Impact of Exports on GDP: An Analysis of the Australian Economy

This professional project examines the impact of exports on the Gross Domestic Product (GDP) of Australia. The study utilizes a quantitative research design, including a literature review and regression analysis, to validate existing theories on the relationship between exports and GDP. The research explores the influence of various factors, such as manufacturing costs, trade relations, climatic changes, currency exchange fluctuations, and factor endowments, on Australia's GDP. The project aims to identify the impact of exports on the Australian economy and evaluate the different elements of export affecting GDP, employing secondary data analysis from sources like the Australian Bureau of Statistics and the World Bank. The findings indicate a positive correlation between exports and GDP in Australia, contributing valuable insights into the country's economic dynamics and trade policies. This report is a contribution to Desklib, a platform offering AI-based study tools for students.

Running head: PROFESSIONAL PROJECT
Professional Project
Name of the student
Name of the university
Author note

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Executive Summary
This study has illustrated the impact of exports of products on gross domestic product of a
country. This study has considered the Gross domestic product of Australia and their export
behaviour. The study had analysed relevant scholarly articles and peer reviewed journals to
prove the existing theories. The study had used a single research design to conduct quantitative
analysis to validate the existing theories. The study has proved that there is positive correlation
between exports and Gross domestic product of Australia.

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Table of Contents
Chapter 1..........................................................................................................................................5
1.0 Introduction................................................................................................................................5
1.2 Research Aim and Objective.....................................................................................................6
1.3 Research Hypothesis..................................................................................................................6
1.4 Research Question.....................................................................................................................6
2.2 Gross Domestic Product............................................................................................................8
2.3 Relationship between Exports and Gross Domestic Product....................................................9
3.0 Research Methodology............................................................................................................10
3.1 Research Philosophy................................................................................................................10
3.2 Research Approach..................................................................................................................10
3.3 Research Purpose.....................................................................................................................11
3.4 Data Collection Method...........................................................................................................11
3.5 Data Analysis Technique.........................................................................................................11
3.6 Sampling Technique................................................................................................................12
3.7 Research Ethics........................................................................................................................12
3.8 Research Limitation.................................................................................................................12
4.0 Findings and Analysis..............................................................................................................13
4.1 Quantitative analysis................................................................................................................13
4.2 Different factors affecting GDP of Australia...........................................................................19

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4.3 Regression Analysis.................................................................................................................21
5.0 Conclusion...............................................................................................................................25
5.1 Objective 1- To find the impact of export on the GDP of a nation..........................................25
5.2 Objective 2- To evaluate the factors of export that impacts the GDP of a nation..................25
References......................................................................................................................................26

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Chapter 1
1.0 Introduction
This study will illustrate the impact of exports of products on gross domestic product of a
country. This study will consider the Gross domestic product of Australia and their export
behaviour. The study will analyze relevant scholarly articles and peer reviewed journals to prove
the existing theories.
1.1 Background of the study
Gross domestic product represents the economic growth of the country as identifies the
trade activities and time span of activities. The national income of a country is used to calculate
the gross domestic product of the country. As stated by McCombie and Thirlwall, (2016),
increase in exports will have a positive impact on gross domestic product and vice versa.
However, the short-term impact of exports on gross domestic product will be different when
compared to the long-term impact of exports. The economic structure of an economy will
determine the way in which the export will influence the gross domestic product. There are
various elements of exports, which if changed there will be changes in pattern of gross domestic
product. Australia has been one of the largest exporters of agricultural products, which includes
livestock and wheat. Thus, the production cost in the country is less and is least in the production
of grains. Endowments patterns are influenced by the factors such as climatic change. The
change in climate will affect the production of agricultural products, which means that adverse
effect of climatic condition will diminish the value of Australia as an exporter (Belloumi, 2014).

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This shows that fluctuation in the endowment factors can have both positive impact and negative
impact on the gross domestic product of Australia.
1.2 Research Aim and Objective
The study is aiming to identify the impact of exports on the economy of a country. The
different elements of export will have a positive or negative impact on the different elements of
Gross domestic product. The study will investigate how the elements of exports are affecting the
factors of gross domestic product. The impact of GDP is different in different countries as it
depends on the economic setting and the study will specifically identify the influence in the
Australian context.
Research objectives
 To identify the impact of exports on Gross Domestic Product
 To evaluate the different elements of export affecting Gross Domestic product
1.3 Research Hypothesis
H0 – Exports does not have any impact on Gross Domestic Product
H1 – Exports have impact on Gross Domestic Product
1.4 Research Question
 What is the impact of exports on Gross Domestic Product?
 What is the significance of exports on Gross Domestic Product?

