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Are our exports 'too dumb' and too 'China-dependent'?

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Having been labelled as "dumb," "getting dumber" and "too dependent on China", it's been a rough few weeks for Australia's exports. Luckily, these criticisms are largely misguided. They misunderstand how and why markets produce these outcomes in an open economy. The remedies proposed are solutions in search of a problem.

Take the "dumb and getting dumber" criticism first. This is based on seemingly bad news that arrived recently from the Harvard Kennedy School's Atlas of Economic Complexity. The Atlas ranks Australia 93rd out of 133 countries in the complexity of our exports. And we are getting worse on that measure, falling 36 rungs down the ladder since 1995.

Being the eighth-richest economy in the world (in per capita terms), Australia is obviously "rich and dumb" according to commentators panicked by a perceived lack of complexity and innovation in an otherwise wealthy economy.

The reason Australia trades with China and not, say, Iceland, is because that's where the money is. Picture: Getty Images

But that misinterprets what the Atlas is saying. It measures the diversity and complexity of a country's exports, not its economy. Coal and iron ore - Australia's two largest exports - account for about a third of our total exports, but the entire mining sector accounts for less than one-tenth of our economy. Australia's exports might be concentrated, but our economy is much more diverse.

And a few things are conspicuously absent from the Atlas, particularly services. Most notably, it doesn't include my industry - education - which also happens to be Australia's third-largest export, and a complex one at that (you can't dig academics out of the ground, after all).

But the most substantial problem with the........

© Canberra Times