5368.0 - International Trade in Goods and Services, Australia, Dec 2009
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2010
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This document was added or updated on 19/02/2010. FEATURE ARTICLE: EXPORT AND IMPORT INVOICE CURRENCIES, DEC 2009
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 and December 2007 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 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). For exports the conversion is undertaken by the Australian Bureau of Statistics (ABS) or the trader. Exchange rates applicable at the time of import or export are used for the conversion. EXCHANGE RATES Graph 1 shows movements in the value of the Australian dollar against selected currencies and the movement in the Trade Weighted Index (TWI) from December 2006 to December 2009. The graph shows that over the period December 2006 to December 2009 the Australian dollar has appreciated against:
The Australian dollar depreciated against the Japanese yen by 12% during the same period. There has been an overall rise in the TWI of 8% between December 2006 and December 2009. However, within the three year period there was some volatility in the value of the Australian dollar, especially during the Global Financial Crisis (GFC). Graph 1 shows three distinct periods of change in the Australian currency:
Table 1 further illustrates the movements of the Australian dollar against the selected currencies during the three periods of change.
Between December 2006 and June 2008 the Australian dollar appreciated against all the selected currencies, especially the United States dollar and United Kingdom pound Sterling (both 21%). At the early stages of the GFC from June 2008 to November 2008 the Australian dollar depreciated against the same currencies. It depreciated 38% against the Japanese yen and by 31% against the United States dollar. From November 2008 to December 2009 it appreciated against all the selected currencies, especially increasing in value against the United States dollar by 38% and the United Kingdom pound Sterling by 30%. It also appreciated significantly against the Japanese yen and Euro by 27% and 20% respectively. When the Australian dollar appreciates, Australian exports invoiced in Australian dollars become less attractive to foreign buyers as it takes more of their currency to purchase Australian goods. In contrast, Australian exports invoiced in other currencies provide smaller Australian dollar returns to exporters and decrease the nominal value of Australian exports. From the import perspective, an appreciating Australian dollar makes imports invoiced in other currencies more attractive to domestic consumers as their purchase requires fewer Australian dollars. For the purpose of Australian import and export 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. EXPORT CURRENCIES Table 2 lists the major currencies used to invoice Australian exports of merchandise goods from March quarter 2008 to December quarter 2009.
The United States dollar was consistently the currency with the highest proportion of export invoices denominated by value. The proportion of export invoices denominated in United States dollars peaked at 81% in September quarter 2008. Since then the proportion of export invoices denominated in United States dollars has declined to 78% during December quarter 2009, a similar proportion as in March quarter 2008. The Australian dollar as an export invoice currency has seen its share of merchandise exports move inversely to that of the United States dollar, reaching 19% in September and December quarters 2009. The respective movements of the two invoice currencies (USD and AUD) coincided with the depreciation of the Australian dollar during the early stages of the GFC (September quarter 2008 and December quarter 2008) and subsequent appreciation since March quarter 2009. During the period of the Australian dollar depreciation against the United States dollar the percentage of merchandise exports invoiced in United States dollars increased in comparison with merchandise exports invoiced in Australian dollars. However during the period of the Australian dollar appreciation against the United States dollar the percentage of merchandise exports invoiced in Australian dollars increased in comparison with those invoiced in United States dollars. During the period shown less than 1% of Australia's merchandise exports were invoiced in each of the Euro (except for March quarter 2009 and June quarter 2009), New Zealand dollar, United Kingdom pound Sterling and Japanese yen. The other currencies accounted for between 0.2% and 0.4% of Australian merchandise exports over this period. Other currencies include the Canadian dollar, Singapore dollar and Hong Kong dollar. 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 2009 calendar year.
The eight largest SITC divisions exported during 2009 were primarily invoiced in United States dollars. Of these, the three largest SITC Divisions, metalliferous ores and metal scrap (SITC 28); coal, coke and briquettes (SITC 32); and non-monetary gold (excl. gold ores and concentrates) (SITC 97), had over 90% of their value invoiced in United States dollars. Six of the 19 largest export SITC Divisions were primarily invoiced in Australian dollars. Of these, the three largest SITC Divisions had 76% of medicinal and pharmaceutical products (SITC 54); 70% of general industrial machinery and equipment, n.e.s., and machine parts, n.e.s. (SITC 74); and 66% of machinery specialized for particular industries (SITC 72). IMPORT CURRENCIES Table 4 lists the major currencies used to invoice Australian imports of merchandise goods from March quarter 2008 to December quarter 2009.
