Sections

Services

Information

UK United Kingdom

Successful Australian exports: where the bloody hell are they?

Australia’s major banking, retail and manufacturing brands are often regarded as less interested in the aggressive overseas expansion being pursued by market leaders in other countries. Some have tried…

Australian companies have done little to expand overseas, preferring the lucrative home market. AAP/Damian Shaw

Australia’s major banking, retail and manufacturing brands are often regarded as less interested in the aggressive overseas expansion being pursued by market leaders in other countries. Some have tried – with mixed success.

The latest major acquisition attempt was the near sale of Hong Kong chain ParknShop, which operates 345 supermarkets. The media speculated that Woolworths was the leading candidate to purchase the company, valued at just over US$3 billion.

But now Woolworths' bid for ParknShop is off the table, we are left with the question: how are Australian companies performing overseas?

Is Woolworths’ interest in foreign expansion typical of Australian companies – as well as its slow and faltering steps towards this goal?

Concern about Australia’s international trade and investment performance prompted the Rudd Government to initiate the Mortimer Review – Winning in World Markets – which was released just before Lehman Brothers collapsed in 2008. The report found that the rate of Australia’s export growth, both in terms of volume and value, had declined substantially in the period 2001-2007.

Outward foreign direct investment (FDI) was an ostensibly better story, with overall stocks almost doubling in that period, thanks largely to the finance and mining sectors.

Given its timing, the Mortimer Review could not anticipate the severe headwinds that Australian companies have experienced in recent years, notably the recessionary conditions in advanced economies and a high Australian dollar.

Recent trade figures reveal that if the mining sector – which accounts for more than half of Australia’s exports – is excluded, Australia’s exports have stagnated. Outward FDI has also been sluggish.

Australian companies do not face a level playing field for international trade and investment. The tyranny of distance persists even in the internet age. Australia’s geographical isolation also means that it remains a fringe player in terms of regional trade agreements.

It’s not a surprise that a far lower percentage of our small and medium-sized companies export compared to their Dutch counterparts – the Western European country whose population is most comparable in size to that of Australia’s.

Despite growth in the past decade, our outward FDI (the category into which Woolworths’ acquisition would have fallen, had it proceeded) is also considerably smaller than those of the Netherlands.

Compounding this isolation is Australia’s small population. The country has always been a “branch office” economy – a disadvantage now that multinationals are consolidating their production and R&D, at best leaving behind hollowed-out sales and marketing offices.

Inward FDI is hard to attract and even harder to retain, as the town of Orange has recently experienced with the announcement of the impending closure of Electrolux’s factory there. Yet as the Electrolux example shows, inward FDI can be critical to outward flows such as exports.

Australia’s geographical isolation and small population are disadvantages that cannot be removed. But they can be redressed through the right policy settings, which have been notably absent in recent years.

The Mortimer Review’s recommendations were never properly implemented. On the contrary, the Gillard government’s trade initiatives were counter to those recommended in the review. The main scheme for supporting Australian exporters, Export Market Development Grants, had its budget cut and not increased.

Austrade has expanded its footprint in emerging markets such as China, but at the expense of its presence in developed countries. Australian exporters targeting the US or Europe can no longer call on Austrade’s services, as in these markets they have been redirected away from trade facilitation to the promotion of inward investment and education.

Ian Murray, the executive chairman of the Export Council of Australia, believes the recent decline in Australia’s performance in global markets was masked by the resources boom. “While the resources boom was at its peak, the government could get away with not doing anything”, he said.

With the Gillard government desperate for budget savings, exporters were a constituency that could be ignored.

We now wait to see whether the new government will take up the challenge of improving Australia’s trade and investment performance. While in opposition, the Coalition railed against cuts to the Export Market Development Grants scheme, for example.

If the new trade minister introduces funding certainty and indexation of the scheme, expands access to export finance for smaller firms, and improves the efficiency of Customs, we will know that finally we have a government serious about improving Australia’s performance in global markets.

In the meantime, there is also a need to supplement the aggregate figures of official statistics with a firm-level perspective on what Australian companies are currently doing offshore and the challenges they face.

Last week the Export Council of Australia launched an international business survey, the first comprehensive data collection exercise of its kind since the 1990s.

Comprehensive data on the international activities of Australian companies, the current lack of which is a symptom of the broader policy neglect of trade, will hopefully provide the basis for more evidence-based policymaking in the future. At least we will find out the extent to which Woolworths’ tentative steps into Asia represent a trend among Australian companies more generally.

