Are SMEs benefiting from Australia's trading boom?

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Australia is a key trade partner for many countries in the region and beyond. However, are SMEs currently taking advantage of this boom in trade growth?

Trade boom

Australia's two-way trade has climbed significantly in recent years. Following a relatively modest increase of 0.6 per cent in 2016, the value of imports and exports surged 11 per cent in 2017, according to the Australian Trade and Investment Commission (Austrade). 

Imports alone were up 7 per cent, representing $377 billion to the country's economy. Trade also comprised approximately 42 per cent of Australia's gross domestic product in 2017, up from 32 per cent in 1990.

But who are the country's biggest trading partners? And what goods and services are changing hands? Let's examine some of the major trends in Australia's import-export markets, as well as how SMEs can take advantage of recent trade growth.

 

Asia leads the way

 

Earlier this year, Economist and Head of Benchmark Research at Austrade Edmund Tang said 12 of Australia's biggest trading partners are now based in Asia.  Specifically, the country's top five trade markets are:

 

  1. China makes up nearly one-quarter of Australia's two-way trade, with a total value of $180 billion. This is more than double any other of Australia's trading partners.
  2. Japan overtook the US as our second-biggest trade partner last year, with imports and exports valued at $72 billion.
  3. The US may be third overall, but the country is Australia's largest trade partner for services.
  4. South Korea's total trade shot up 71 per cent to $55 billion in 2017, due largely to the country's acquisition of Australian liquified natural gas platforms.
  5. India rounded out the top five with $25 billion worth of trade with Australia. This was up 28 per cent year on year, enabling the country to overtake the UK and New Zealand.

 

"The Asia-Pacific region accounted for 71 per cent of Australia's two-way trade last year, with a compound annual growth rate of 6.5 per cent over the past decade," Mr Tang stated.

 "The regional share was sharply up from 61 per cent a decade ago. In dollar terms, our trade with the Asia-Pacific region has jumped by $253 billion over the past 10 years."  

SMEs benefiting from better market access

 

Burgeoning global trade growth has enabled Australian SMEs to import cost-effective manufactured goods from overseas and deliver much-needed products to domestic consumers.

National Australia Bank statistics show 12 per cent of the country's SMEs are in a constant state of expansion. Millennial business owners are particularly keen to grow, with 66 per cent intending to broaden their horizons over the next three years. But what goods are SMEs bringing to Australian shores?

According to the Department of Foreign Affairs and Trade, the most popular imported goods last year were:

  1. Motor vehicles.
  2. Refined petroleum.
  3. Ships, boats and floating structures.
  4. Telecoms equipment and parts.
  5. Crude petroleum.

Clearly, machinery and transport equipment are highly in demand in the country, but the top 10 imports also include computer parts, medical supplies and a range of other manufactured products.

 

Building the foundation for better growth

 

While Australian SMEs may have better access to overseas goods, they don't always have access to the necessary finance to pay suppliers up front.

This predicament is only likely to get worse after the banking royal commission unveiled widespread misconduct in the financial services industry. SMEs are likely to find that banks tighten their lending criteria to small businesses in response to government pressure and/or regulatory changes.

 A lack of working capital is a significant impediment to growth, but finding the right business finance solutions can help organisations kickstart their expansion plans.

 

Trade finance is designed specifically to help SMEs bridge the gap between placing orders with their suppliers and receiving payment from customers. These transactions can then be paid through an existing debtor finance facility or through direct payments.

 

Would you like to learn more? Please contact Classic Funding Group today to find out how you can utilise business finance solutions to achieve your growth ambitions.