A NSW Government website

History of trade in NSW

For millennia Aboriginal communities managed Australia’s land and natural resources sustainably, engaged in trade and developed an impressive bank of intellectual property.

Indigenous Australian Trade  

 Indigenous trade routes enabled meetings at particular locations of importance and ceremonial exchanges as well as goods, objects and Dreaming songs.

Colonial Era

"We must have an export or the settlement will never prosper, and this (wool) promises to be the first." Rev. Samuel Marsden, 1814 

Following European settlement in 1788, the development of a trading economy in colonial NSW can be traced to the appointment of Governor Lachlan Macquarie in 1810 and the arrival of increasing numbers of convicts and free settlers (after convict transportation to NSW ceased in 1840). During this period, NSW trade was dominated by the production of wool for the British market, with the colony surpassing Germany as Britain’s primary source of wool by 1850.  

Colonial governments supported this by encouraging land settlement and constructing railways to transport freight to ports, establishing an economic growth pattern based on land settlement, exports and British investment. This economic growth pattern continued through booms and busts until the 1890s when a depression and severe drought led to a contraction in wool production. 

Federation to the Second World War

Federation of the Australian colonies in 1901 saw the Commonwealth Government assume responsibility for international trade and customs under the Constitution. It immediately moved to introduce tariffs to protect local manufacturing from imports. This move was opposed by NSW whose economy relied heavily on being able to export wool and other commodities to overseas markets.  

Attempts at recovery in agriculture were hampered by low productivity and falling prices overseas. This continued up until the Great Depression began in 1929. The collapse in trade led Britain in 1932 to establish ‘imperial preference’, a system of preferential tariffs for the British Empire and high tariffs for the rest of the world which benefited NSW exporters.  

Meanwhile mining production had expanded towards the end of the colonial era through the discovery of coal deposits in the Hunter Valley and silver, lead and zinc deposits in Broken Hill. Iron ore mining in turn led to the commencement of steel production in Newcastle and Port Kembla. Increasing demand for iron ore, steel and coal overseas meant that NSW’s trade was increasingly dominated by commodities. 

Post-war Boom Years

The post-war years were a period of unprecedented economic growth and technological progress. Excess production capacity generated by the needs of wartime led to increasing demand from overseas for commodities such as iron ore, steel and coal which NSW was well placed to supply.  

The signing of the General Agreement on Tariffs and Trade (GATT) led to increased trade liberalisation, putting an end to imperial preference. However, Australia continued to raise tariffs and subsidies to protect its own manufacturing and agricultural sectors under a policy known as ‘protection all round’.  

This period was also a period of realignment in NSW’s trade relationships as Britain pursued economic integration in Europe. By the end of the 1960s, Japan had replaced Britain as Australia’s largest export market following the conclusion of a trade agreement between the two countries in 1951 and became NSW’s leading market for commodities. 

Trade Liberalisation

The end of the boom in the 1970s marked an important shift in NSW trade. Long-term declines in both productivity and employment, combined with record high inflation, meant that protectionism was no longer viable, and Australia moved to reduce its tariffs and subsidies accordingly.  

Australia undertook a sustained reform agenda over decades that liberalised trade barriers and reduced industry protection. NSW benefitted from this program of unilateral, bilateral and multilateral trade liberalisation through further integration into the global economy which saw increases in Gross State Product (GSP) and productivity, and lower unemployment rates. Post-war growth in the services sector also led to increased trade in services. NSW accordingly began to grow its share of exports in sectors such as education, finance and professional services.  

Over this period, several economic shocks led to fluctuating demand for commodities, while manufacturing output fell across industrialised economies as manufacturers and production increasingly shifted towards Asia.  

NSW was well placed to respond to this, by shifting its export focus to supplying high demand commodities and products to support industrial expansion in Asia, while also capitalising on the growing demand for services such as international education and tourism. 

The Future

A knowledge-based economy and digitally enabled trade.

International trade is being transformed by digital disruption and an increased demand for services. The future of global trade looks more connected than ever, providing opportunities for even the smallest NSW businesses to participate in a global marketplace.  

Rapidly changing technologies such as automation, robotics, artificial intelligence, and the internet of things will fundamentally re-shape industry and business over the next century. NSW’s future trade success lies in part, in the knowledge-based economy and industries that take advantage of emerging technologies by remaining competitive through the provision of high value-added products and services.