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 What are the different elements of exports?
 What are the different factors affecting Gross Domestic Product?
 What is the impact of factor endowment on Gross Domestic product?
2.0 Literature review
2.1 Exports
As stated by Ajmi et al., (2015), exports can be defined as the goods leaving the country
by depleting the natural resources. Exports of goods play a vital role in growth of an economy as
it contributes to the national income. Exports will increase the opportunity of employment and
account deficit of a country. The developing countries have been using exports to enter the
global market and globalization has helped various economies in increasing their market share
globally.
Manufacturing cost
Manufacturing cost will determine the amount of export a country can make. The
decrease in manufacturing will increase the export quantity especially for developing countries.
The foreign will acquire products at cheaper cost due to the less cost of manufacturing for the
product (Dritsakis & Stamatiou, 2017). This shows that inverse relationship between
manufacturing cost and exports of the country. These consist of various factors such as cost of
raw materials and cost of labours. When production cost increases, there is decrease in market
competitiveness for that country. Trade relations are developed based on import and export
activities and countries rich in resources use it to their advantage to monopolize the market.

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Climatic change
The change in climate generally affects the countries exporting agricultural products to
the different countries. The adverse changes in the climatic condition will decrease the
production volume, which increases the demand. However, due to the decrease in production
volume, there will be fewer amounts of exports, which will add less value to the national income
of the country (Costinot, Donaldson & Smith, 2016). Therefore, the country having abundance of
resources in a particular department will be focused on protecting the resources form adverse
climatic conditions. On the contrary, increase in exports increase the contamination of
surrounding environment. Thus, with increase in exports, there will be short-term increase in the
gross domestic product of the country but in a long-term perspective; there will be decrease in
exports. This is mainly due to the increase in operational barrier.
2.2 Gross Domestic Product
As stated by Van den Berg, (2016), Gross domestic Product defines the market value of
all the goods in a given point of a time in a country. Therefore, GDO is the indicator of health
and size of any country. GDP includes income from all the sector and nothing is subtracted from
it. GDP can be divided into two factors such as Real GDP and Nominal GDP. The real GDP
measures the prices of the product that is being produced in a country. The nominal GDP will
consist of the monetary value of the goods which changes depending upon the changes in the
original prices of the goods.
Currency exchange fluctuation

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The exchange value of currency fluctuates most of the times and the country having
stable exchange value are having a string economic setting. However, in most of the time
countries purposefully depreciates their monetary value to facilitate their export. As stated by
Aldcroft, (2017), appreciation in currency will decrease the export levels and increase imports of
the country. However, fluctuation in currency exchange rates will determine the underlying
economy of a country.
Factor Endowment
The factor endowment theory states that different countries will have abundance
resources in different areas. This defines comparative advantage in the global market. The heavy
endowed goods in a country will provide the economy with boost. Thus, most of the countries
focus on the abundant resources for improving market economy (Ju, Lin & Wang, 2015). The
country having abundance in capital to labour should be more efficient in developing
technological products rather than agricultural products. Thus, identify the resources for gaining
comparative advantage effective utilization of resources is required.
2.3 Relationship between Exports and Gross Domestic Product
The amount of exports of any country will have an impact on the growth of the economy.
Exports are an essential component of GDP and GDP can be denoted as GDP= consumption
spending +investment+ government spending + (exports -imports) (Farhani & Ozturk, 2015).
This equation shows that if the export component increases there will be increase in the GDP of
the country. Moreover, foreign trade is an important component of comparative analysis where
trade deficit signifies decrease in GDP and trade surplus signifies increase in GDP.

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Conceptual framework
Figure 1: Conceptual framework
(Source: As created by author)
3.0 Research Methodology
3.1 Research Philosophy
Mackey and Gass (2015) stated that research philosophy highlight the source from which
knowledge regarding the research can be obtained. There are three types of philosophies-
positivism, interpretivism and realism. Positivism shows the factual data based on research;
whereas interpretivism focuses on the social belief based on the research topic. Positivism when
combines with interpretivism, it refers to realism. In this research, interpretivism is considered
as the qualitative data collected is collected for the research which is used to describe the
objectives that is whether or not there is any impact of the export made by the Australia on the
GDP of the nation.
EXPORT GDP
Climatic
Change
Manufacturing
cost
Factor
Endowment
Currency Exchange
Fluctuation

