Australian exporters remain optimistic about global trade prospects this year despite the stubbornly high Australian dollar.
A recent study commissioned by transport and logistics giant DHL shows exporters are continuing to gain confidence while learning to manage the strong Australian dollar, international competition and rising raw material costs.
The DHL Export Barometer found that:
- 61% of exporters expect orders to increase in the next 12 months
- 48% achieved an increase in orders over the past 12 months
- Exporters are confident about company profitability, with 50% expecting an order increase
- The Middle East the most promising future export market (54%), ahead of North America and China (51%)
- 35% of exporters said a Free Trade Agreement (FTA) with Japan would have a positive impact
The survey found that exporters are diversifying their export markets beyond China into the rest of Asia and the Middle East.
Also, there has been a shift away from over-dependence on the mining sector, with stronger results from the services and agriculture industries over the past 12 months.
Gary Edstein, Senior Vice President, DHL Express Oceania, is encouraged to see that exporter confidence continues to grow: “The DHL Export Barometer has shown that exporter confidence has steadily increased since the lows of 2012.”
More confident about profitability
Mr Edstein said 61% of exporters surveyed expect orders to increase in the coming year, up on last year’s 58%.
“Exporters are also more confident about company profitability, with 50% expecting an increase in shipments, he said. “However, only 37% of exporters intend to increase staff numbers in the coming 12 months and only 48% of exporters achieved an increase in orders over the past 12 months, which is slightly down on last year (51%).
“These results are representative of the cautious market that we have witnessed over the past 12 months.”
However, all indicators point to overall strength of the Australian economy and the contribution that the exporter community makes to Australia’s prosperity, Mr Edstein added.
The confidence among exporters goes against recent official trade figures, which showed Australia's trade deficit unexpectedly rose to $1.9 billion in June.
The report showed miners were the least confident exporters while those in services like education were the most positive.
Agricultural exporters are also increasingly confident, amid growing demand for safe food from Asia.
University of NSW Economist Tim Harcourt said: “Whilst media reports imply we are putting all the export eggs in the China basket, the Barometer clearly shows an overall diversity in our export destinations.
“In 2014, the Middle East (54%) is considered the most promising market, ahead of North America and China (51%). Indeed, many Australian companies use Dubai increasingly as a hub for their Middle East operations and with all this commercial interest, there is naturally a large number of Australian expatriates living in the region.
“We already have 250 Australian registered businesses in the UAE and around 16,000 Australian expatriates. The Middle East and North Africa (MENA) region has a population of just under 400 million, and is a $7.1 billion market for Australia’s merchandise exports, advanced services, research collaboration and technology.”
Compared to last year, the UK and Taiwan have increased the fastest of all regions (up 10% and 11% on 2013 respectively) and overall the results show parity between export growth in both advanced and emerging economies.
The Barometer found that services exporters (70%) are the most confident they will increase their export orders over the next 12 months, followed by agricultural exporters (64%) then manufacturers (60%) and miners (39%).
The same cannot be said for the mining sector, which sees increasing orders over the past 12 months by just 25%, with rising fuel costs cited as the biggest negative impact and increasing orders at almost half the pace of those in agriculture (48%), manufacturing (50%) and services (48%).
Mr Harcourt said: “There are now clear signs the exporter community represents a more diverse group of industry sectors. Some might say we’ve gone from the mining boom to the dining boom with the services exporters most confident they will increase their export orders in the next 12 months.”
The strong dollar is still considered to have had the greatest negative impact on sales but that has reduced 7% since 2013 (53%), as has the impact of international competition.
The number of exporters challenged by international competition (34%, down 5%) and domestic economic conditions (20%, down 8%) has declined, however, the cost of raw materials (29%, up 3%) and regulatory constraints (18%, up 6%) have both become more prevalent.
Mr Edstein said: “The DHL Barometer revealed that for those companies new to
exporting a major challenge is transport and logistics (37%). This highlights the importance of exporters working with suppliers who are interested in their business and see them not just as a customer, but as a business partner. Exporters should find out about the support services a logistics company provides and understand how flexible they are prepared to be in their product or service offering.”
When looking at international threats, China was regarded as the biggest competitive threat (55%) followed by USA (31%), India (15%), New Zealand (11%) and Indonesia (11%).
Free Trade Agreements (FTA)
Of potential Free Trade Agreements, 61% of exporters thought a China – Australia FTA would benefit their business, 31% said it would have no effect and only 8% said it would be negative. This was the most supported potential agreement.
And 35% of exporters said an FTA with Japan would have a positive impact. Of the exporters who viewed it favourably, 59% said it would assist them to increase their exports to Japan and 38% said they would start exporting to Japan.
Only 5% of exporters said an FTA with Japan would have a negative effect with 60% viewing it impartially.
Online and social media
For the first time, the Barometer asked how exporters used social media to generate export orders or enquiries. Overall, 37 percent of exporters used social media, with 24 percent using Facebook, 14 percent LinkedIn, 11 percent Google+ and 9 percent on Twitter.
While most exporters provide product and/or service information on their website, many do not provide pricing and shipping information and online booking and payment functionality.
Mr Edstein said: “Exporters have a great opportunity to enhance the online user
experience and therefore increase orders and enquiries. Particularly when you consider that exporters who appear more effective at generating orders through online commerce and those who provide a better user experience tend to be the more nimble, very small businesses (1-4 employees) and businesses that have commenced exporting in the past five years.
“These same businesses are also expecting more export orders (65%) than those that don’t use online commerce (59%).”