The surplus rose by $366 million in December with export value rising by 2.3 per cent.

A strong rise in resources exports was also recorded with a large recovery in coal exports following the Queensland Floods.

Australia’s exports continue to be dominated by resources, comprising approximately 62 percent of total exports in December.

There was a drop in services exports recorded that indicated a weakness in travel and education exports.

The divergent economy remains weak with a low rate of building approvals that have continued falling 24.5 percent year on year.

Recent interest rate cuts, and further expected cuts, are expected to provide support for the divergent economy and modest growth is expected in late 2012.

Following the unexpected rise in trade surplus it is predicted to moderate throughout 2012.

HSBC bank have announced Alan Park as the head of the global initiative Project Finance Metals and Mining for Asia Pacific.

The initiative will develop mining-focused project finance business globally and for the Asia Pacific region.

Chris Russell, head of global banking at HSBC Bank Australia, said Australia is a priority market because of its growing trade and investment flows with emerging markets.

“Australia is the second largest project finance market in the Asia Pacific and we see high potential for market growth,” Russell said.

“There are currently 102 mining projects at an advanced stage of development in Australia, with a record capital expenditure of over $230 billion.”

The initiative aims to connect customers with trade and investment flows between the 87 markets globally operated by HSBC.

James Cameron, head of project finance Asia Pacific for HSBC, said the initiative would expand capability offshore and in Australia.

“We’re supporting Australia’s largest names in infrastructure and mining as they expand their operations offshore as well as our regional client base as they seek opportunities to invest in Australia,” Cameron said.

While some industries are going through growth periods in the face of the strong AUD, notably imports and mining, which has had a massive investment boom, others that are in direct competition are suffering in comparison.

Offshore travel by Australians is at record levels but local tourism, retail and the tertiary education sector are showing weaker conditions, according to HSBC Global Research. So while some sectors of the economy are growing, and rapidly, others are beginning to slow down in order to make way for those on the up.

Much of the slow down has been in response to increasing numbers of Australians travelling overseas. The highest level of external departures on record, 33 percent, was recorded over the last year, which in turn has an effect on local retail spend and the manufacturing industry. This industry in particular has seen a decline in employment, however latest estimates suggest that manufactured export volumes have continued to rise despite the strong AUD.

The education export sector has also shown a drop in numbers over the past few quarters with local universities struggling to compete with the current exchange rate. Part of the reason for this decline however may be due to changes in slowing the issuance of student visas.

Despite the fact that some industries are decelerating in the face of the strong Aussie dollar, others are continuing to show strength, which can be taken as a positive outlook for Australia.

It is acknowledged that mining is a relatively capital intensive activity that uses large numbers of skilled labour during the construction phase, but far fewer during the subsequent mining phase. This has been highlighted in recent weeks by the announcements by some of the large mining companies of their increased use of trucks that are operated remotely without the need for drivers. What happens to all the skilled labour force once the construction phase is over? This might be 10 years or more away but when it happens, what work will be available for these people?

The sectors of the economy that employ most staff such as tourism, education and manufacturing, are the industries suffering the most from the impact of the mining boom, with the Australian dollar in particular creating great difficulty. The situation in their export markets is exacerbated by the weaknesses in European and USA economies. There appears to be a substantial disincentive for Australian businesses, particularly small to medium companies in the service and manufacturing sectors, to look at exporting with the strong Australian dollar, weaknesses in many overseas markets and minimal support from government. The concern is that if these businesses are not looking to become exporters where will employment opportunities be developed?

The concern I have that SMEs are not focusing on exporting is exemplified by the dramatic drop in the number of applicants for Export Market Development Grants (EMDG). The EMDG program, which is the government’s main financial assistance program for SMEs looking to develop export markets, is currently looking at the number of applicants dropping by at least a third over the previous year. While this drop can be attributable to a number of factors relating to the funding of the program (the program was severely underfunded in the past two years and there is no certainty of receiving full payment) and some changes to eligibility, the drop in applications is a sign that SMEs have not been looking at export as a potential market opportunity. The fact that EMDG applications are a lag indicator (as applications are for expenses incurred in the year ended 30 June 2011), is a greater concern as to what might be happening currently.

The possible loss of SMEs to exporting is a blow to Australia’s long term export performance and employment levels. While many SMEs may not succeed in exporting their goods and services, most will. Of those that do succeed there will be a number that will extremely successful – a look through the finalists at the 49^th Australian Export Awards will show more than three quarters were SMEs that accessed Export Market Development Grants in their start up phase.

