DHL EXPORT BAROMETER 2016

Exporter confidence plateaus amid competing head and tailwinds

  • 2016 Export Barometer records a slight decline in Australian exporter confidence
  • Weakening Australian dollar has allowed exporters to compete more effectively with overseas companies, while concerns around global political/economic environment spike
  • Australian exporters support the push for FTAs, with ChAFTA jumping in popularity
  • More than half (53 per cent) of Australian exporters, including those who import, say they would be negatively impacted by the government decision to charge GST on all imports

America’s back, free trade agreements are helping (particularly with China) and Europe remains on Australian business horizons despite Brexit, according to the 2016 DHL Export Barometer. However exporters are muddling through the waters of an uncertain world economy and there has been a plateauing of confidence with exporter sentiment recording its first drop since 2011.

Gary Edstein, Senior Vice President, DHL Express Oceania said: “While the DHL Export Barometer shows Australian exporter confidence remains relatively steady, in 2016 we’ve seen a slight decline in a number of areas. While almost two-thirds of exporters predict an increase in sales over the next 12 months, the competing head and tail winds are evident as Aussie exporters reap benefits from a weaker dollar and free trade agreements, but also operate in an increasing complicated world landscape.

“While the intent to increase the number of employees remains strong, the proportion of export businesses looking to increase wages is at a five year low. Along with a slightly weakened sentiment in 2016, the amount of businesses that reported an increase in actual export orders versus expected growth has declined.”

China and North America top future prospects
The 16th DHL Export Barometer shows that exporters still have confidence in expanding sales to international markets.

China again ranked in first place regarding expected export orders with 60 per cent of exporters expecting growth over the next 12 months – up from 56 per cent in 2015. Similarly, the recovery in North America continues with 59 per cent of exporters expecting increased future sales compared with 55 per cent last year.

Tim Harcourt, J.W. Nevile Fellow in Economics, UNSW & The Airport Economist, explains: “While New Zealand remains our most popular export destination followed by the US, Australia’s perception of trade with China is strengthening – both in terms of predicted future sales and also the benefits of ChAFTA. The weaker Australian dollar and US recovery is helping to sustain exporter confidence overall, balanced by the increase in competition posed by operating in a global market.

“Despite talks of ‘Eurosclerosis’, Europe ranks fourth for growth prospects just after the Middle East – and the impending Brexit has not put exporters off the UK, which maintains its place as a significant export destination in its own right.”

Free trade agreements (FTAs) popular with exporters

The 2016 DHL Export Barometer shows evidence that exporters like Australia’s free trade agreements and that they actually work in a practical business sense.

Positive perceptions around Australia’s FTA with China – ChAFTA – is increasing with 67 per cent of exporters expecting positive impacts going forward, a jump from 58 per cent in 2015.

The FTA with the USA has maintained its popularity traction with 59 per cent of exporters claiming the agreement has a positive impact on their business. Interestingly, perceived benefits from Closer Economic Relations with our nearest neighbor, New Zealand, have decreased slightly to 51 per cent, down from 56 per cent in 2015.

The controversial Trans Pacific Partnership (TPP) received a positive response from 47 per cent of Australian exporters surveyed – continuing the steady increase seen in previous years (46 per cent in 2015 and 37 per cent in 2014).

In terms of other future FTA destinations and positive potential impacts, the European Union (EU) was nominated among the highest proportion of exporters (55 per cent) followed by India (49 per cent) and Indonesia (45 per cent). 

Export challenges continue
While exchange rates continue to be a concern among more than half of exporters, the weakening dollar has allowed Australian businesses to compete more effectively internationally. Despite additional costs of raw materials, 57 per cent of exporters say their ability to compete has increased due to the weakening dollar. 

Harcourt comments; “While the weakened Aussie dollar has helped drive revenue, it has jacked up raw material costs as three out of four Australian exporters now simultaneously import in this modern era of globalisation.”

Concerns around economic and political conditions have risen steadily, with one in five (23 per cent) exporters claiming a negative impact on sales over the past 12 months (up from nine per cent in 2015). Likewise, concerns around internal and external capacity constraints has jumped to 20 per cent (up from 11 per cent in 2015).

As the exchange rate fluctuates, exporters are responding by implementing a wide range of strategies. Increasing service levels is the most popular strategy, employed by 38 per cent of Aussie exporters. Competing online is the second-most popular response among 28 per cent (up from 22 per cent in 2014 and 25 per cent in 2015). 

China remains the biggest international competitor among exporters who say international competition negatively affects export sales, as indicated by 59 per cent overall, with almost three-quarters (73 per cent) of manufacturers identifying China as their greatest competitive threat.

Conversely, the perceived threat from the USA has dropped to 29 per cent (down from 34 per cent in 2015), also regarding India (down from 19 to 14 per cent) and New Zealand (down from 13 to 12 per cent).

Changes to the GST threshold
When asked about the government decision to charge GST on all imported goods, more than half (53 per cent) of Australian businesses said they would be negatively impacted. Of these, 38 per cent indicated administrative burden and 37 per cent expect delays at the border waiting to clear customs. Just 18 per cent of respondents said it would make it easier for them to compete with overseas retailers.

While businesses that export-only predict a lesser impact, almost half of Australian businesses that both import and export expect the removal of the GST threshold will result in delays for goods to clear the border. More than a third (38 per cent) of businesses that both import and export believe the cost of doing business will increase due to the need to bring in raw materials. 

Edstein concludes: “We’re experiencing very exciting times for Australian exporters. Global trade is increasing like never before with FTAs and greater online connectedness offering Australian businesses a plethora of options to grow. While export confidence appears to have plateaued, we hope to see more local companies ‘taking the international plunge’ to build a market for themselves on a global scale.

About the DHL Export Barometer
Conducted by ACA Research, 302 Australian exporters were surveyed for the 2016 DHL Export Barometer between 24 May and 2 July, 2016.

The DHL Export Barometer is an initiative aimed at analysing export confidence in Australia and identifying export trends, and was first launched in November 2003. It is based on nationwide independent research, examining the business outlook of Australian exporters, highlighting changes in overseas market demand and providing insights into the factors impacting on Australia’s export trade.