FEATURE ARTICLE: EXPORT AND IMPORT INVOICE CURRENCIES, JUNE 2012


INTRODUCTION

Goods imported into and exported from Australia can be invoiced in a range of currencies. This article analyses the major currencies used in these invoices. Initially the article looks at movement of the Australian dollar against selected currencies covering the period from December 2006 to June 2012. It then looks at the following three dimensions of the data:

• Compositional changes in the currencies used to invoice goods imported into and exported from Australia for the eight quarters from September quarter 2010 to June quarter 2012;
• Currencies used to invoice imports into and exports from Australia by selected divisions of the Standard International Trade Classification (SITC) Rev 4 for the 2011-12 financial year;
• Historical comparisons of the currencies used to invoice merchandise trade from the 2006-07 financial year through to the 2011-12 financial year.

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 and December 2009 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). 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 June 2012.

The graph shows that over the period December 2006 to June 2012 the Australian dollar has appreciated against the following currencies:

• United Kingdom pound (GBP) by 60%
• Euro (EUR) by 34%
• United States dollar (USD) by 27%
• New Zealand dollar (NZD) by 13%.

There has been an overall rise in the TWI of 17% between December 2006 and June 2012.

Within the six year period, considerable volatility was observed, which subsequently produced three distinct periods of change in the Australian dollar. Graph 1 shows these periods of change in the Australian currency exchange rates.

• The first period, from December 2006 to June 2008, prior to the Global Financial Crisis (GFC). The Australian dollar was characterised by stable growth against all selected currencies.
• The second period, from June 2008 to November 2008. The Australian dollar declined against all the selected currencies, except the New Zealand dollar and to some extent the United Kingdom pound.
• The most recent period, from November 2008 to June 2012. The Australian dollar significantly increased in value against all currencies. The Australian dollar's appreciation against most currencies coincides with the current mining boom which has significantly bolstered Australia's trade position to historic levels. In addition, developments in Europe and relatively high Australian interest rates may have also increased demand for the Australian dollar. Although the Australian dollar has strengthened against most currencies, it is worth noting the divergence in their relative appreciation since the GFC.

Table 1 illustrates the movements of the Australian dollar against the selected currencies during the three periods of change.

TABLE 1. MOVEMENTS IN SELECTED EXCHANGE RATES, Percentage change
	Dec 2006-Jun 2008	Jun 2008-Nov 2008	Nov 2008-Jun 2012
United States dollar	21.0	-31.0	52.3
Euro	2.8	-15.7	54.4
New Zealand dollar	10.0	-7.0	10.3
UK pound sterling	20.9	-11.6	50.1
Japanese yen	10.5	-37.5	24.6
Trade Weighted Index	13.0	-25.3	38.2

Between December 2006 and June 2008, the Australian dollar appreciated against all the selected currencies, especially the United States dollar and United Kingdom pound, each by 21%. During the initial stages of the GFC, from June 2008 to November 2008, the Australian dollar depreciated against these same currencies, particularly the Japanese yen, United States dollar and the Euro, 38%, 31% and 16% respectively. From November 2008 to June 2012, the Australian dollar appreciated significantly against all selected currencies, notably against the Euro by 54%, United States dollar by 52%, and the United Kingdom pound by 50%. The appreciation against the Japanese yen (25%) in this period was less than the depreciation (-38%) during the GFC, meaning that the Japanese yen was the only selected currency that the Australian dollar depreciated against between December 2006 to June 2012. Although the Australian dollar's appreciation against the United Kingdom pound was strongest overall (60%) in the December 2006 to June 2012 period, its appreciation was only third greatest, behind the United States dollar and the Euro in the November 2008 to June 2012 period. This was because the Australian dollar against the United Kingdom pound did not depreciate significantly during the GFC.

When the Australian dollar appreciates, Australian exports invoiced in Australian dollars become less attractive to foreign buyers as it takes more of their local currency to purchase Australian goods. From the imports 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 imports 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 shows the Australian dollar value and percentage contribution of the major currencies used to invoice Australian exports of merchandise goods from September quarter 2010 to June quarter 2012.

