beyond pt 0 23/1
beyond pt 0 23/1
beyond pt 0 23/1
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External competitiveness<br />
Greater use of e-commerce can be expected to lead to significant changes<br />
in external competitiveness. Details about the impact upon the trade<br />
outcomes and external factors in general are provided in Exhibit 4.2.<br />
A key factor is that the real exchange rate is driven by changes in<br />
investment. The capital inflow that stems from the opportunities created<br />
by greater use of e-commerce pushes the value of the Australian dollar up.<br />
In the longer term, when the investment pressure slackens (i.e. after<br />
2007) the exchange rate moves closer to the base line projections. It<br />
does not fall back to the base case because e-commerce has a favourable<br />
long term impact on the terms of trade. The terms of trade improve<br />
because Australia will earn higher unit prices on a slightly smaller<br />
volume of exports. Additionally, the prices of imported items will fall<br />
relative to exports.<br />
The appreciation of the real exchange rate is expected to have a<br />
significant impact on aggregate export and import volumes. 16 The overall<br />
result is a deterioration in the balance of trade at first. This is gradually<br />
unwound as exports recover strongly when the exchange rate moves<br />
towards base case levels.<br />
The impact of these changes is not felt evenly through the economy.<br />
Tourism and related services exports enjoy a significant boost as a result<br />
of these factors. Commodity exports face offsetting disadvantages.<br />
16 Changes in import and export volumes are measured by making a weighted average of the percentage<br />
change in the quantities of each individual commodity (e.g. wool, wheat). These weights are value<br />
shares.<br />
<strong>23</strong>