THE UK has firmed in its ranking among Western Australia’s top 10 trading partners in recent years, but there are questions as to whether the complex international gold trading system has led to an overstating of this elevated status.
THE UK has firmed in its ranking among Western Australia’s top 10 trading partners in recent years, but there are questions as to whether the complex international gold trading system has led to an overstating of this elevated status.
According to unpublished international trade data from the Australian Bureau of Statistics, the UK has moved from position seven on WA’s top 10 trading list in 2001 to number three in 2003. Last year, total trade between WA and the UK was valued at $3.78 billion, compared with $1.9 billion in 1999.
Significantly, according to the data, the UK ranks third behind China, who’s rampaging economy has been devouring Australian commodities at a rapid rate of knots, while veteran economic powerhouse Japan has retained its undisputed and long-held number one position with WA.
Last year Japan accounted for $8.71 billion worth of trade with WA – almost double China’s total trade with the State ($4.8 billion).
At present, both Asian giants are fuelling a flowering of WA’s resources sector, the likes of which has not been seen for a number of years.
Yet because of the complex international gold trading system, the UK’s ranking at third appears to be misrepresented.
That is, the ABS figures relate to physical shipments of WA gold to the UK, and although the gold’s value is substantial, the exports do not necessarily reflect outright sales between WA gold producers and UK buyers.
In fact, despite the increase in overall trade between WA and the UK, the Australian dollar value and volumes of most trade items have remained stable, or in fact decreased, in the same period.
Shipments of non-monetary gold, however, increased substantially, not only sustaining but bolstering the value of trade between WA and the UK.
The amount of gold exported from Australia to the UK has increased by almost 50 per cent year-on-year since 1999, according to the ABS data.
In fact last year the export of Australian gold to the UK almost tripled from 56.7 tonnes ($1.02 billion) to 148.6 tonnes ($26.5 billion).
In 2003 the gold exports made up 70 per cent of trade between the UK and WA while many items have fallen, led by combined confidential trade (includes diamonds, alumina and wheat), which has dropped from almost 30 per cent in 2001 to 15 per cent last year.
Perth Mint treasurer Nigel Moffatt said the increased volume sent to London’s bullion banks reflected both a rise in the gold price and subsequently a drop in demand from both India and Asia.
However, Mr Moffatt said the trade of gold was very complicated and that the figures did not truly represent an increase in trade with the UK, but rather low global consumer demand for gold.
The transition of gold from producers through to the ultimate markets involves credit swapping between London banks and worldwide buyers – mainly from India and parts of Asia.
“London’s status as the world’s centre for gold trading gives UK-based bullion banks a key role in the vaulting and storage of gold ultimately destined for sale into consumer markets,” Mr Moffatt said. “In periods of low consumer demand, large volumes of Australian produced gold gets shipped to London.”