Table 2. INVOICE CURRENCIES FOR EXPORTS - Quarterly
Invoice currency	Sep Qtr 2010	Dec Qtr 2010	Mar Qtr 2011	Jun Qtr 2011	Sep Qtr 2011	Dec Qtr 2011	Mar Qtr 2012	Jun Qtr 2012
Value ($m)
United States dollar	51 700	50 949	47 100	55 328	59 659	58 446	48 266	55 873
Australian dollar	8 995	9 130	7 915	8 659	9 138	9 335	8 376	9 316
Euro	484	447	557	701	435	660	711	719
New Zealand dollar	363	401	291	298	383	369	293	321
UK pound sterling	211	198	163	211	222	183	158	188
Japanese yen	295	202	151	150	299	189	128	148
Other	195	203	240	190	212	217	210	233
Total	62 244	61 529	56 415	65 535	70 348	69 399	58 142	66 799
Contribution (%)
United States dollar	83.1	82.8	83.5	84.4	84.8	84.2	83.0	83.6
Australian dollar	14.5	14.8	14.0	13.2	13.0	13.5	14.4	13.9
Euro	0.8	0.7	1.0	1.1	0.6	1.0	1.2	1.1
New Zealand dollar	0.6	0.7	0.5	0.5	0.5	0.5	0.5	0.5
UK pound sterling	0.3	0.3	0.3	0.3	0.3	0.3	0.3	0.3
Japanese yen	0.5	0.3	0.3	0.2	0.4	0.3	0.2	0.2
Other	0.3	0.3	0.4	0.3	0.3	0.3	0.4	0.3
Total	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0

Between the September quarter 2010 and June quarter 2012, the United States dollar consistently represents the highest proportion of export invoices denominated by value. In this period the goods invoiced in United States dollars increased slightly by half a percentage point to 84% in June quarter 2012, with a peak of 85% in September quarter 2011. The Australian dollar was consistently the second largest proportion of export invoices. The Australian dollar as an export invoice currency has moved inversely to that of the United States dollar. The proportion of Australian dollars used in export invoices has correspondingly decreased approximately half a percentage point in the same period, with the highest value of 15% in December quarter 2010.

The respective movements in the proportions of the two invoice currencies for exports (USD and AUD) coincided with the appreciation of the Australian dollar during the last eight quarters of trade. As the Australian dollar appreciated, merchandise exports invoiced in United States dollars increased in contrast to merchandise exports invoiced in Australian dollars.

The proportion of merchandise exports invoiced in the Euro was maintained at around 1%, with a small decrease of half a percentage point between the June quarter 2011 and September quarter 2011 period. Between the September quarter 2010 and June quarter 2012 the New Zealand dollar, United Kingdom pound and Japanese yen were less than 1% of invoiced exports, with less than half a percentage point variation between the eight quarters.

Other currencies accounted for between 0.3% and 0.4% 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 2011-12 financial year.

TABLE 3. Export invoice currencies for selected SITC Rev 4 Divisions(a), Contributions - 2011-12
	Value	USD	AUD	EUR	NZD	GBP	JPY	Other
SITC code description	$m	%	%	%	%	%	%	%
01 Meat and meat preparations	7 126	51.2	45.3	0.6	0.2	1.0	0.2	1.4
02 Dairy products and birds’ eggs	2 200	74.0	25.6	-	0.1	-	-	0.3
04 Cereals and cereal preparations	9 068	88.3	10.6	0.4	0.3	-	0.4	-
05 Vegetables and fruit	1 865	55.0	42.1	0.9	0.2	0.2	1.4	0.2
11 Beverages	2 087	14.0	68.6	2.8	1.6	7.1	0.6	5.3
26 Textile fibres (excl. wool tops and other combed wool) and their wastes, not manufactured into yarn or fabric	5 487	82.6	15.6	1.3	-	0.3	0.1	0.1
28 Metalliferous ores and metal scrap	85 474	98.5	1.4	0.1	-	-	-	-
32 Coal, coke and briquettes	48 259	98.9	1.1	-	-	-	-	-
33 Petroleum, petroleum products and related materials	14 447	88.3	11.7	-	-	-	-	-
34 Gas, natural and manufactured	13 001	79.1	20.9	-	-	-	-	-
54 Medicinal and pharmaceutical products	4 058	7.2	79.9	0.9	3.2	0.4	1.5	6.8
68 Non-ferrous metals	10 711	92.9	7.0	-	-	-	-	-
72 Machinery specialized for particular industries	2 069	24.5	68.7	3.4	1.5	0.6	0.1	1.3
74 General industrial machinery and equipment, n.e.s., and machine parts, n.e.s.	1 891	19.2	74.7	3.0	1.2	0.9	0.3	0.7
77 Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (incl. non electrical counterparts, n.e.s., of electrical household type equipment)	1 656	31.1	60.1	4.9	1.4	1.9	0.2	0.3
78 Road vehicles (incl. air-cushion vehicles)	2 770	57.3	32.7	0.4	8.8	0.6	0.1	0.1
87 Professional, scientific and controlling instruments and apparatus, n.e.s.	1 922	47.0	36.2	10.1	3.0	1.6	1.4	0.7
89 Miscellaneous manufactured articles, n.e.s.	2 603	32.6	47.6	2.8	5.7	8.6	0.6	2.2
97 Gold, non-monetary (excl. gold ores and concentrates)	15 792	98.0	2.0	-	-	-	-	-
Other	32 201	55.0	34.9	5.2	1.9	0.5	1.7	0.8
Total	264 687	84.0	13.7	1.0	0.5	0.3	0.3	0.3
- nil or rounded to zero (including null cells)
(a) Some SITC divisions exclude commodities subject to a confidentiality restriction. These are included in Other.