SMEs need encouragement to enter export markets. This does not necessarily mean greater financial support, although a program such as EMDG should provide certainty to exporters and a real incentive to develop new markets.  However, it does mean focused support from government with an understanding that the high dollar is a barrier to new exporters and that it takes time to develop export markets. The support of Austrade is crucial and it is important that Austrade’s new role does not focus too much on emerging markets or investment but looks to ensure SMEs become successful exporters.

Western Australian Federal Minister Gary Gray announced the initiative on behalf of Foreign Affairs Minister Kevin Rudd at the Africa Downunder conference in Perth.

“Australia has more than 100 years of experience in attracting overseas investment to harness our resource potential and promote economic growth. We are committed to sharing this experience with our African friends,” he said. “Sharing our experience can help the countries of Africa harness their natural resource wealth and attract investment for the benefit of all their peoples.”

More than 40 percent of Australian overseas mining projects are in Africa. Worth US$20 billion, the 650 projects represent more than 230 Australian companies across 43 countries and territories in Africa. The announced visits will include study tours, organised in partnership with the Australian mining industry and over 60 Australia Award scholarships focussed on mining governance.

“Australia’s relationship with African countries is being transformed by investment by Australian resources companies,” Gray said. “This investment is building strong people-to-people links, bringing our governments and private sectors closer together, creating new opportunities for trade in goods and services, and making unprecedented contributions to economic growth and development.”

Partially driven by the strength in the Australian dollar and high interest rates, foreign direct investment reached US$508 billion in 2010, according to UNCTAD’s World Investment Report 2011.

The Australian Government’s commitment to developing the National Broadband Network along with continued growth in the mining and resources boom has boosted the value of investment projects in Australia to more than A$830 billion, according to a Deloitte Access Economics Report.

The majority of Foreign Direct Investment in Australia comes from the United States of America, the United Kingdom, Japan, the Netherlands and Switzerland.

Minister for Tertiary Education, Skills, Jobs and Workplace Relations, Chris Evans said the centre is an opportunity to promote Australia and leverage shared skills to advance the local workforce. “We have the chance to become a breeding ground for oil and gas expertise throughout the world.”

The $80 million centre will act as a hub for all of GE’s regional training, supporting growth in the oil and gas, energy, mining, transportation and water industries.

Senator Evans made the announcement last week alongside GE’s Global Chairman and CEO, Jeff Immelt. The centre is to be built on a 100,000 square metre site at Jandakot Airport and will house GE’s Western Australian headquarters, along with a facility for engineering and leadership training.

GE Australia and New Zealand’s President and CEO, Steve Sargent emphasised the importance of training and development fuelling Australia’s economic growth. “Working with the Australian Government to invest in a highly skilled labour force is going to create tremendous value for both the industries that are thriving here—and the local economy,” he said.

“It is about business aligning with Government plans to invest in the critical skills needed to support growth.”

Construction of the first stage of the complex is to be completed in September.

General manager of Port of Brisbane operations Peter Kyte has advised port businesses to consider sending home non-essential staff or ceasing operations, according to their risk assessment. The port closed on Tuesday 11 January with all ships vacating their berths to anchor offshore. Potential power loss and closure of access roads were contributing factors in the decision.

The effect of the flooding extends from port access to road and rail closures, and exporter’s offices being non-operational, making them unable to process documentation such as Pre Receival Advices. Coal and wheat industry freight movements are halted in some areas due to mine and rail closures, and Queensland livestock and key export crops have been destroyed by flood waters.

Queensland’s cotton crop in is worth $400 million a year, and the sorghum crop $160 million. Initial estimates from the Royal Bank of Canada indicate flooding damage to the mining and agriculture sectors could wipe $9 billion from export revenue.

The full extent of the effects on the state will be uncovered only once floodwaters recede.

1. Indian student attacks

Two attacks on Indian students in Melbourne, seemingly racially motivated, threatened to curtail this multimillion-dollar industry in a significant source market. However, it was not just education, Australia’s third largest export and our highest value service export, at risk. Australia’s image in India was at least temporarily tarnished as this issue, unresolved since 2009, increased in profile.

