Australian live cattle exports were a USD1 billion trade that keeps growing. The trade starts in the northern part of Australia and ends in Indonesia. The traded cattle will be slaughtered for consumers in Indonesia. What are the economic impacts of the Indonesia-Australia cattle trade?
There was also a trade of higher quality beef that comes from cattle that’s slaughtered in Australia. Usually, the beef is for supplying premium markets in Indonesia, like restaurants and international hotels. Those trades changed a few years ago when the trade was disrupted by bans and constraints.
Economic Impacts of the Indonesia-Australia Cattle Trade
Agricultural products from Australia, especially beef and cattle, become a very essential merchandise export to Indonesia. Indonesia becomes the biggest export market for frozen beef and feeder cattle in Australia. Indonesia is also the fifth biggest boxed beef market.
It is very unique since Indonesia’s beef consumption per capita is just 2.23 kg. That number is very low since the world’s average beef consumption can reach 6.4 kg per capita. Every year, Indonesia imports more than 500,000 heads of Australian cattle on average. What are the economic impacts?
1. High Cost of Transportation
The Indonesia-Australia cattle trade is facing high transportation costs between islands. The high transportation cost will make the price of domestic meat higher than expected. Indonesia has a high logistic cost, one of the highest in Southeast Asia, accounting for 24% of GDP.
Singapore’s logistic cost is only 7% of GDP while Malaysia’s logistic cost is just 13% of GDP. The high logistic cost is caused by the size of the country, which has more than 17,000 islands. The infrastructure development between those islands is unbalanced.
It results in the goods distribution requiring road, air, and sea transport. It increases the complexities of logistics.
2. The Expanding Middle-Class
The middle class of the country is now encompassing 20% of the country’s population which means there are more than 52 million people. This Indonesia-Australia cattle trade happens because the country has urbanized consumer markets that grow fast with a 2.4% annual growth rate.
In 1972, the country’s urban population was 17.8% but in 2021, the urban population reached 57.3%. Between 1971 and 2020, the real GDP per capita of the country grew significantly to USD3.757 from USD701.