The United States dollar was the most used currency in invoices for the majority of the above SITC divisions. Almost 99% of both Metalliferous ores and metal scrap (SITC 28) and Coal, coke and briquettes (SITC 32), and 98% of Non-monetary gold (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 for the ten largest SITC divisions denominated by value.

For six of the 19 largest export SITC divisions the Australian dollar was the most used export invoice currency. Invoicing in Australian dollars accounted for 80% of Medicinal and pharmaceutical products (SITC 54); 75% of General industrial machinery and equipment, n.e.s., and machine parts, n.e.s. (SITC 74); and 69% of both Machinery specialized for particular industries (SITC 72) and Beverages (SITC 11).

Merchandise exports invoiced in the Euro had one relatively significant contribution of 10% for Professional, scientific and controlling instruments and apparatus, n.e.s. (SITC 87), but not for any other of the 19 largest SITC divisions. Similarly, the New Zealand dollar, United Kingdom pound, and Japanese yen were insignificant in terms of overall percentages contributing to the 19 largest SITC divisions.

In contrast to the previous feature article in 2009, Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (SITC 77) replaced Special transactions and commodities not classified according to kind (SITC 93) in the SITC 19 largest value divisions for exports. Other than this change, the results are consistent with the previous issue of this feature article.

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 2010 to June quarter 2012.

Table 4. INVOICE CURRENCIES FOR IMPORTS - Quartely
Invoice currency	Sep Qtr 2010	Dec Qtr 2010	Mar Qtr 2011	Jun Qtr 2011	Sep Qtr 2011	Dec Qtr 2011	Mar Qtr 2012	Jun Qtr 2012
VALUE ($m)
United States dollar	28 875	29 475	28 490	30 639	32 739	36 755	32 158	33 479
Australian dollar	18 347	18 337	15 786	16 102	19 360	17 757	17 989	18 214
Euro	3 932	3 841	3 519	3 895	4 444	3 981	3 980	4 276
New Zealand dollar	649	637	549	603	676	678	514	594
UK pound sterling	536	551	532	575	642	802	769	644
Japanese yen	1 111	1 011	985	795	1 090	1 094	1 170	1 122
Other	1 069	1 055	1 074	1 110	1 212	1 224	1 245	1 122
Total	54 519	54 907	50 934	53 719	60 164	62 290	57 825	59 451
CONTRIBUTION (%)
United States dollar	53.0	53.7	55.9	57.0	54.4	59.0	55.6	56.3
Australian dollar	33.7	33.4	31.0	30.0	32.2	28.5	31.1	30.6
Euro	7.2	7.0	6.9	7.3	7.4	6.4	6.9	7.2
New Zealand dollar	1.2	1.2	1.1	1.1	1.1	1.1	0.9	1.0
UK pound sterling	1.0	1.0	1.0	1.1	1.1	1.3	1.3	1.1
Japanese yen	2.0	1.8	1.9	1.5	1.8	1.8	2.0	1.9
Other	2.0	1.9	2.1	2.1	2.0	2.0	2.2	1.9
Total	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0

Between the September quarter 2010 and June quarter 2012, the United States dollar consistently represents the highest proportion of import invoices denominated by value. Over this period goods invoiced in the United States dollar increased from 53% in September 2010 to 56% in June quarter 2012, with a peak of 59% in December quarter 2011. The Australian dollar was consistently the second largest proportion of import invoices. The proportion of import invoices valued in Australian dollars has decreased from a high of 34% in September quarter 2010 to 31% in June quarter 2012, with the lowest value of 29% in December quarter 2011. As was the case for exports the percentage of merchandise imports invoiced in Australian dollars has moved inversely to the percentage invoiced in United States dollars over the period.

