The marginal propensity to import in China and the composition of Australia’s exports : some interesting revelations

The marginal propensity to import manufacturing products is rising more rapidly than the marginal propensity to import primary products in China, yet Australia’s exports to this country are concentrated in primary products thereby leading to large export revenue and hence output and employment losses. The over-reliance on primary product exports to China has also led to fluctuations export revenue and hence output and employment growth. These problems have been compounded due to these products dominating the export base. Adopting industry policy to stimulate manufacturing exports and thus broaden the export base has the potential to alleviate the losses and fluctuations in export revenue and hence output and employment growth when Australia trades with China and the rest of the world.