This year – the year of the global financial crisis (GFC) – was meant to be the year of trade Armageddon. This was the year that the bottom would drop out of the export market and everyone would stay at home and never venture beyond our shores.
This year was meant to lead to a reversal in globalisation and a ‘buy local’ revival. The economy was supposed to decline, the labour market was supposed to fracture and we were meant to see a large rise in unemployment.
But guess what? It didn’t happen quite as expected. While we did see a huge drop in international trade – world trade volumes declined by 20% over the year according to the Reserve Bank of Australia – Australian export volumes held up. We did see a decline in global economic growth – particularly in the advanced economies of the North Atlantic – but Australian economic growth has held up. We have seen a decline in labour market performance across the globe – particularly in the OECD economies – but Australian employment has surprised us all on the upside and unemployment has not risen as much as expected.
So why did this occur? It’s a combination of factors.
Firstly, Australia is benefiting from past economic reforms – especially the floating of the exchange rate, the tariff reductions and financial reforms of the 1980s. Take the exchange rate for example, the devaluation at the beginning of the GFC kept exporters competitive and in the game.
Australia has also engaged more closely with the Asia-Pacific region over the past 25 years, and the relatively strong performance of Asia and the emerging economies relative to the advanced economies in the GFC, has benefited our export performance. ‘The power of proximity’ has replaced the ‘the tyranny of distance’ and now ‘the big four in Asia’ – Japan, China, Korea and India account for nearly $140 billion or just under half our total exports.
Secondly, the fiscal stimulus has clearly helped. Australia went hard and went early and put resources in the right places. As a result, Australia was the only advanced country to have reported positive through-the-year growth to June 2009. It’s no wonder the international commentators have been talking about Australia’s ‘miracle economy’ going from ‘down under to down wonder’.
Thirdly, the stimulus packages overseas have helped too. The fiscal expansions in the region – in countries like China and Thailand – have given us a boost. Take China, for example, the investment in the second and third tier cities is boosting Beijing’s demand for resource exports, construction and infrastructure services. Australian architects, designers, builders, educators and engineers are benefiting as well as our miners. And with China needing to improve its efficiency of investment, and commitment to reducing green house emissions, they’ll be opportunities in Australian exporters of financial, professional business and environmental services. That’s why we’re talking ‘bamboo shoots’ as much as ‘green shoots’.
Finally, there’s the resilience of Australian exporters themselves – particularly as employers. According to the DHL Barometer, exporters are confident that they’ll expand opportunities over the next 12 months and most maintained employment levels to avoid future ‘firing and hiring’ costs. Working hours have been adjusted and training increased as an alternative to layoffs. Our exporter community is a key reason why Australian employment levels have held up over the year.
In fact, you can just tell these attributes from this year’s honour roll of export award winners. According to Austrade CEO Peter O’Byrne: “Selecting winners from such a strong field was a rewarding challenge. The National Winners are outstanding examples of Australian companies who have demonstrated innovation and determination in achieving their export success.”
It’s true – there are many characteristics that illustrate the dynamism and diversity of this year’s finalists.
Firstly, they’re born to be global. Five out of the 12 winners are first time entrants in the awards. This shows that rookies can excel in the export game, just like more experienced hands. And six out of 12 are export market development grant (EMDG) recipients showing how that program really helps small- and medium-sized enterprises (SMEs) to go global. Some are literally born global. For example, cheeky underwear manufacturer aussiebum actually sold overseas before making their first Australian sale.
Secondly, speaking of size, the list shows size doesn’t matter as we have winners that are both large and small. From a small boutique games company like Firemint in Melbourne to a large Queensland manufacturer like Noja Power or a major resource player like Wesfarmers Curragh.
Thirdly, they are all around the country, from the capital cities to rural and regional Australia. All states and the Northern Territory are represented in the winners list. As usual, the island state of Tasmania punches above its weight with Autech and Pivot Maritime taking honours.
Fourthly, as the old song goes, I’ve been everywhere man, and it is the case with these winners who have covered places all over the world as diverse as Brazil and Brunei, Norway and Nigeria, Mexico and Mauritania, India and Indonesia, Singapore and Saudi Arabia, Kuwait and Qatar. Many winners sell to multiple markets. For example, Noja sells to 70 countries, Capilano exports honey to 52 countries, Autech sells software to 25.
Fifthly, exports are part of their core business. For example, for ICT supplier Smarts Group, export revenue accounts for 90% of overall revenue, for office service supplier Servcorp, it’s 75%. In fact, for Smarts, exports grew by 30% this year alone.
Finally, they’re environmentally conscious. Companies like Noja are putting the green back into the green and gold and showing that climate change is an opportunity for Australia to show the world our impeccable environmental export credentials.
So what will happen in the future? The RBA predicts another boom and it looks like we’ll be getting growth in emerging markets and we’ll see investment integrated more with trade as Australia’s global economic engagement becomes more sophisticated and multifaceted. And if these winners can pave the way in a year as tough as this, imagine well they going to go in the great recovery.
In short, when it comes to these Australian export winners, you ain’t seen nothing yet!
Tim Harcourt is Chief Economist with the Australian Trade Commission and the author of The Airport Economist.