Since March quarter 2008 the United States dollar was consistently the currency with the highest proportion of import invoices denominated by value. The proportion of import invoices denominated in United States dollars peaked at 57% in December quarter 2008. Since then the proportion of United States dollars used in import transactions has declined to 50% during December quarter 2009. The proportion of Australian dollars used as an import invoice currency was 36% in December quarter 2009, 8 percentage points higher than a year earlier. As was the case for exports the percentage of merchandise imports invoiced in Australian dollars moved inversely to the percentage invoiced in United States dollar over the period. The respective movements in the proportions of the two invoice currencies for imports (USD and AUD) coincided with the depreciation of the Australian dollar during the height of the GFC and subsequent appreciation since the crisis abated. The proportion of merchandise imports invoiced in the Euro was maintained at between 8% and 9%. Other currencies accounted for between 2% and 3% of Australian merchandise imports during the period. Other currencies include the Swiss franc, Singapore dollar, Hong Kong dollar and Papua New Guinea kina. 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 2009 calendar year.
The United States dollar was the currency most used in invoices for the majority of the above SITC divisions. Almost 100% of petroleum, petroleum products and related materials (SITC 33), 86% of gold, non-monetary (excl. gold ores and concentrates) (SITC 97), and 71% of office machines and automatic data processing machines (SITC 75) of imports were invoiced in United States dollars. For a number of SITC divisions the Australian dollar was the most used import invoice currency. Invoicing in Australian dollars accounted for 81% of medicinal and pharmaceutical products (SITC 54), 76% of road vehicles (incl. air-cushion vehicles) (SITC 78), 52% of organic chemicals (SITC 51) and 51% of rubber manufactures n.e.s. (SITC 62). The Euro was the third most significant import invoice currency accounting for; 26% of machinery specialised for particular industries (SITC 72), 21% of general industrial machinery and equipment n.e.s. and machine parts n.e.s. (SITC 74), and 18% of power generating machinery and equipment (SITC 71). RECENT YEARS COMPARISON Table 6 shows the proportion of exports and imports invoiced in the major currencies in the last six calendar years from 2004 to 2009.
The proportion of merchandise exports invoiced in United States dollars increased from 69% in 2004 to 80% in 2008. The main offset to this general increase from 2004 to 2008 was a general decrease in exports invoiced in Australian dollars from 26% in 2004 to 17% in 2008. The proportion of exports invoiced in other major invoice currencies generally showed a slight downward trend over the period. The proportion of imports invoiced in United States dollars increased from 50% in 2004 and 55% in 2008 before decreasing to 52% in 2009. The proportion of imports invoiced in Australian dollars peaked in 2007 at 34%. It offset the decrease in United States dollar invoices in 2009 by increasing 2.7 percentage points. The proportion of imports invoiced in each of the other currencies decreased slightly over the six year period. FURTHER INFORMATION The commodities represented in tables 3 and 5 are based on SITC Revision 4, whereas commodity details in previous articles were based on SITC Revision 3. The ABS implemented Revision 4 in July 2008 and at the SITC division level, the changes were not significant. See 5368.0.55.010 - Information Paper: Impact of introducing Revision 4 of the Standard International Trade Classification, 2008 for more details. A feature article, "The Terms of Trade and the National Accounts", released with the December quarter 2004 issue of 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. For the updated weights of the TWI see Media Release Number 2009-22, date 30 September 2009 on the RBA website <www.rba.gov.au>. For more information about hedging activity undertaken by importers and exporters in 2009, refer to Foreign Currency Exposure, Australia, March 2009 (cat. no. 5308.0). ABBREVIATIONS
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 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 import and export 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 applying 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 further discussion for more details about hedging activity). For exports prior to October 2004, Customs and Border Protection permitted goods to be invoiced in a relatively small number of currencies. In October 2004, the range of currencies allowed on export documents was increased to 28. As transactions in non-permitted currencies are converted to Australian dollars by the exporter, the increase in the number of permitted currencies may have reduced the proportion of export invoices reported in Australian dollars for December quarter 2004 and following quarters. Document Selection These documents will be presented in a new window.
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