The RBA publishes this chart which they update frequently and below I compare the July 2014 edition with May 2018. Resources were way over $40Bn a Quarter in 2014 – now just $40Bn and checking the wiggles confirms the backward slide. Rural, Services and Manufacturing have all increased since 2014. I am assuming the Chinese exchange rate is the reason but I have asked the RBA. If anybody knows reason please pass on.
Thanks to an eagle eyed reader who pinged me this.
I think the reason for the different levels is a change in units between 2014 and 2018. The earlier chart says it’s is in 2011/12 prices, which means only the figures for that year are accurate, with figures for all other years being adjusted to discount for price changes between those years and 2011/12. The 2018 chart is in 2015/16 prices, which means that 2015/16 figures are correct, and figures for all other years are deflated to the value of a dollar in that year.
I think they have probably done the deflation by looking at prices in each sector separately. So, since resource prices were lower in 2015/16 than in 2011/12, resource exports appear smaller in 2015/16 dollars than in 2011/12 dollars, for any given year. But since prices in other sectors (services, rural, manufacturing) were higher in 2015/16 than in 2011/12, the value of exports in those sectors appears higher in 2015/16 prices.
If I’m right then in reality, the chart is not showing real export revenues at all, except in the base years of the charts: 2011/12 in the 2011/12 chart, and 2015/16 in the 2015/16 chart. All figures for all other years in each chart are just the volume exported in tonnes (or other units) multiplied by the ruling price per tonne of that product in 2011/12, or 2015/16, depending on the chart. In that case the charts are complete BS and give no idea of the real trends in export revenues – or even of the balance between resource and other sectors, except in the base years for each chart.
Looking at price trends in Aussie dollars for our main exports between 2011/12 and 2015/16 seems to confirm that the charts are just tonnes (or whatever) exported multiplied by the $A price of a tonne of that stuff in the base year specified, irrespective of the price actually paid at the time of sale.
You can get $A prices of our main exports over time here: www.indexmundi.com/
Sure enough, the prices of iron ore and coal, our two biggest resource exports by far, fell between 2011/12 and 2015/16. So the same volume for say, 2008, shows as a lower amount in 2015/16 dollars than in 2011/12 dollars.
By contrast, the prices of services, manufactures, and rural exports went up about 10 per cent over those four years, so their figures are 10 per cent higher for all years in the later chart. (The rise is only an average for each sector: in “rural” for example, the beef price went up about 50 per cent but the wheat price fell.)
In fairness to the RBA, they do call the chart export “volume”, which, if you are a statistical purist, might tip you off that what is really being shown is tonnes or whatever of the various items, not the receipts for the sale of those tonnes. But not many people would guess that, given that the chart is shown in dollars. It should really come with a proper explanation, but I don’t see any link to one, even in the pdf version of the chart park here: www.rba.gov.au/chart-pack/pdf/chart-pack.pdf?v=2018-06-22-10-09-25
David Brewer with inflation money yesterday is worth more than today. When calculating the present value of future income or expenditure it is necessary to reduce the future by the estimated inflation. When one has inflation like Zimbabwe had, and Venezuela now has, the future the present value of cashflow is worth almost nothing. Exchange rate comes in both for exports and imports. The exchange rate declines with increased inflation. $A is declining against $US. The Australian value of exports will appear higher but with a current account deficit imports go up and outflow increases to pay for borrowing.
The first set of graphs (May 2018) are wrong. Turnbull and Co are leading us down the path of Venezuela where International investment and operations have and are walking away. Shorten and Co will be even worse.
Here is some things which will turn Australia around
1/ Government to get out of electricity and gas supply, Get rid of RET, all subsidies and authorisations for solar and wind, privatise, the market operator,
2/ Sell the ABC or shut it down. Break up the NBN and privatise the parts to get real competition.
3/ Make all unions, business associations, religions, non-profit associations comply with a revised company act. Make those that make a profit and/ or are involved in political lobbying (eg unions and those advocating Sharia law) pay tax.
4/ Stop funds to schools, universities and other education establishments if they restrict free speech, the study of subjects such as the history of western civilisation, or favour certain groups of students or academics which claim to represent some minority. (particularly gender, race, culture, ethnicity)
5/ Get rid of the Fair Work Act and its associated tribunals. Reduce the minimum wage to the level of the Old age pension.
Make people on unemployment benefits, single mothers and many of disability pension work in the community for at least 10hrs per week.
