Australia's trade deficits: terms of trade, productivity and macroeconomic policy

Comments on Adam Carr “SCOREBOARD: Import binge”, 1/03/2010, http://www.businessspectator.com.au/bs.nsf/Article/SCOREBOARD-Import-binge-pd20100301-355KJ?OpenDocument&src=sph

While Carr sees a rosy short term picture from trade, especially imports, the authorities need to think about policy issues on how to balance trade over the longer term.

It is not so rosy if looking at the fact that Australia's trade advantage in terms of terms of trade is probably above the historical average and its resources exports are good, but there are still fairly large trade deficits.

Both macro and micro economic policies need to pay attention to this situation.

We need to raise our productivity and international competitiveness.

That is where hard work has to be done.

There are implications for both monetary and fiscal policies.