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3.2 Research Approach
Deductive and inductive are the two types of research approach (Neuman, 2013).
Research question are first developed and the data collected are analyzed to answer those
questions in deductive approach. In inductive approach, data are first collected and analyzed to
find new direction in a research. In this research study, deductive approach is utilized as the data
collected obtained is analyzed to address the impact of export on GDP of Australia.
3.3 Research Purpose
Exploratory and descriptive are two research purposes used in research study. Flick
(2015) stated that when new theories are explored from data, exploratory purpose is used;
whereas when the objectives is described through the findings of the research, descriptive
purpose is followed. In this research, descriptive purpose is followed as the research objectives
are described through the obtained data from survey.
3.4 Data Collection Method
Data are collected through two ways- primary and secondary process. Panneerselvam
(2014) stated that primary data are collected directed from research respondents through survey,
interviews and questionnaires. Moreover, when research papers, articles, websites and journals
are considered to obtain data, this process is known as secondary data collection. In this research,
secondary data collection is utilized to obtain data based on research question. The selected
secondary sources are taken from the government site of “Australia Bureau of Statistics” for
characteristics of Australian exporters and GDP growth report published by The World Bank.

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3.5 Data Analysis Technique
Primary and secondary data are analyzed through quantitative and qualitative data
analysis techniques respectively (Smith, 2015). In this research study, quantitative analysis
method is used. The obtained data is analyzed through regression analysis and the data is
evaluated in Microsoft Excel.
3.6 Sampling Technique
Bryman and Bell (2014) stated that the selection of samples for a research is done
through two different ways- probability and non-probability sampling technique. Probability
sampling technique refers to the situation when respondent get equal chance to participate in a
research (Neuman, 2013). On the other hand, when selective respondents are selected, non-
probability sampling technique is used. In this research, non-probability sampling technique is
used as only two websites are considered as sources to obtain the data.
3.7 Research Ethics
All the reports considered are based on the details of GDP growth for Australia and
export reports that is done from Australia. These data are not manipulated and the exact situation
is written in the report.
3.8 Research Limitation
This research only considers secondary data that does not represent the current situation
and illustrate only outdated data. Moreover, the research outcome only illustrates the scenario of
Australia and hence not applicable on an international level.

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4.0 Findings and Analysis
4.1 Quantitative analysis
Trade policies of a nation are important for boosting the economic growth. Australia is
country having an open market and has developed free trade. The free trade has made it possible
for the country to grow steadily in the past decade where they never had to face recession. GDP
reflects the economic growth a nation and various sources suggest that Australia has experienced
steady economic growth of around 3.2% in the last decade (Tang, 2017). Trade liberalisation has
been instrumental in developing trade relationship with various neighbouring countries in Asia.
Exports have made strong performance in the past fiscal year after dip in export volumes in the
year of 2015. The Australian economy has become dynamic and flexible only because of their
openness in the market. Multilateral, unilateral and bilateral are the different forms of trade
liberalisation, which has been steeping for Australia’s stable economic growth. Trade
liberalisation has reduced the amount of the risk in the global trade market by incorporating free
trade and reducing restrictions on imports (Abs.gov.au, 2018). There is a positive relationship
between exports and Gross domestic product in Australia.
The tables below represent the value range of exports from the fiscal year of 2006 to
2013 and from the year of 2014 to 2016. The graph represents the Gross domestic product
fluctuation for the last 50 years (Abs.gov.au, 2018). The comparison of the tables and the graphs
shows the increase in exports have increase in Gross Domestic product in that particular year and
vice versa. The graph shows that in the year of 2012, there has been decrease in the export
quantities and the graph shows the same thing that there has been a steady decrease in GDP.
Therefore, the corresponding GDP value for exports in each year shows a clear pattern

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(Data.worldbank.org, 2018). This pattern shows that there is positive correlation between
exports and gross domestic product.
Value of Exports 2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
$m $m $m $m $m $m $m
Value of each business'
exports
Number of Export
Transactions
$100m or more
1 to 2 np - - - np np -
3 to 10 np 1,731 1,628 1,742 np np 2,416
11 to 20 3,114 3,217 3,428 3,900 4,749 4,936 4,624
21 to 50 9,337 10,25
0
16,68
1
11,13
3
14,07
1
17,43
7
14,18
5
51 or more 116,6
53
127,2
02
170,2
66
147,7
04
189,2
78
202,6
19
188,4
66
Total 131,9
60
142,4
00
192,0
03
164,4
78
209,9
12
226,8
13
209,6
92
$1m and less than
$100m
1 to 2 np 711 602 307 431 342 291
3 to 10 np 1,842 2,148 1,563 1,685 2,067 1,755
11 to 20 1,685 1,907 1,454 1,502 1,164 1,524 2,140
21 to 50 3,250 2,978 3,069 3,106 2,925 2,754 2,839
51 or more 25,64 27,08 27,59 25,91 25,74 26,62 26,33

