Determinants of Export Supply of The Australian Textiles Industry

This paper analyses the export supply of Australia's textile products. The long-run relative price elasticity indicates that a one per cent increase in relative price of exports will increase textile exports supplied by 1.83 per cent. The estimated long-run elasticity with respect to production capacity implies that a one per cent increase in the production capacity seems to decrease the textile exports supplied by 3.15 per cent. The estimated long-run elasticity with respect to effective rate of assistance shows that a one per cent decline in the effective rate of assistance will increase the textile exports supplied by 1.54 per cent. Since Australia is unable to influence the world price of textiles, further increases in the supply of textile exports seem to depend on domestic policy actions such as reducing the effective rate of assistance to textile industries and ensuring reductions of cost of production of textiles, for example by lowering of wage costs through labour market and industrial relations reforms.