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From the Top: The Real Export Picture

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Not surprisingly the question most commonly asked of us remains "what effect is the Aussie dollar having on exports?" which is really not easy to answer because there are so many factors out there influencing our export performance. The high dollar is obviously having an enormous impact on some important sectors. The export grants consultants, who really are a good barometer of the SME export sector, will say without any doubt activity is very slow and even slower in wine exports, education and training, and inbound tourism. Not all this is dollar related, of course, but in these three sectors it’s probably more about the dollar than anything else. Another strong indicator is export performance in 2010. Without any argument the positive trade balance that started in April last year is something worth crowing about, particularly the 13.7 percent growth in exports. But sadly when you look at the detail the picture is not quite as pretty. Unprocessed food is down 11.0 percent, processed food about flat, manufacturing while up marginally overall, the elaborately transformed part is flat at best and services exports are also flat. All the growth is coming from the mining sector and a major slice of that is coal. That growth is measured in dollars not volume, which begs the question about how much is in fact in price and not tonnage. I would suggest that most is price. The other factors that are causing SME exporters difficulty are the GFC, which remains an issue in many markets, especially the more sophisticated ones, and the effect the GFC has had on international competition and international currencies. European countries with a low euro, Germany in particular, and the United Kingdom, are heavily promoting exports to Asia, while Obama’s export led recovery is undoubtedly increasing the level of competition in our own backyard. In currency terms it was also interesting to note that in a recent article Max Walsh of Dixon Advisory wrote: "Throw in the exchange rate appreciation and you have local manufacturing or processing industries subject to import competition facing the full force effect". For some Australian exporters it certainly is the full force of soft international markets and added overseas price-driven competition in their local market. So here we sit, comfortable-or are we just a tad too comfortable? My view is more than likely the latter. Things in the land of Oz are, I suggest, not quite as sound as we perhaps think they are. From an export perspective business, apart from mining, has slowed and one cannot see that changing for some time. Our Asian markets will remain under attack; the dollar is unlikely to drop dramatically unless US interest rates move strongly ahead and minerals sales falter. And international competition in our domestic markets will remain high in many sectors as marketers capitalise on low currencies to offset slow local demand. The result, I fear, is a significant change in the shape of the export pie with dangerously less diversity and a greater reliance on mining. This will affect jobs in the eastern states, the result of which will be felt right across Australian business. This scenario begs the question: is now the time to cut back on expenditure on export promotion? In my opinion it’s clearly not. A fundamental principle in marketing is when under attack fight back with all you’ve got to maintain market share. Our exports are under attack and we need to fight. First, the Austrade budget should be increased (not reduced) to provide more support offshore particularly in difficult markets where their support can make a real and measurable difference. Second, the Export Market Development Scheme (EMDG) should be fully funded to encourage exporters to put more marketing dollars behind their export business. Third, every locally inflicted export facilitation cost or hurdle needs to be reviewed and where possible scrapped. And finally the benefits of our Free Trade Agreements need to be better marketed so that Australia’s SME exporters can capitalise on them. And finally, to top it off, is now the time to introduce an ETS or price on carbon? Clearly this alone will become a major export issue and I trust the Government will not exclude the non minerals export sector from deliberations. The need to be internationally competitive on all fronts is an absolute imperative. Let’s not see yet another impost in what is already a very difficult business environment.

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