel services - $16.6 billion
- Professional services - $5.2 billion
- Business travel services $4.4 billion
- Financial services - $3.7 billion
Further statistical information on Australia's trade in services is available from the DFAT publication 'Trade in Services Australia 2015'.
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 2015, global services exports were valued at US$4.8 trillion and accounted for 22.6 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 World Trade Organization (WTO), Australia also promotes improved services exports through APEC, the negotiation of comprehensive Free Trade Agreements and the Trade in Services Agreement.
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.