International Trade Performance: The Gravity of Australia's Remoteness

This paper examines how distance and economic size influence the level of international trade. Parameters for an international gravity trade model are estimated and used to calculate annual expected aggregate trade for Australia over the last 20 years. This model also includes a new indicator of economic remoteness that statistically identifies each country's distance from world economic activity. The results indicate that Australia may have been performing slightly better than the gravity trade model predicts given its geographic remoteness. The parameters from the model are also used to construct a simple indicator of trade performance, which suggests that Australia performs well relative to a range of similarly developed economies.