Which markets matter most to Australian exporters?

While we know that the global financial crisis (GFC) had a large impact on global trade, Australia however was one of the few stand out economies that managed to see export volumes grow. While our trade data is dominated by swings in the commodity cycle, some new data from the Australian Bureau of Statistics (ABS) tells us a little bit more about the Australian exporter community and how its members have been affected by the GFC.

First of all, we now know that there were 45,581 exporting businesses in the ‘exporter community’ in 2008-09.  This tally comprises 43,259 goods exporters and 3,422 service exporters – although the count excludes in-bound services (like tourism and education) that are also important to the national export effort. The number of exporters fell slightly from the 2007-08 figure of 45,623. This is mainly due to a 4.3% decline in the number of businesses exporting services.

The exporter community can be broken down by market destination for goods as well, and the results make some pretty interesting reading. For the most part the rankings are quite stable. The Top 20 has been largely unchanged for some time now, although the individual rankings do move around a bit.

Our Trans-Tasman cousin, New Zealand, topped the rankings with 17,079 Australian businesses exporting to the shaky isles in 2008-09. This number is actually down on the previous year but the Kiwis are always ranked number 1. This indicates that many exporters actually find exporting ‘across the ditch’ relatively easy and that Kiwiland is a good ‘nursery’ to start with when learning the craft of exporting. The Closer Economic Relationship (CER), now nearly three decades old, really gave Australian companies – especially small businesses – a kick-start into exporting by giving them a start in the land of the long white cloud.

The United States is second, with 9,084 exporters.  Many small and medium businesses get their start in the USA as they are attracted by the size of the market. But the numbers have actually fallen to the USA over the year, with other sub-prime crisis-hit economies also affected (such as the United Kingdom) as well as the North East Asian giants Japan and South Korea.

Singapore is in third place with 6,667 exporters, followed by the United Kingdom with 5,210 and Hong Kong on 5,146. ‘Entrepot’ economies such as Singapore and Hong Kong tend to have lots of wholesale trading houses and act as a hub port for exporters (and importers). For instance, Singapore has played the role of a gateway port for South East Asia, while, in the past, Hong Kong played a similar role in North East Asia – particularly before China opened up more to international trade and commerce.

Next is China on 4,816, a growth of 321 exporters and a $12.2 billion increase in export revenue. China’s position supports the Austrade/Sensis survey that showed many SMEs looking to the Middle Kingdom as an export destination – joining the larger Australian blue chip corporates such as Rio Tinto, ANZ, Elders, BHP Billiton and Woodside, who have been in Beijing for some time.

Papua New Guinea is next with 4,313 exporters. The data shows the importance of our near neighbours to small business exporters, with three Pacific destinations in the top ten. ASEAN neighbour Malaysia on 3,619 is ranked eighth, with Japan (9th) on 3,341 and Fiji (10th) on 3,168.

The ‘second top ten’ is still heavily focused in Asia, but includes both mature and emerging markets. Thailand is still a strong performer on 2,829, despite a slight fall. Germany is the main continental European destination on 2,823 exporters, followed by the United Arab Emirates (UAE) on 2,720 and Indonesia on 2,623. Then comes Canada, India, Taiwan, South Korea and Australia’s main African destination, South Africa, with New Caledonia continuing to hold its place in the top 20.

It should be noted in analysis that many exporters have multiple destinations, so they may be counted twice in terms of countries. The analysis of company numbers is also not necessarily a reflection of value. For instance, while New Zealand attracts over 17,000 exporters and Japan only around 3,300, the value of the those exports to Japan was valued over $52 billion, while New Zealand exports totalled over $8.5 billion.

Does the data change over the years? From the limited data available, the top 20 remains pretty stable, with a few countries changing positions. However, if you look at longer-term snapshots, you see a bit more movement. For example, a comparison of the 1989-90 rankings with the present shows – you guessed it – China charging up the table. In recent years, India and the UAE have been consistent chart busters.

In conclusion, in terms of exporters, we have an exporter base in Australia that is spread far and wide across the globe but concentrated enough in the bigger markets to get a good bang for their buck. And exporting seems to be delivering to all Australian exporters – both large and small. Austrade research shows that exporters, on average, grow faster, are more profitable, more innovative and pay higher wages than non-exporters. The micro-economic performance of Australian exporters will be very important as we all put the GFC behind us and enter the next phase of global recovery.

Table: Number of Exporters by export destination

(Source: ABS Cat 5368.0.55.006 – table 11, includes multiple destinations.)

Tim Harcourt is Chief Economist of the Australian Trade Commission (Austrade) and the author of The Airport Economist.