New insights – services sector’s international presence and contribution

On 10 September 2020, the Australian Bureau of Statistics (ABS) released the new Australian Outward Foreign Affiliates Trade 2018‒19 data. This new product, jointly commissioned by the Department of Foreign Affairs and Trade (DFAT) and Austrade, is the first time since 2002‒03 that the ABS has comprehensively measured the economic activity of Australian majority-owned foreign affiliates (i.e. Subsidiaries, branches and joint ventures where Australian ownership is at least 50 per cent).

The new data provides key economic facts on Australia’s 5,176 majority-owned foreign affiliates. In 2018‒19 these entities employed 412,000 people, added $160 billion in value to their host economies and posted sales of goods and services valued at $213 billion – equivalent to 45 per cent of Australia’s exports. They also returned $15 billion in profits back to Australia in that year.

Australia’s total provision of services to the world in 2018‒19 was valued at $187.2 billion, comprising $97.4 billion captured in balance of payments statistics as services exports from Australia (52 per cent share) and $89.8 billion in foreign affiliate sales that are not captured in balance of payments measures of Australian exports (48 per cent share).

foreign affiliates chartThis new data highlights the importance of foreign affiliates in the delivery of particular Australian services, especially in financial and insurance, construction, engineering and other technical and health services.

Unlike goods trade, it is often necessary for a company to set up a commercial presence in the host economy to provide the service – for example to provide a health service such as aged care. As a percentage of international service delivery in 2018‒19 Australian foreign affiliates provided:

  • over 99 per cent of health services: $6.4 billion compared to just $34 million in exports identified in the annual balance-of-payments figures as direct exports from Australia
  • over 90 per cent of mining services: $3.2 billion compared to $218 million in direct exports
  • 92 per cent in construction services: $11 billion compared $970 million in direct exports; and
  • four-fifths (81 per cent) of financial services: $20.7 billion compared to $5.0 billion in direct exports.