5368.0 - International Trade in Goods and Services, Australia, Jun 2014 
Quality Declaration
Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 05/08/2014
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FEATURE ARTICLE: EXPORT AND IMPORT INVOICE CURRENCIES, JUNE 2014
Similar analyses appeared in the March quarter 1998, March quarter 2001 and March quarter 2003 issues of the discontinued publication, International Merchandise Trade, Australia (cat. no. 5422.0), as well as in the June 2005, December 2007, December 2009 and June 2012 issues of International Trade in Goods and Services, Australia (cat. no. 5368.0). All values in this article are reported in Australian dollars. The methodology used to measure invoice currencies is described in the appendix. INVOICE CURRENCY An invoice currency is the currency in which an invoice for exported or imported goods is denominated. For exports the conversion is undertaken by the Australian Bureau of Statistics (ABS) or the trader using the Reserve Bank of Australia's (RBA) daily exchange rates. For imports, conversion of a foreign invoice currency value to Australian dollars is undertaken by the Australian Customs and Border Protection Service (Customs and Border Protection). Exchange rates applicable at the time of export or import are used for the conversion. For the purpose of Australian export and import statistics, foreign currencies are converted to the Australian dollar using the exchange rate applicable on the day of shipment. However, trading partners may choose a conversion for payment purposes using a different exchange rate or one applying on a different day if favourable conditions exist. In addition, some exporters and importers hedge exchange rates and calculate the value of the transaction using the hedged exchange rate rather than the prevailing exchange rate. For more detail see the further information section. EXCHANGE RATES Graph 1 shows movements in the value of the Australian dollar against selected currencies and the Trade Weighted Index (TWI) from December 2008 to June 2014. The graph shows that over the period December 2008 to June 2014 the Australian dollar appreciated against the following currencies:
The Australian dollar depreciated against the New Zealand dollar by 9.6% during the same period. There has been an overall rise against the TWI of 31.7% between December 2008 and June 2014. Within the six year period, considerable volatility was observed, which subsequently produced four distinct periods of change in the Australian dollar.
Table 1 illustrates the movements of the Australian dollar against the selected currencies during the four periods of change.
During the period December 2008 to February 2012, the Australian dollar appreciated the most against the Euro (63.1%) and United States dollar (60.3%). February 2012 to March 2013 was a steady period for the value of the Australian dollar with net changes well under 4% for nearly all currencies. The notable exception was the Japanese yen, against which the Australian dollar appreciated a further 16.5%. Between March 2013 and January 2014, the value of the Australian dollar remained high by historic standards but depreciated against all the major currencies. The highest decreases in value were recorded against the UK pound (-21.5%) and the Euro (-18.3%). However, between January and June 2014, there have been signs of increased confidence in the Australian currency with modest appreciation against most major currencies. The highest increases in value were recorded against the Euro (5.9%). EXPORT CURRENCIES Table 2 shows the Australian dollar value and percentage contribution of the major currencies used to invoice Australian exports of merchandise goods from September quarter 2012 to June quarter 2014.
Between the September quarter 2012 and June quarter 2014 the United States dollar consistently represented the highest proportion of merchandise export invoices denominated by value. In this period the proportion of exports invoiced in United States dollars increased 1.3 percentage points, with a maximum of 85.1% in the March quarter 2014. The Australian dollar consistently accounted for the second largest proportion but this has been falling in most quarters, with an overall 1.3 percentage point decrease over the period. A notable exception is June 2014, with an increase back to the level recorded in March 2013. During the same period, the Euro accounted for a relatively small proportion of merchandise export invoices, ranging from 0.5% to 1.5%. Table 2 indicates that there are recent seasonal influences affecting the relatively high share accounted for by the Euro in the March quarters. This recent seasonality can be partially explained by the following two factors: Table 3 in this article shows that 31.2% of the Euro-denominated exports are classified in oil-seeds and oleaginous fruits (SITC 22); and Table 12a. Merchandise exports, standard international trade classification (1 and 2 digit) from the 'Downloads' tab of this publication indicates that there are strong seasonal influences impacting the March quarter. The New Zealand dollar, United Kingdom pound and Japanese yen each accounted for less than 1%, with less than half a percentage point variation between the eight quarters. 'Other' currencies accounted for between 0.3% and 0.5% of Australian merchandise exports during the period. 'Other' currencies include the Canadian dollar, Singapore dollar and Chinese renminbi. EXPORT COMMODITIES BY CURRENCY Table 3 lists the major currencies used to invoice Australian exports by selected SITC Rev. 4 divisions (2 digit) for the 2013-14 financial year.