Diplomacy was in full force as former acting Prime Minister and Minister for Education Julia Gillard, and acting Minister for Foreign Affairs Simon Crean, met with their Indian counterparts to ease tension.

2. China versus Rio Tinto

In 2009, Chinese authorities arrested detained four Rio Tinto employees, including Australian executive Stern Hu, for five weeks before formally charging them with commercial bribery and trade secrets infringement. Hu attended a closed trial in March 2010 and accepted the Chinese court’s 10-year sentence.

The sentence came as a warning for exporters to avoid corrupt practices when doing business in China, particularly in the resources sector, which is Australia’s biggest earner in China.

3. Mining tax debacle

The resources sector came out in force against the Henry Tax Review suggestion that the sector pay 40 percent tax on its so-called ‘super profits’. The Federal Government decided to adopt the suggestion and the industry spent millions in a nationwide advertising campaign in protest. Economists believe the tax will curb some investments and affect mineral exports, which may have a trickle-down effect in the wider economy.

4. Rising Australian dollar

The Australian dollar reached parity with the US dollar in mid-October after months above US80c and US90c. The weakness of the US economy, in addition to flailing markets in the UK and eurozone (particularly Portugal, Ireland, Greece, Spain), boosted the Australian dollar in global markets, and threatened to chew at exporters’ margins. Competing on a lower dollar is no longer an option for exporters as near-parity is predicted to continue well into 2011.

5. Global travel woes

An ash cloud created by the eruption of Eyjafjallajökull, the Icelandic volcano most found difficult to say and spell, interrupted much of Europe’s airspace for five days in April. Airlines had to deal with thousands of stranded passengers and airfreight routes had to be re-routed or delayed.

Let’s not forget natural disasters in Haiti, China, and Pakistan, the Gulf oil spill, and the US Department of Homeland Security’s Transportation Security Administration body-scanning controversy added to the mix. On a domestic front, Virgin Blue suffered a system crash that saw several planeloads of passengers stranded in September.

Things to celebrate

But it wasn’t all bad. Exporters started the year with a larger backyard market thanks to the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). Australia’s foray into China at the Shanghai World Expo and as country of honour at the China International Small and Medium Enterprises Fair was also successful, and we also launched a nation brand, Australia Unlimited, as distinct from our tourism campaigns.

Not that we forgot about tourism, which received a lot of attention in December when US talk show host Oprah Winfrey decided to visit for her last show, Oprah’s Ultimate Australian Adventure, bringing an entourage of 302 dedicated audience members and employing hundreds of US and Australian staff. Organised by Winfrey’s Harpo Productions in conjunction with Tourism Australia and local airline Qantas, the tour will be televised in January 2011.

What events rocked your exports in 2010?

It is a book that explains the how, the why and, importantly, the effects of technological change to the world’s economy. Why, with the ubiquitous spread of technology, it doesn’t matter where your business operates. Where the culture of hard work and enterprise is more important than resources, location and opportunity.

Why, he asked, is it cheaper and easier for Egyptians to import from China traditional lamps formerly manufactured by Egyptian peasants who earn an average of $50 per month? His explanation is the culture of hard work in China.

I was reminded of Friedman’s book last weekend when I read an article of his in the Sydney Morning Herald. He recounted a skit on Chinese TV that tells the story of a race between four children, one from the USA, one from China, one from India and one from Brazil.

The American child raced ahead to an early lead and exclaimed, “I will win because I always win” but later doubled over in pain. The explanation was given by the Chinese child: “He’s overweight and flabby. He ate too many hamburgers.” I guess that’s how they see us too.

Australia and our cargo cult mentality of relying on the mining industry to give us our national wealth, reminds me of the Papua New Guinea Highlanders in the 1970s who started a new religion where all the goods of the west would simply arrive by helicopter as a reward to the lucky few who joined the new religion.

In my last blog, I called on the government to assist Australian exporters with a lift in the Export Market Development Grants (EMDG) scheme for exporters rather than the niggardly attitude adopted by the current government.

Our real long-term prosperity cannot rely on simply digging up easy-to-mine minerals. There is no guarantee any of these ‘riches’ will be in demand into the long-term future.

We need to again emphasise our strengths in technology, our legal profession, education and manufacturing. We need to help these sectors of our economy to expand to new markets if we are also not to become “too fat and flabby”.

A proven and cost effective way is to provide exporters with grants that partially reimburses them for marketing activities in promoting exports.