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5 7 5 5 7 6 9
Total 32,30
9
34,52
5
34,86
8
32,39
3
31,95
2
33,31
4
33,36
5
$100,00 and less than
$1m
1 to 2 235 253 288 249 248 270 283
3 to 10 681 708 753 711 728 753 771
11 to 20 634 669 695 637 625 647 632
21 to 50 962 974 924 937 942 923 906
51 or more 648 662 632 656 647 638 660
Total 3,160 3,266 3,292 3,190 3,189 3,231 3,252
$10,000 and less than
$100,000
1 to 2 211 209 223 215 218 215 227
3 to 10 298 299 294 290 295 298 292
11 to 20 78 76 71 75 77 74 70
21 to 50 19 18 15 17 np np np
51 or more 3 3 3 3 np np np
Total 609 605 606 600 610 607 610
Less than $10,000
1 to 2 54 54 53 53 np np 55
3 to 10 7 6 6 7 np np 6
11 to 20 - - - - - - -
21 to 50 - - - - np np np

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51 or more - - - - np np np
Total 61 60 59 60 60 61 61
Total Goods Exporters
(a)
1 to 2 854 1,227 1,166 824 1,154 1,293 856
3 to 10 5,217 4,586 4,829 4,313 4,324 4,536 5,241
11 to 20 5,511 5,869 5,648 6,113 6,616 7,181 7,467
21 to 50 13,56
8
14,22
0
20,68
9
15,19
3
17,95
5
21,13
1
17,94
7
51 or more 142,9
49
154,9
54
198,4
96
174,2
78
215,6
75
229,8
86
215,4
69
Total 168,0
99
180,8
56
230,8
28
200,7
20
245,7
24
264,0
27
246,9
80
Table 1: Exports in terms of value range
(Source: Abs.gov.au, 2018)
Value of exports 2013-14
(TAU)
2014-15
(TAU)
2015-16
(TAU)
$m $m $m
Value of each business'
exports
Number of Export
Transactions
$100m or more

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fewer than 3 - - -
3 to 10 2,168 881 891
11 to 20 2,989 4,259 2,290
21 to 50 8,351 8,597 11,722
51 or more 219,957 198,098 183,816
Total 233,466 211,835 198,718
$1m and less than $100m
fewer than 3 339 414 518
3 to 10 1,349 1,314 1,480
11 to 20 1,664 1,790 2,200
21 to 50 3,169 3,665 3,280
51 or more 28,954 31,266 32,687
Total 35,475 38,450 40,165
$100,000 and less than
$1m
fewer than 3 284 357 375
3 to 10 794 854 888
11 to 20 644 670 765
21 to 50 916 967 995
51 or more 645 683 741
Total 3,282 3,531 3,764
$10,000 and less than
$100,000
fewer than 3 248 265 283

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3 to 10 298 306 317
11 to 20 70 73 77
21 to 50 15 17 20
51 or more 3 3 3
Total 634 665 701
Less than $10,000
fewer than 3 57 63 65
3 to 10 6 7 8
11 to 20 - - -
21 to 50 - - -
51 or more - - -
Total 63 71 74
Total Goods Exporters
(a)
fewer than 3 928 1,099 1,242
3 to 10 4,615 3,362 3,584
11 to 20 5,368 6,792 5,332
21 to 50 12,451 13,247 16,018
51 or more 249,559 230,050 217,247
Total 272,921 254,551 243,423
Table 2: Exports in terms of value range
(Source: Abs.gov.au, 2018)

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Graph 1: GDP growth from 1960
(Source: Data.worldbank.org, 2018)
4.2 Different factors affecting GDP of Australia
The different factors that affect GDP are climatic condition, manufacturing cost, trade
policies and geographic location. Climatic condition has a deep impact in a country like
Australia, as it one of the largest exporters of agricultural and livestock products. This is a sole
reason that the government environmental laws are strict and active in protecting the
environment. Similarly, mining and mineral exports are also affected due to the changes in the
climatic conditions. The changes in the climatic condition will affect the production and the
contribution of exports in GDP will be less.