The United States dollar was the most frequently used invoice currency for the majority of the above SITC Rev. 4 divisions. Almost 100% of coal, coke and briquettes (SITC 32), 99.0% of metalliferous ores and metal scrap (SITC 28) and 97.7% of gold, non-monetary (excl. gold ores and concentrates) (SITC 97) were invoiced in United States dollars. Similar to findings in the previous issue of this feature article, the United States dollar was the primary currency used to invoice exports in fourteen of the twenty largest SITC Rev. 4 divisions denominated by value. For six of the twenty largest export SITC Rev. 4 divisions, the Australian dollar was the most used export invoice currency. Invoicing in Australian dollars accounted for:
Merchandise exports invoiced in the Euro had two substantial contributions of 34.2% and 12.0% for oil-seeds and oleaginous fruits (SITC 22) and professional, scientific and controlling instruments and apparatus, n.e.s. (SITC 87) respectively. Merchandise exports invoiced in the United Kingdom pound also had two notable contributions of 10.5% for miscellaneous manufactured articles, n.e.s. (SITC 89) and 8.5% for beverages (SITC 11). Similarly, 9.1% of road vehicles (incl. air-cushion vehicles) (SITC 78) exports were invoiced in New Zealand dollars and 7.4% of medicinal and pharmaceutical products (SITC 54) were invoiced in 'Other' currencies. IMPORT CURRENCIES Table 4 shows the Australian dollar value and percentage contribution of currencies used to invoice Australian imports of merchandise goods from September quarter 2012 to June quarter 2014.
Between the September quarter 2012 and June quarter 2014, the United States dollar consistently represented the highest proportion of merchandise import invoices denominated by value. In this period goods invoiced in the United States dollar decreased from 56.2% in September 2012 to 54.5% in March quarter 2013, then recovered, peaking at 57.0% in the March quarter 2014. The Australian dollar consistently accounted for the second largest proportion of import invoices. The proportion has decreased from a high of 31.0% in the September quarter 2012 to 28.1% in March quarter 2014. However, the June quarter 2014 showed an increase to 29.6%. As was the case for exports, the percentage of merchandise imports invoiced in Australian dollars has generally moved inversely to the percentage invoiced in United States dollars over the same period. The proportion invoiced in the Euro has increased from 7.1% to 9.3% throughout the September quarter 2012 to March quarter 2014 period, before falling to 8.0% in the June quarter 2014. 'Other' currencies not specifically selected accounted for between 1.9% and 2.3% of Australian merchandise imports during this time. 'Other' currencies include the Papua New Guinea kina, Swiss franc, Singapore dollar and Canadian dollar. IMPORT COMMODITIES BY CURRENCY Table 5 lists the major currencies used to invoice Australian imports by selected SITC Rev. 4 divisions (2 digit) for the 2013-14 financial year.
The United States dollar was the most used currency in invoices for fifteen of the eighteen SITC Rev. 4 divisions identified above. Almost 100% of petroleum, petroleum products and related materials (SITC 33), 78.8% of articles of apparel and clothing accessories (SITC 84) and 76.6% of furniture and parts thereof; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings (SITC 82) were invoiced in United States dollars. For the other three SITC Rev. 4 divisions listed, the Australian dollar was the most used import invoice currency. Invoicing in Australian dollars accounted for 80.7% of medicinal and pharmaceutical products (SITC 54), 77.0% of road vehicles (incl. air-cushion vehicles) (SITC 78) and 49.0% of rubber manufactures, n.e.s. (SITC 62). The Euro was the third most significant import invoice currency accounting for: 38.0% of transport equipment (excl. road vehicles) (SITC 79); 27.3% of power generating machinery and equipment (SITC 71); and 22.4% of machinery specialized for particular industries (SITC 72). Merchandise imports invoiced in New Zealand dollars also had one relatively significant contribution of 11.7% for gold, non-monetary (excl. gold ores and concentrates) (SITC 97). When compared with the 2011-12 data presented in the previous feature article, the composition of the largest eighteen SITCs was broadly consistent. However, within certain SITCs there were some notable shifts. Of particular note were increases to the use of the Euro for power generating machinery and equipment (SITC 71) and transport equipment (excl. road vehicles) (SITC 79). For SITC 71, the increase in the use of the Euro was mostly balanced by a decrease in the use of United States dollars. For SITC 79, the increase was matched by a similar size proportional decrease in the use of Australian dollars. RECENT YEARS COMPARISON FOR EXPORTS Table 6 shows the proportion of exports invoiced in the major currencies in the last five financial years from 2009-10 to 2013-14.