The respective movements in the proportions of these two currencies (USD and AUD) coincided with the appreciation of the Australian dollar during the last eight quarters of trade.

The proportion of merchandise imports invoiced in the Euro was maintained at between 6% and 7%. Other currencies accounted for around 2% of Australian merchandise imports during the period. 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 2011-12 financial year.

TABLE 5. IMPORT INVOICE CURRENCIES FOR SELECTED SITC Rev 4 DIVISIONS(a), Contributions - 2011-12
	Value	USD	AUD	EUR	NZD	GBP	JPY	Other
SITC code description	$m	%	%	%	%	%	%	%
33 Petroleum, petroleum products and related materials	37 340	99.6	0.3	-	-	-	-	-
51 Organic chemicals	2 930	53.0	42.5	3.1	0.1	0.8	0.2	0.2
54 Medicinal and pharmaceutical products	10 685	10.2	85.2	2.8	0.3	0.3	0.1	1.1
62 Rubber manufactures, n.e.s.	3 873	41.7	49.1	5.0	0.2	0.4	2.7	1.0
67 Iron and steel	3 975	67.1	21.9	7.6	0.2	0.6	1.4	1.2
68 Non-ferrous metals	3 118	82.9	10.1	4.3	1.1	0.7	0.2	0.7
69 Manufactures of metals, n.e.s.	6 386	57.9	25.6	9.5	1.0	1.2	0.7	4.0
71 Power generating machinery and equipment	4 988	61.6	17.2	10.7	0.3	3.5	4.3	2.4
72 Machinery specialised for particular industries	11 420	38.7	27.1	19.0	0.6	3.5	8.6	2.4
74 General industrial machinery and equipment, n.e.s., and machine parts, n.e.s.	11 406	45.0	24.9	20.5	1.0	2.0	4.0	2.6
75 Office machines and automatic data processing machines	9 526	71.5	22.1	1.3	0.7	0.4	3.5	0.5
76 Telecommunications and sound recording and reproducing apparatus and equipment	11 700	55.1	39.9	2.7	0.3	0.6	0.9	0.5
77 Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (incl. non electrical counterparts, n.e.s., of electrical household type equipment)	11 070	54.7	27.8	11.8	0.5	1.5	1.4	2.3
78 Road vehicles (incl. air-cushion vehicles)	28 389	15.5	73.5	5.1	0.3	0.7	4.4	0.5
79 Transport equipment (excl. road vehicles)	3 417	34.5	43.4	9.9	0.6	4.6	0.8	6.3
84 Articles of apparel and clothing accessories	5 749	75.6	16.0	2.8	0.7	0.8	0.2	3.9
87 Professional, scientific and controlling instruments and apparatus, n.e.s.	5 078	47.1	31.3	12.9	0.7	2.9	1.9	3.2
89 Miscellaneous manufactured articles, n.e.s.	10 049	49.3	33.3	7.8	1.4	4.2	0.7	3.3
97 Gold, non-monetary (excl. gold ores and concentrates)	6 875	76.3	3.2	0.2	7.2	-	-	13.0
Other	51 753	58.5	25.2	9.3	2.2	1.2	1.0	2.5
Total	239 730	56.4	30.6	7.0	1.0	1.2	1.9	2.0
- nil or rounded to zero (including null cells)
(a) Some SITC divisions exclude commodities subject to a confidentiality restriction. These are included in Other.

The United States dollar was the most used currency in invoices for the majority of the above SITC divisions. Almost 100% of Petroleum, petroleum products and related materials (SITC 33), 83% of Non-ferrous metals (SITC 68), and 76% of both Non-monetary gold (SITC 97) and Articles of apparel and clothing accessories (SITC 84) 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 85% of Medicinal and pharmaceutical products (SITC 54), 74% of Road vehicles (incl. air-cushion vehicles) (SITC 78), 49% of Rubber manufactures, n.e.s (SITC 62), and 43% of Transport equipment (excl. road vehicles) (SITC 79).

