|
EU-Australia Economic Relationship 2006 
December 2007
Economic Partners
The European Union (EU) and Australia share a
strong and longstanding economic relationship,
with the EU having been Australia’s largest single
economic partner since records began in 1980.
The best way to look at the EU-Australia economic
relationship is by considering the Balance of
Payments, which takes into account trade in goods
and services, foreign investment income and transfer
payments.
The EU is Australia’s largest partner in both two-way
trade in goods (eg coal, alcohol, wool) and two-way
trade in services (eg travel, transportation). It is the
largest investor in Australia and the second largest
destination for Australian investment overseas.
The Balance of Payments relationship has grown in
2006 with economic activity between the EU and
Australia worth $A100 billion, 19% of all Australian
overseas transactions. This figure, when compared
with Australia’s other major economic partners,
shows that the EU is Australia’s largest single
economic partner.
Partners in Trade (Goods)
The EU has been Australia’s most important trade
partner in terms of total merchandise trade since
1996. In 2006, the EU remained Australia’s largest
two-way merchandise trading partner, followed
closely by ASEAN, Japan and China.
Two-way merchandise trade between the EU and
Australia was worth $A57 billion in 2006.
In 2006, the EU was the largest source of merchandise
imports into Australia. EU imports accounted for
21% of Australia’s total imports.
Did you know?
For merchandise imports to Australia, Germany is the largest source of imports from the EU. It accounts for $A9 billion of merchandise imports into Australia, ahead of the UK. |

Australia’s main imports from the EU in 2006 were:
- medicaments, worth $A4 billion;
- passenger motor vehicles, worth $A2 billion; and
- telecommunications equipment, worth $A1 billion.
In 2006, Australian merchandise exports to the EU
continued to grow faster than imports to Australia
from the EU. Exports to the EU accounted for 12%
of total Australian exports, and the EU regained
its position as the third most important market for
Australian exports, after Japan (20%) and just behind
China (13%).
Australia’s principal exports to the EU were:
- coal, worth $A4 billion;
- alcoholic beverages (mainly wine), worth $A1
billion; and
- other ores, totalling $A1 billion.
Did you know?
40% of Australian exports to the EU go to the UK. |
Other major exports included nickel ores, medicaments
and wool.
Viewed from the EU’s
perspective, Australia
is ranked as its 19th
largest partner in two-
way merchandise
trade.
Partners in Trade (Services)
In 2006, two-way trade in services between the EU
and Australia was worth $A18 billion. This makes
the EU Australia’s most important trading partner for
two-way trade in services. Two-way trade in services between the EU and Australia has been increasing
steadily over the last five years.
The EU is the largest market for Australian services
exports (worth almost $A9 billion in 2006, or 19% of
total services exports). It is also the largest source of
services imports into Australia, valued at $A10 billion
for 2006.
The main trade in services between the EU and
Australia is in travel. In 2006, travel accounted for
61% of Australian services exports to the EU, and
44% of imports. Two-trade in travel was worth $A9
billion. Another major area of the EU-Australia trade
in services relationship is transportation, accounting
for 25% of the total. In 2006, two-way trade in personal
and cultural services increased signifi cantly.
Recent estimates suggest that the services sector
accounts for approximately 70% of the GDP of both
the EU and Australia. As global trade in this sector
continues to expand, Australia and the EU will no
doubt become even more important partners in two-
way services trade.
Figure 2: Australia’s two way trade in services with major partners, 2005 to 2006
EU-Australia investment
A survey conducted in 2006 by the European
Commission Delegation in Australia, in cooperation
with EU diplomatic missions, found that there
were approximately 2,300 EU companies with a
presence in Australia, with a total estimated turnover
of $A180 billion (just over 12% of total sales in
Australia). Furthermore, the survey found that EU
companies directly created an estimated 400,000 jobs
in Australia, and were possibly responsible for an
additional 775,000 jobs when account is taken of the
flow-on (multiplier) effects. This makes total direct
and indirect employment generated by EU investment
more than 1.2 million or around 12% of the Australian
workforce.
The major areas of turnover by EU companies are in
manufacturing, and the finance and insurance sectors.
Other areas include mining, wholesale trade activities
and construction.
Overall, the EU remained Australia’s largest two-way
investment partner in 2006, with investment worth
$A735 billion, or 38% of Australia’s total foreign
investment stocks. The United States is Australia’s
second largest two-way investment partner, worth
$A683 billion, or 35% of total stocks.
In 2006, the EU’s stock of investment in Australia was
worth $A480 billion, up 16% on the previous year and
accounting for 33% of all investment in Australia. This
was ahead of the United States which accounted for
25% of total foreign investment in Australia (worth
$A363 billion). See Figure 3 below.
In 2006, the EU was the second largest destination for
Australian investment overseas (after the US), with
stocks reaching $A254 billion and accounting for 31%
of total Australian investment abroad.
The EU economy in the world
With a combined GDP of $A19.3 trillion in 2006, the
EU was the world’s largest economy, accounting for
roughly 30% of global GDP.
In 2006, the EU was the world’s largest two-way
trader of merchandise goods (excluding intra-EU
trade). It was the world’s largest exporter of goods and
the world’s second largest importer. The table overleaf
ranks the EU and Australia in world merchandise trade
against other world leaders.
Figure 3:
Stock of investment
in Australia at
December 2006
China
NZ

Leading exporters and importers in world merchandise trade, 2006
| Rank |
Exporters |
Value ($US bn) |
Share |
Rank |
Importers |
Value ($US bn) |
Share |
| 1 |
EU |
1329 |
17% |
2 |
EU |
1463 |
18% |
| 2 |
US |
904 |
12% |
1 |
US |
1733 |
21% |
| 3 |
China |
762 |
10% |
3 |
China |
660 |
8% |
| 4 |
Japan |
595 |
8% |
4 |
Japan |
515 |
6% |
| 18 |
Australia |
106 |
1.4% |
14 |
Australia |
126 |
1.5% |
Figure 4: World's largest traders in merchandise, 2006

In regard to trade in services, the EU25 was responsible
for 22% of global services exports and 24% of
services imports in 2005 (latest data available). This
makes the EU the world’s largest market in services,
accounting for 26% of global services trade.
Growth in the EU economy
In 2006, growth in the EU economy rebounded to a
healthy 3.0%, following a period of disappointing
growth from 2003 onwards. Future projections are
for sound growth to continue into 2007 and 2008
at a rate of 2.4% per annum. Signifi cantly, these
estimations put the EU growing at a faster rate than
both the United States and Japan for this year and the
next. This means that the EU economy is forecast to
be the fastest growing major developed economy in
the near future.
For more information on the EU-Australia
economic relationship contact:
Kathleen Burke
Trade and Economic Section
Phone 6271 2722
Email kathleen.burke@ec.europa.eu
|