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Manufacturing cost affects the export volumes, which in turn will affect the GDP.
Various countries will try to import products from other countries if the cost of manufacturing is
low in the other country. The cost of manufacturing is affected by other constraints in the market
such as shortage of labour and less availability of the resources. Therefore, if the cost of exports
increases other countries will search for a better option in the market. Thus, the export volumes
will decrease which will significantly decrease the GDP of a country.
` Geographic location will similarly have a considerable impact on export volumes as
countries like to trade with countries with convenient and less expensive route of travel.
Australia has been able to develop free trade relation with Japan, China and South Korea because
of this reason. This has been able to boost the economy of the country and increase their amount
of export volumes in the past few years.
Development of effective trade policy is essential for bring about growth in the economy.
Australia has developed a free trade policy, which enables it to free import and export goods
with various countries such United States, United Kingdom, Japan, China and South Korea.
Australia has been known for maintaining a steady growth in their economy due to their
economy, which can be understood by the high disposable income of the population. There has
not been consecutive negative dip in the economic growth of the country, which shows the
stability of the economy. Thus, it can be said that there is positive relationship between export
and gross domestic product of Australia. However, this analysis based on secondary data so there
are limitations attached to it, which could have been overcome by using multiple design.

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4.3 Regression Analysis
SUMMARY
OUTPUT
Regression Statistics
Multiple R
0.7692
23119
R Square
0.5917
04206
Adjusted R
Square
0.5406
67232
Standard Error
150.03
78891
Observations 10
ANOVA
df SS MS F
Signific
ance F
Regression 1 260988. 26098 11.593 0.00929

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6547 8.6547 63806 2317
Residual 8
180090.
9453
22511.
36816
Total 9
441079.
6
Coeffic
ients
Standar
d Error t Stat
P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
37.762
33601
363.887
1046
0.1037
74867
0.9199
02423
-
801.362
8312
876.88
75032
-
801.36
3
876.88
75
X Variable 1
4.3130
61899
1.26670
5983
3.4049
4318
0.0092
92317
1.39203
2666
7.2340
91132
1.3920
33
7.2340
91
PROBABILIT
Y OUTPUT
Percentile Y
5 927
15 1050

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25 1055
35 1140
45 1205
55 1345
65 1390
75 1460
85 1530
95 1560
0 10 20 30 40 50 60 70 80 90 100
0
500
1000
1500
2000
Normal Probability Plot
Sample Percentile
Y
Graph 1: Normality Probability plot

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200 220 240 260 280 300 320 340
0
200
400
600
800
1000
1200
1400
1600
1800
f(x) = 4.313061899128 x + 37.7623360141604
R² = 0.591704206460693
IN BILLION
Exports
GDP
Graph 2: Regression line
Regression analysis is conducted to identify the nature and degree of relationship
between the independent and dependent variable. Multiple R is the correlation coefficient,
which will highlight the nature of relationship. The value of multiple R is 0.769223119, which
means that there is positive relationship between imports and gross domestic product. The value
is almost equal to 1, which signifies positive correlation. If the value of R is greater than 0.8, it
signifies that goodness of fit is not high and majority of the values are not falling with the
regression line.
R2 represents the coefficient of determination, which defines the explaining capability of
the independent variable on the dependent variable. The value of R2 is 0.5917, which means that
59.17 % of the independent variable can be explained by the dependent variable. The remaining
40.83% variation occurs due to uncertainty, which is quite expected in practical studies of this
nature.

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The F- value is used to reject the null hypothesis taken in the study and in this study, the
F value is 0.009292317. The F-value is less than 0.05 so null hypotheses can be rejected and
alternative hypothesis has been accepted. The regression equation is y = 4.3131x + 37.762,
which signifies the positive relationship as the slope is positive.
5.0 Conclusion
5.1 Objective 1- To find the impact of export on the GDP of a nation
The data analysis from the secondary sources illustrated that there is a positive impact of
the export on the Gross Domestic Product (GDP). It has been found from the graphs present in
the Australia Bureau of Statistics that in those years when greater exports were made, the GDP
of the nation Australia increased. On the other hand, those years, when the exports are not high,
the GDP of the nation diminished. The value of the regression is 0.009292317. Since the value of
regression is found to be lesser than 0.05, it is said that there is a relationship between the two
research variable that is export and GDP. Moreover, the value of R Square is 0.5917 that shows
that the dependent variable, which is ‘export’ define the independent variable, which is ‘GDP’ by
59.19%. Thus, the research found the impact of 59.19% of export on the GDP of a nation.
5.2 Objective 2- To evaluate the factors of export that impacts the GDP of a nation
It is fond from the Literature review that ‘manufacturing cost’ and ‘climatic change’ are
the two factors of export that affects the GDP of a nation. The lesser is the manufacturing cost,
the greater will be the export from a nation. Moreover, in an agricultural nation like Australia,
climate affects the crop production, which furthermore influences the total production for
exporting.