The Euro was the third most significant import invoice currency accounting for; 21% of General industrial machinery and equipment n.e.s. and machine parts n.e.s. (SITC 74), 19% of Machinery specialized for particular industries (SITC 72), and 13% of Professional, scientific and controlling instruments and apparatus, n.e.s (SITC 87).

In contrast to the previous feature article in 2009, Non-ferrous metals (SITC 68) and Transport equipment (excl. road vehicles) (SITC 79) replaced Non-metallic mineral manufactures, n.e.s. (SITC 66) and Furniture and parts thereof (SITC 82) in the 19 largest value divisions for imports. Other than this change, the results are consistent with the previous issue of this feature article.


RECENT YEARS COMPARISON

Table 6 shows the proportion of exports and imports invoiced in the major currencies in the last six financial years from 2006-07 to 2011-12.

Table 6. INVOICE CURRENCIES FOR EXPORTS and IMPORTS, Annual
	2006-07	2007-08	2008-09	2009-10	2010-11	2011-12
Invoice currency	%	%	%	%	%	%
Exports
United States dollar	75.3	76.5	80.5	80.4	83.5	84.0
Australian dollar	21.1	20.1	16.7	17.0	14.1	13.7
Euro	1.0	0.9	0.9	0.8	0.9	1.0
New Zealand dollar	0.9	0.9	0.6	0.8	0.6	0.5
UK pound sterling	0.8	0.7	0.5	0.4	0.3	0.3
Japanese yen	0.7	0.5	0.5	0.4	0.3	0.3
Other	0.3	0.3	0.3	0.3	0.3	0.3
Total	100.0	100.0	100.0	100.0	100.0	100.0
Total Exports $m	168 099	180 857	230 829	200 720	245 724	264 687
Imports
United States dollar	51.1	52.8	54.7	51.5	54.9	56.4
Australian dollar	33.7	32.7	30.5	34.5	32.0	30.6
Euro	8.5	8.2	8.3	7.8	7.1	7.0
New Zealand dollar	1.0	1.0	1.1	1.2	1.1	1.0
UK pound sterling	1.5	1.4	1.3	1.1	1.0	1.2
Japanese yen	2.2	2.0	1.9	1.9	1.8	1.9
Other	2.0	1.9	2.2	2.1	2.0	2.0
Total	100.0	100.0	100.0	100.0	100.0	100.0
Total Imports $m	180 801	202 307	219 485	203 590	214 080	239 730

The proportion of merchandise exports invoiced in United States dollars increased from 75% in 2006-07 to a peak of 84% in 2011-12. The increase was relatively consistent over this time, except between 2008-09 and 2009-10 where there was little change between the years. The main offset to this general increase from 2006-07 to 2011-12 was a general decrease in exports invoices in Australian dollars from 21% in 2006-07 to 14% in 2011-12. The proportion of exports invoiced in other major invoice currencies generally showed a slight downward trend over the period. The Other currencies category did not change and remained constant at 0.3 percentage points across all periods.

The proportion of imports invoiced in United States dollars increased from 51% in 2006-07 to 55% in 2008-09, then significantly decreased to 52% in 2009-10 before increasing again to 56% in 2011-12. In contrast, imports invoiced in Australian dollars decreased from 34% in 2006-07 to 31% in 2008-09, followed by a sharp rise to 35% in 2009-10 and a subsequent decrease to 31% in 2011-12. Over the six year period the Euro decreased slightly from 9% in 2006-07 to 7% in 2011-12. All other currencies did not change significantly with all variations being less than 0.4 percentage points over the six year period.

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 2007-08 to 2011-12.

The United States dollar is consistently the most used currency for exports invoicing, followed by the Australian dollar and the Euro. From the graph, the movement from the Australian dollar to the United States dollar is apparent. In the years 2007-08 and 2008-09, the use of United States dollars for exports invoicing significantly increased, which saw a corresponding decrease in the use of Australian dollar in exports invoices. Between 2008-09 and 2009-10 the use of the Australian dollar and United States dollar in export invoices did not change significantly. In the following years between 2010-11 and 2011-12 the general upward trend continued for the United States dollar. From 2007-08 to 2011-12 the Euro remained fairly constant, whilst other currencies decreased slightly, driven primarily by the slight decrease in the New Zealand dollar, United Kingdom pound and Japanese yen.

