Australian exporters have started the year facing a challenging external environment. Commodity prices have slumped, global growth remains fragile, international trade is subdued, and world currencies are in the process of a major re-alignment.
At the same time the falling Australian dollar is in the process of adjusting our international competitiveness, even as the continued rise of emerging Asia works to reshape our trading prospects over the longer-term.
So there are now some significant and offsetting forces in play for our export prospects. But which of them will dominate in practice? And do Australia's businesses feel optimistic about what 2015 will bring for their international operations, or are they daunted by the volatile global environment? The latest Australia International Business Survey offers an important source of insight regarding this last question.
AIBS is a survey produced by Austrade, the Export Council of Australia, the Export Finance and Insurance Corporation and the University of Sydney. When AIBS 2014 was launched last year, it was then the largest survey of Australian international businesses in more than a decade, and provided a range of information on how those businesses interacted with the world economy. The second and latest survey in the series, AIBS 2015, is now complete, and this year the results provide a far more in-depth analysis of over 1,200 Australian companies involved in international business.
While most of the results from this major new survey will only be released later this year, we already have some initial findings about business prospects. According to AIBS 2015, many of Australia's internationally-involved companies are feeling more positive about what the coming year will bring. When we asked participants, What is the overall outlook for your company's international operations in 2015 compared to 2014? 69 per cent of AIBS respondents said the outlook for this year was better than 2014. That compares favourably to the 24 per cent who said it was unchanged and to the just eight per cent that said the outlook for 2015 was worse than for last year.
We also asked AIBS participants to give us the main reasons for their views. Of those companies that said they were more optimistic about 2015, by far the most frequently cited reason for their opinion was the decline in the Australian dollar. In other words, the upside of the fall in commodity prices and the drop in the dollar has been a significant boost to Australia's relative competitiveness and to exporter optimism.
Other important supportive factors for 2015 identified by companies included signs of increased international demand for their products, expected entry into new markets and access to new consumers, upcoming payoffs from past efforts at building long-term relationships, and reaping the rewards of improved brand awareness and reputation. In addition, firms also highlighted the anticipated benefits from Australia's new Free Trade Agreements with China, Japan and Korea.
What about the smaller group of companies that expected 2015 to be tougher than last year? Perhaps not surprisingly, the most commonly referenced difficulty for these businesses was the downturn in global commodity markets. Interestingly, this was followed in the worry list by the level of the Australian dollar, suggesting that for some companies the fall in the exchange rate, at least at the time of the survey, had not been large enough to restore lost competitiveness and unwind the adverse consequences of its previous highs. Other respondents indicated political instability in overseas markets along with heightened international competition as critical factors in explaining their more pessimistic take on market conditions.
Still, the main message from the survey results is positive. The past year has brought much talk about the need for the Australian economy to transition from the resource boom and to find new sources of economic growth, while recent months have seen some pessimism regarding the current pace of this needed economic rebalancing. In this context, the results from AIBS 2015 provide an important element of optimism, as many of Australia's internationally involved businesses reckon that 2015 will turn out to be a better year than its predecessor, now that the adjustment in the dollar is starting to provide some welcome support for Australia's export prospects.
Mark Thirlwell is the chief economist of Austrade.
Detailed results for AIBS 2015 will be available later this year. If you would like to receive a copy of the report you can register your interest with the Export Council of Australia. Contact information below:
Export Council of Australia
Tel: 02 8243 7400
AIBS 2015 is an in-depth survey of Australian companies involved in international business.The survey was undertaken between October and December 2014 and during that time more than 1,517 responses were achieved which translated into a sample of 1,237 businesses. This sample size makes AIBS 2015 one of Australia's largest international business surveys. It also represents some of the most extensive research into Australia's international businesses since last years AIBS survey. AIBS 2015 was commissioned by the Export Council of Australia, with the support of our partners, Austrade and Efic, and was conducted by the University of Sydney.