You can participate in the Export Council of Australia survey here.

Sign in to Favourite

Join the conversation

22 Comments sorted by

  1. Rene Oldenburger

    Haven't got one

    One difference between Dutch and Australian businesses doing business overseas is language.

    Very common for Dutch business men or women to speak the language of the country they want to trade with

    report
  2. Jena Zelezny

    research for second PhD in Humanities and Social Sciences (Performance Studies/Theatre & Drama/Dramatic Literature/Visual Arts) at La Trobe University

    Hi Catherine. You'll probably be aware of all the academics who are now working in the UK and the USA. No need for lists, but given the situation here in Higher Education, I'll venture to say that academics are a successful Australian export.

    report
  3. George Takacs

    Physicist

    Maybe the Future Fund could purchase the Orange factory from Electrolux, and direct it to focus on the development of the most energy efficient fridges and freezers.

    Our comparative advantage, as an advanced country with high education and training standards, is surely in doing things that require more brains than cheap labour and energy. Developing higher quality products, with features that help the world to meet the sustainability challenges that can no longer be ignored, must be the way ahead for manufacturing in advanced countries.

    report
  4. Garry Baker

    researcher

    Other than rocks - Australia doesn't export manufactures which could make a dent in our GDP. Sure we do have outfits like Cochlear and CSL, but they are minnows in terms of their volume of inward revenue.

    One of the problems is, Australia doesn't have a single brand name, nothing the big wide world would recognise in an instant, whereas Switzerland has Nestle and Swatch, along with a raft of others. Even tiny Finland had Nokia up until ten minutes ago - But we have nothing.

    The reasons…

    Read more
    1. Frank Moore

      Consultant

      In reply to Garry Baker

      And when billions have been spent by taxpayers via our cringing, collusive and grasping pollies and media - on whom has this money been urinated upon?
      That's right! Foreign nationals, foreign brand names.

      The example of total policy failure in this regard has been Australia's multi-generational support for 3 foreign car makers in Australia.
      What BRAND NAME did these billions create Garry Barker?
      An Australian Mercedes? Volvo? BMW? That could have been mar
      keted overseas?
      No! Our cringing…

      Read more
    2. Michael Anderson

      Engineer

      In reply to Garry Baker

      Although I would agree that Australia needs to generate brands that successfully export overseas. The attack on free trade is unconvincing. If Australian businesses collapse because of free trade, they're trying to make money on the wrong goods/services.

      The real problem in Australia is that our analysis of our export situation is the always the same barf regurgitated, we're too far away, too small, too behind in R&D, too exposed to by free trade, too limited by high wages, etc. etc. Developed economies like Australia make money by selling high tech, high value end products not just to world markets. Because free trade flows two ways.

      report
  5. Craig Myatt

    Industrial Designer / R&D

    I am in R&D for manufacturing, and we have seen two big impacts on our manufacturing and exports over the last 10 years: the mining boom making human resources scarce+costly and mining exports affecting exchange rates upward, making exported products and services far less competitive in export markets.

    It would be great to imagine that this likely more 'business friendly' government than the last two federal governments, might spend some time and resources on implementing the Mortimer review, which made welcome and simple to achieve recommendations. We really need that. And the wealth benefits for Australia would be welcome, and prudent.

    report
  6. David Clancy

    Lecturer, Biomedical Science at Lancaster University

    And New Zealand has Fisher & Paykel. They manage the tyranny of distance. And they're 1/5 our population.

    Academics are not a successful export, they are a gift to whichever country they land in, having been trained using Australian dollars.

    I remember attending a meeting at Melb. Uni. called 'Making the Boom Pay'. that was 2006. Gillard and others were there. Very few of the fine words made it into public policy

    report
  7. Anthony Waring

    logged in via email @gmail.com

    Banks with all their profits are risk averse when financing entrepreneurs, inventors and people with ideas. Where do they go ? Overseas. We need to become less risk averse if we are to develop an innovative prosperous economy rather than just being a quarry to the world.

    report
  8. Ed Biel

    Orchardist at Wanaka Orchard

    The main reason Australia cannot compete on the world stage with either manufactured or agricultural produce/products is fairly stated in the article: "Australian companies do not face a level playing field for international trade and investment." This is due to the high input costs faced by Australian producers and the blind acceptance by our pollies of the WTO mantra of 'free trade' being the solution to the worlds economic problems. It is not! - when it is so imbalanced in favour of a few…

    Read more
  9. ann moffatt
    ann moffatt is a Friend of The Conversation.

    retired

    what about all the revenue we get from wifi? we don't 'talk up' our successes.

    however, we missed the boat on solar power manufacturing. cos we couldn't get seed funding our oz team went to germany. now that group and its spin offs supply most of europe. we could have done that from oz.

    same thing happened with the unsw reverse osmosis project. couldn't get funded here so company was sold to usa. now look at where reverse osmosis is. australia could have had that business!!

    report
  10. Andrew Smith

    Education Consultant at Australian & International Education Centre

    Australian companies can do a lot, but maybe not via conventional channels.

