A few things have happened recently that have reminded me of a line we wrote in March 2011 “So here we sit, comfortable or are we just a tad too comfortable.” My view is more than likely the latter. Things in the ‘land of Oz’ are not quite as sound as we perhaps think they are. From an export perspective, apart from the mining sector, business has slowed and one cannot see that changing for some time. We also made the point that the low Euro, Pound and US Dollar were also impacting on the domestic business of our exporters and that’s when the Euro was at 70 odd cents.
The first thing that took me back to that article was reading the 2010-11 Austrade Annual Report and in particular the section on the performance of the Export Market Development Grants Scheme (EMDG). In the document it reports that the value of export sales generated in 2009/10 by grant recipients declined from $6.6 billion in 2008/9 to $5.5 billion. That’s a 16.7% drop. At the same time it reports that employees of grant recipients dropped from 131,575 to 82,465 or 37.3% which is astounding. The really sad part is that 25% of claims were paid to rural and regional business who have suffered enough from floods and almost anything else nature can throw at them. And that was only financial year 2009/10, it is far worse looking at the raw data for the year ended 2010/11, where claims are predicted to drop by 30% to less than 3,500 and equally new entrants to the scheme are down a similar amount, which simply means the future doesn’t look encouraging at all. One can only imagine what the 2011-12 Austrade Annual Report will say about export generated sales and declines in employment among EMDG recipients for the last financial year, it won’t be pretty. Why the Government is sitting back watching this happen amazes me.
The second thing that brought the article to mind was when the AIEx was preparing a submission to the Productivity Commission on the Export Finance Insurance Corporation (EFIC). We made the point in that submission that EFIC does an excellent job for SME exports but it is unfortunately limited in what it can do by government legislation. The sad thing is that part of the problem could have been resolved if legislation first developed by the current opposition had passed through Parliament. That legislation would have allowed EFIC to provide financial support to a wider range of transactions for Australia’s SME’s sector, including those establishing global supply and distribution chains. Why this Government has never put it through is anyone’s guess.
The other issue that reminded me of the March 2011 article related more to the value of foreign currencies and imports. I was talking to a senior manager of one of Australia’s largest ports. We were discussing imports and exports and the ratio of both and he said “you would not believe the growth in the amount of food being imported into Australia, it’s huge”. This was reinforced when I was handed an almost full size frozen pizza at Wynyard station recently, it was made in Germany. Now I’m the last person to talk of any form of protectionism but we need to be aware that while the resources boom is terrific for some, it’s not too terrific for many others.
The types of companies that are impacted by EMDG, EFIC and low foreign currencies issues are essentially SME’s. They represent a major slice of employment in this country and whether in export or not they are hurting. The exporters are catching it both ways particularly those who can gain little benefit from cheaper imported components and that includes education, many services, agriculture and tourism to name just a few. And when it comes to employment the Government may wish to note that EMDG recipient employment numbers alone are equal to the motor vehicle industry, a privileged sector that Governments like to prop up.
What the industry is looking for is leadership and some action. Let’s see some stimulus go the exporter’s way, remove the EMDG cap, lift the maximum grant to $200,000 and relax the rules on the export performance test. Let’s help finance our exports and push the EFIC legislation through, it will after all have bipartisan support and let’s see real action on going to market with an all of Government approach on missions, tenders and big business opportunities. The Brits, French Germans and American’s can do it, why can’t the Aussies? It just takes a bit of initiative, some hard work and a big dose of passion.
Ian Murray, Executive Director- Australian Institute of Export
