New politics and economics — export opportunities and risks

Thu 28 May

Efic’s latest edition of World Risk Developments reviews opportunities and risks for Australian exporters arising from latest economic and geopolitical developments across the globe.

‘A British exit from the EU would cost Australian businesses based in the UK preferential market access to the rest of the continent’, says Efic’s senior economist Cassandra Winzenried. ‘But given the unfavourable economics of “Brexit”, a negotiated compromise on Britain's relationship with the EU is the more likely outcome.’

‘Disappointing data suggest China is at risk of missing its 7% growth target this year’, warns Winzenried. ‘The central bank’s successive interest rate cuts will stabilise rather than stimulate the economy — but large scale fiscal stimuli aren’t likely for fear of excessive debt accumulation.’

According to Winzenried, ‘exporters must adjust to the ‘new normal’ of slower Chinese growth and a rebalancing of the economy towards consumption’.

South Africa’s economy is also languishing, shrinking Australian exports to its largest African market. ‘Rising violence, political uncertainty and a drift toward nationalism will add to risks and damp opportunities further’, says Winzenried.

Business risks have also increased in PNG — where the commodity slump has given rise to foreign exchange shortages. ‘While strong buffers will ward off crisis — adjustments will be required to achieve sustainable growth’, says Winzenried.

But on the upside, according to Winzenried ‘new opportunities will arise from ASEAN’s currently underdeveloped e-commerce market’. Online retailing in the region is forecast to grow by up to 25% p.a. in coming years and be worth up to US$90b once it matures.

According to Winzenried, ‘the recent commonwealth budget will also promote exports — setting aside funds to increase business awareness of Australia’s FTAs, promote infrastructure development and stimulate small business through tax cuts’.