    I would question the Austrade EMDG model where an organisation using the scheme ends up paying most back to Austrade in the form of consulting fees e.g. advise participation in a one off event requiring "fly in fly out" travel.... many would suggest a chartered accounting company such as PWC etc. (with superior levels of local expertise and access to Australian personnel) would be a better fit.

    International education…

    Read more
  11. Garry Baker

    researcher

    Yes, and the worlds biggest Solar panel manufacturer went back to China after years of knocking on all the doors here for a start up. An Australian citizen of Chinese descent, here for 20 years, engaged in PV development had to turn elsewhere for help. Now we buy his panels by the millions, and it benefits China immensely. Not us though

    As for WifI - read up on an enterprise called Radiata - Sold of to Cisco without a sniff of interest in the technology from locals...Telstra included…

    Read more
  12. David Pearn

    Follower

    Any local company that enjoys significant success immediately becomes a takeover target by foreign transnationals with the profits being exported overseas denying further expansion here.
    Australia is increasingly simply a branch office with all that implies.
    We used to ride on the sheep's back, now it's the dump truck, and milk tanker and even they are increasingly foreign owned.
    Our gambling and house building do nothing to improve our balance of trade figures.

    report
    1. Frank Moore

      Consultant

      In reply to David Pearn

      And David Pearn, our political and media leaders love of importing as many people into Australia increases our imports over exports. Leading to debt and debt again, leads to foreign ownership which leads to dollars being repatriated out of the nation.
      Almost every good and service - every bit of infrastructure built to service or alleviate problems of overcrowding - has serious components of imports over exports and debt, debt, debt.
      Only a full blown traitor could contemplate this as good.

      report
  13. Marian Macdonald

    logged in via Twitter

    Well, here's a classic example.

    One of the biggest exporters from the Port of Melbourne is dairy co-op Murray Goulburn (got to declare I am one of its farmer-shareholders). It processes 35% of the milk produced by Australian farmers and is on the cusp of the Asian boom in dairy consumption, with global dairy consumption increasing 6% pa and global production rising at 2%.

    Unlike our Kiwi competitors, Australia doesn't have a FTA with China, the biggest developing dairy market, so are at an…

    Read more
  14. Michelle Bourke
    Michelle Bourke is a Friend of The Conversation.

    CEO at Artlivemedia

    I think the point about Export and Outward FDI is a very interesting one.

    The problem is more than just "the tyranny of distance", I think it is the stark differences in language, culture and government systems between our own.
    China, Indonesia, Korea, Japan - all rapidly developing or already developed economies with rising majority of middle class citizens. China's population eclipses the ENTIRE population of Europe and USA combined, and Korea/Japan/Indonesia eclipse the entire US population…

    Read more
  15. Richard Helmer

    REsearch Engineer

    i think we need to look to our culture to provide a product identity that can have some longevity...and i guess we need to embrace a future where Australia is largely driven by SMEs and innovation...as hard as this will be

    whilst much of the USA's 20th century success was an outcome of the two wars impact on the worlds social and industrial landscape ... they did manage to embrace the future visions and become cultural leaders in film [hollywood], beverages [coke], clothing [nike] and computing…

    Read more
    1. John Canning

      Professor at University of Sydney

      In reply to Richard Helmer

      Hi Richard,
      One has to be very careful about SMEs as a saviour of our nation. India is a nation largely driven by SMEs and that has not addressed broader poverty. Increasingly these SMEs are technology driven innovators but again that is not translating socially. Whilst economic figures improve for India, the poor overall remains poor and the wealth gap continues to grow – inhumanely with clear cruelty on display in the cities I might add.
      In Australia, SMEs cannot afford to contribute substantially…

      Read more
    2. David Pearn

      Follower

      In reply to John Canning

      .....not to mention the vast chasm that is the gap between AWE and CEO's in the US which seems to be a pointer to ultimate civil unrest if the general public cease being distracted by televised professional sport?
      Do US leaders not think it is an issue?

      report