Graph 2 shows the major movements in the currencies used for invoicing exports as a percentage of the total in the past five financial years from 2009-10 to 2013-14. The United States dollar is consistently the most used currency for export invoicing, followed by the Australian dollar and the Euro. From Graph 2, an inverse relationship between the Australian dollar and United States dollar is apparent. The overall trend over the five years observed indicates a shift towards an increased use of the United States dollar for export invoicing, and conversely, a decrease in the use of the Australian dollar. From 2009-10 there was an upward trend in the use of the United States dollar until 2011-12. There was a notable decline in the use of the United States dollar for export invoices between 2011-12 and 2012-13, mirrored by an increased use of the Australian dollar. However, between 2012-13 and 2013-14 the use of the United States dollar fully recovered its upward momentum. From 2009-10 to 2013-14 the share accounted for by the Euro remained fairly constant whilst 'Other' currencies decreased slightly. The 'Other' currencies driving the decrease were the New Zealand dollar, United Kingdom pound and Japanese yen. RECENT YEARS COMPARISON FOR IMPORTS Table 7 shows the proportion of imports invoiced in the major currencies in the last five financial years from 2009-10 to 2013-14.
Graph 3 shows the major movements in the currencies used for invoicing imports as a percentage of the total for the past five financial years from 2009-10 to 2013-14. The data shows that the United States dollar is consistently the most used currency for import invoicing, followed by the Australian dollar and the Euro. Similarly to Graph 2 there is an apparent inverse relationship between the share of trade accounted for by the Australian dollar and United States dollar. As with exports, the percentages suggest an increase in the use of the United States dollar and a decreased in the use of the Australian dollar for import invoicing. Of the five years, 2012-13 was the only financial year where the proportion accounted for by the United States dollar decreased. In contrast, 2012-13 was the only financial year in which the share accounted for by the Australian dollar increased. There are many possible factors that would influence the incentive for an importer to invoice in one currency over another. One of these factors could be the value of one currency against another. For example, if the Australian dollar depreciates against the United States dollar, Australian consumers find imports invoiced in Australian dollars relatively more attractive than imports invoiced in United States dollars. Therefore it is reasonable to assume that an importer's choice of invoice currency could be influenced by movements in the exchange rates. Graph 1 shows there was some depreciation of the Australian dollar against the United States dollar between 2011-12 and 2012-13. Between the same periods, Graph 3 indicates a reduction in the use of the United States dollar for import invoicing. These occurrences could be influenced by the logic described at the top of this paragraph. The use of the Euro in invoices slightly decreased from 2009-10 to 2011-12, which may be due to a combination of factors including, but not exclusive to, the relative decrease in trade with Europe and the perceived instability of the Euro. However, between 2011-12 and 2013-14, the use of the Euro in import invoices moderately increased. Currencies grouped as 'Other' in the graph showed insignificant change in their use in import invoices over the five year period. FURTHER INFORMATION A feature article, The Terms of Trade and the National Accounts, released with the December quarter 2004 issue of Australian National Accounts: National Income, Expenditure and Product, Australia (cat. no. 5206.0) discusses, amongst other things, how exchange rates can influence the terms of trade. For information on the Reserve Bank of Australia's (RBA) methodology of compiling the TWI see the article Developments in the Trade-Weighted Index Reserve Bank of Australia Bulletin October 2002 on the RBA website <www.rba.gov.au>. For more information about hedging activity undertaken by importers and exporters in 2013, refer to Foreign Currency Exposure, Australia, March Quarter 2013 (cat. no. 5308.0). If you require further information about the Export and import invoice currencies, June 2014 feature article, please contact the International Trade section on Canberra (02) 6252 5409 or email international.trade@abs.gov.au. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us. APPENDIX Measurement of Invoice Currencies Information on the invoice currencies used in export and import transactions is collected by Customs and Border Protection and passed on to the ABS with other merchandise trade information required for statistical purposes. For exports, the ABS converts values reported in foreign currencies to Australian dollars using a representative mid-point of the buy and sell rates on the date of departure of the goods from Australia. The trader may report to Customs and Border Protection in Australian dollars. For imports, Customs and Border Protection converts values reported in foreign currencies to Australian dollars using exchange rates applicable on the date of departure of the goods from the overseas country. The ABS receives details of the invoice currency together with the value of the import transaction in Australian dollars. Some factors may complicate the measurement of invoice currencies. In Australian export and import statistics foreign currencies are converted to the Australian dollar using the exchange rate applicable on the day of shipment. Some trading partners may undertake the conversion for payment purposes using a different exchange rate or one applicable on a different day. Additionally, some exporters and importers hedge exchange rates and calculate the value of the transaction using the hedged exchange rate rather than the prevailing exchange rate (see the further information section for more details about hedging activity). ROUNDING Where figures have been rounded, discrepancies may occur between sums of the component items and totals. Percentage movements are calculated from data at the level of precision presented in this publication (i.e. $m) except for international merchandise trade tables. ABBREVIATIONS
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