Australia's Terms of Trade

1. Data of ToT over the 10 year period of 2001-2010
 

2001   104.8%

2002   105.85%

2003   105.92%

2004   116.18%

2005   131.08%

2006   145.52%

2007   152.39% 

2008   174.63%

2009   162.98%

2010   178.9

2. Identify the year to year trends in the terms of trade. 

From the year 2000 to 2010 there is a pretty consistent and even to say a rapid yearly increase in terms of trade, growing from a 100% in year 2000 to 178.9% in 2010. 

Even though the data shown a pretty clear increasing trend, from year 2008 to 2009 there was a drop in ToT from 174.63% to 162.98% respectively. Yet for the next year ToT picked up again and increased from the 2009 162.98% to 178.9% in 2010, being the highest and latest value in the data, proving the clear increasing trend.

3. Identify the changes in trade balance over this same period.  

changes in trade balance were quite unrelated to those of ToT, and show more of a fluctuation. A decrease from 2001 til 2005, dropping from 0.18% to -2.72%, from there on it picked up again and increase to -1.61% in 20017. and since then has been fluctuating heavily yearly.

Balance of trade as a % of GDP
2001   0.18%

2002   0%

2003   -2.12%

2004   -2.7%

2005   -2.72%

2006   -1.81%

2007   -1.61% 

2008   -2.6%

2009   0.1%

2010   -0,97%

The trade of balance in this data is represented as a percentage of GDP, and is generally fluctuating on the negative side meaning there is a trade deficit; more expenditure on imports than earned from exports. 

In years 2001, 2002, and 2009 there were slight positive values, at 0.18%, 0% and 0.1% respectively. The trade balance values were the lowest in 2004, 2005 and 2008 at

4. Next, using your understanding of price elasticity of demand, research the types of exports and imports for your assigned country.

IMPORTS: Australia is a major importer of machinery and transport equipment, computers and office machines and telecommunication lasers. Therefore tertiary goods

EXPORTS: Rich in natural resources, Australia is a major exporter of commodities. Metals like iron-ore and gold account for 28 percent of total exports, coal for 18 percent and oil and gas for 9 percent. Manufactured goods constitute 33 percent of the total exports with food and metal products and machinery and equipment accounting for the biggest share. Agricultural products, particularly wheat and wool make up 5 percent of trade outflows. Mainly primary and secondary goods.

a. Based on the results of your research, to what degree do you think demand for exports/imports is elastic or inelastic?

Most of Australia's exports are demand inelastic as they are primary and secondary goods. Yet many if not most of the goods imported by Australia are elastic in demand as they require higher technology and labour skill for production and are priced higher, therefore are known to be price elastic in relation to demand.

b. Based on your research, does it appear that changes to the terms of trade has affected the balance of payments?
In this specific example I don't see a clear correlation between the Terms of Trade and balance of payments, as the fluctuation in the trade balance has very little correlation with the values of ToT