6/ bring in National service
7/ reduce company tax to 25% of net profit and the maximum personal tax 35%. GST at 10% to apply to everything except export (importers apply their own GST or VAT)
Apologies for things being slack here – my NBN has been out since ~8.30am Friday morn – 50+ hours and counting now. Just org’d a wireless BB dongle so have basic connection. Apparently earthworks cut a cable in central Canberra on the project to install trams.
Wazz,
NBN will cost us $100 billion BEFORE we pay connection fees.
It must rank in the world’s top 10 wastes of money.
Another one of Kevin Rudd;s brilliant initiatives.
Just like “We’ll put a great big tax on mining”. Ten years later the resource project investors have still not returned to Australia.
Thanks very much Kev – you bloody JERK.
Thinking a bit more about this graph, what the RBA should do is show actual export revenue for each year, not the amount in tonnes (or other measure of volume) multiplied by the price per tonne in some arbitrary year.
This would avoid the problem of resource exports now being shown as much lower – for the same year – than they were shown before, with other exports becoming magically larger.
No replies from RBA yet to my email sent 11am Thursday morn 21st June. My NBN is back on whoopee.
Did the RBA reply?
Not a word in reply to 2 emails in over a week.
Hi wazz,
In case they still haven’t answered, their FOI page says this:
“If you are unhappy with elements of the Bank’s IPS [Information Publication Scheme] or release of information more generally, you can complain in the first instance to the Bank using the FOI contact details contained on this website.”
FOI contact address: foi@rba.gov.au
FOI webpage: www.rba.gov.au/information/foi/making-an-foi-request.html
Gidday Dave – I re-emailed RBA at that FOI address and got following
[Thank you for your email.
The main reason for the level difference between the two charts reflects the fact that they are using different reference years (as published by the Australian Bureau of Statistics or ABS). The difference in reference year is noted in each charts: the older chart is using 2011/12 prices while the more recent chart is using 2015/16 prices as the reference year.
Each year, the chain volume measure in the annual and quarterly National Accounts published by the ABS is re-based to a new reference year. For example, in the 2017 September quarter National Accounts, the reference period was updated from 2014/15 to 2015/16; this means that the chain volume measure in the new reference year (2015/16) will be equal to the current price value in that period. Re referencing will change the level of the chain volume measure but it will not cause any changes to the quarterly growth rates. (However, there could be other factors/revisions that result in changes to growth rates.) When there are large price movements between reference years for the components that comprise GDP, this can bring about changes in their relative importance. This tends to be most applicable to exports, which tend to experience large price swings between periods.
Further information on the National Accounts re-referencing can be found in: ABS Demystifying Chain Volume Measures. I trust this helps.]
I notice RBA stays right away from commenting on why Resources are reducing compared to Rural – Manufacturing and Services which all increase.
Well done, Warwick, nice to know the old FOI route still gets action some times.
On a quick look at the RBA’s reply, I see I was on the right track, but there is a little twist.
The graphs are not just volume in each year multiplied by price at a fixed date. Instead, the prices are also moving and are rather centred on a base year than reduced to a base year. This is because it’s a “chain volume” index.
The RBA’s referenced document gives pages of examples of current price, constant price, and chain volume measures of the output of “Fruitonia”. (They talk about this so much, I wonder if they think they live in Fruitonia.) Anyway, for various reasons they prefer a chain volume index to a constant price estimate. And they may have a point when measuring the total output of an economy, where you have got complex problems of gradual substitution of products to contend with.
But this is largely irrelevant to exports by sector. What the layman wants to know here is simply how much we are getting for exports of different types. It doesn’t matter if service exports are changing in nature, or if we now have more gas and less oil, or more wheat and less beef. All we care about is what we got paid each year for what we sold in each broad category. So just present actual export revenue from each sector in each year. Maybe you’d want to eliminate inflation – OK, show the revenues in inflation-adjusted dollars. Or show exports’ importance to the economy, by expressing revenues as a share of GDP – in which case you will never need to change the figure for any year, barring corrections.
Another reason to stick close to actual revenues is that the Chart Pack seems to have no explanations whatever except what you see on the graphs. So the RBA needs to keep it simple, and obvious. As this graph now stands, how would a reader ever guess that it is a Laspeyres chain volume estimate of value, let alone work out what that means, what the figures mean, and, as your correspondent has flagged, why, for the same exports in the same year, figures vary in different editions?