Australian businesses are confident that they can negotiate economic conditions to increase sales.
Fears of trade tensions hitting business confidence haven’t materialised, as more than eight in ten (84%) Australian companies expect their sales to grow in the next year, more than their peers in the Asia-Pacific region (77%) and the global average (79%), according to new research by HSBC.
HSBC Navigator: Now, next and how for business, a survey of over 9,100 companies in 35 countries and territories, including over 200 businesses from Australia, reveals that while Australia’s economy has slowed to its most sluggish pace since 2009, firms are upbeat on business growth – both now and over the next five years – and are confident they can negotiate economic conditions to increase sales.
When asked what external conditions will drive this growth, the most cited response was new markets opening up (30%), confirming a positive outlook for international trade opportunities or overseas ventures.
Following three rate cuts by the Reserve Bank of Australia since June, Australian firms cited ‘favourable changes in interest rates’ (28%) as the second most important external factor supporting growth, higher than the global (20%) and Asia-Pacific (19%) averages.
In order to counter threats or business contraction, Australian firms are prioritising investment in innovation (27%), customer experience (25%), and off-shore expansion and employee well-being (both 22%).
“In our conversations with clients, we are hearing concerns over the impact of trade tensions and muted demand, so it’s encouraging to see firms are still aiming for growth,” said Steve Hughes, Head of Commercial Banking, HSBC Australia. “Embracing low rates to build rather than retreat, or expanding into new markets using new or existing trade pacts, could help businesses navigate challenging conditions.”
Despite global uncertainity, Australian firms are capitalising on opportunities to enter new markets, with more companies looking to expand into North America (23% in 2019 vs. 15% in 2018) and Europe (29% in 2019 vs. 22% in 2018) over the next three to five years.
“As trade talks continue, it’s not just policy-makers who are welcoming the benefits that a trade agreement between Australia and the European Union could bring. It’s interesting to see that businesses are willing to alter course to capitalise on the opportunities presented by a bloc that is already Australia’s second-largest trading partner,” said Hughes.
Notwithstanding the resurgence of activity between Australia and Europe and North America, the research confirms that trade within the Asia-Pacific region remains fundamental for Australian businesses. Mainland China continues to be the most important market in the region for Australian firms, followed by New Zealand, while Japan’s importance has fallen significantly (5% in 2019 vs. 18% in 2018).
Australian businesses consider markets in Asia-Pacific as attractive because of proven customer demand (56%), the opportunity to access new suppliers (39%) and the culture of innovation (38%) present in the region.
“Australia is on the brink of introducing a number of intra-regional free trade agreements, including the multi-lateral Regional Comprehensive Economic Partnership (RCEP) and bi-lateral deals with both Indonesia and Hong Kong. These deals will reduce, or completely remove, barriers for Australian exporters and should encourage them to maintain long-established trade ties while embarking on new partnerships closer to home and further abroad,” added Hughes.
Note to editors:
HSBC Navigator: Now, next and how for business
HSBC’s Navigator report comprises a global survey gauging business sentiment and expectations on trade activity and business growth from 9,131 decision-makers in 35 markets. 3,252 businesses in 12 Asian economies participated in the survey. Research was conducted by Kantar for HSBC between August and September 2019. HSBC’s Navigator helps businesses capitalise on new opportunities and make informed decisions for the future by understanding the outlook for international trade. The full report can be accessed here: www.business.hsbc.com/trade-navigator