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 2007-08 to 2011-12.

The graph shows that the United States dollar is consistently the most used currency for imports invoicing, followed by the Australian dollar and the Euro. Similar to graph 2 the inverse relationship between the Australian dollar and United States dollar is apparent. Referring to graph 1, in the years 2007-08 and 2008-09 the Australian dollar appreciated against selected currencies before sharply depreciating during the GFC. Graph 3 shows that in this period the use of the United States dollar for import invoices spiked upwards and following this period decreased sharply in 2009-10. Conversely, the use of the Australian dollar in import invoices decreased as a percentage of the total between the years 2007-08 and 2008-09, and sharply increased in 2009-10. Since 2009-10, there has been an increase in the use of the United States dollar in invoices and a corresponding decrease in the use of the Australian dollar. Over the five years, the use of the Euro in invoices has decreased slightly, which is possibly due to a combination of several factors which might include, but are not exclusive to, the relative decrease in trade with Europe and the perceived instability of the Euro. Currencies grouped as Other in the graph showed insignificant change in their use in import invoices over the five year period.


CONCLUSION

This article analysed the major currencies used to invoice merchandise goods imported into and exported from Australia. Initially, the article investigated the movement of the Australian dollar against selected currencies from December 2006 to June 2012, and how these movements could potential affect invoice currencies. It then looked at the compositional changes in the currencies for imports and exports for the eight quarters from September quarter 2010 to June quarter 2012. The major change in invoice currencies over the eight quarters, for imports and exports, was the increase in use of the United States dollar and the corresponding decrease in the Australian dollar as a percentage of the total. Currencies used to invoice imports and exports by the 19 largest SITC divisions denominated by value, during the 2011-12 financial year, showed a small change to the results of the previous issue of this feature article. There were two SITC divisions in imports and one SITC division in exports that differed from the previous article's 19 largest SITC divisions. Similarly, in both articles the United States dollar was the major currency used in invoice currencies for imports and exports, followed by the Australian dollar and the Euro. Notably, the Euro was used more frequently for import invoice currencies than in exports, in terms of their percentage contribution to the total. Historical comparisons of the currencies used to invoice merchandise trade, from 2007-08 to 2011-12, highlighted the inverse relationship between the Australian dollar and the United States dollar for both imports and exports. As the use of the United States dollar increased in invoices, there was a corresponding decrease in the use of the Australian dollar. The United States dollar and the Australian dollar were used more frequently for export invoices than in imports, in terms of their percentage contribution to the total.

FURTHER INFORMATION

The commodities represented are based on SITC Rev 4, whereas commodity details in previous articles were based on SITC Rev 3. The ABS implemented Rev 4 in July 2008 and at the SITC division level, the changes were not significant. See Information Paper: Impact of introducing Revision 4 of the Standard International Trade Classification, 2008 (cat. no. 5368.0.55.010) 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 2010-22 dated 30 September 2010 on the RBA website <http://www.rba.gov.au>.

For more information about hedging activity undertaken by importers and exporters in 2012, refer to Foreign Currency Exposure, Australia, March 2009 (cat. no. 5308.0).


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 applicable on a different day. Additionally, some exporters and importers hedge against exchange rate movements when setting contracts (see the Further Information section for more details about hedging activity).

For exports prior to October 2004, Customs and Border Protection permitted goods to be invoiced in only a relatively small number of currencies. From 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 subsequent quarters.

This article was based on financial years in order to capture and present the most recent data available. This differs from the previous invoice currency feature articles which were based on calendar years. This is not expected to have any effect on the analysis.


ABBREVIATIONS

$m	million Australian dollars
ABS	Australian Bureau of Statistics
EUR	Euro
excl.	excluding
GBP	United Kingdom pound sterling
GFC	Global Financial Crisis
incl.	including
JPY	Japanese yen
n.e.s.	not elsewhere specified
NZD	New Zealand dollar
SITC Rev 4	Standard International Trade Classification Revision 4
TWI	Trade Weighted Index
USD	United States dollar