Australian Industry on the Export Frontline

Speech by the Australian Deputy Prime Minister and Minister for Trade, The Hon Tim Fischer to the Australian Chamber of Commerce and Industry National Industry Policy Conference - "Industry '98: Priorities for the Future"

Melbourne, 24 July 1998

Ladies and gentlemen.

It's good to see Australian industry here in large numbers this evening. I applaud your hard work in looking at the challenges confronting Australian industry today.

East Asia's economic difficulties have figured prominently as a major issue for Australian industry in 1998-99. Certainly, no-one can deny that the region is facing its most serious economic challenge in decades.

Yet despite this Australian industry is sustaining its trade and investment effort remarkably well.

That is because Australian exporters have demonstrated their business acumen in quickly diversifying their markets and in positioning themselves through judicious investments for new opportunities once Asia rebounds.

And this good export performance has been helped by the Government putting in the hard yards in opening a wide range of markets for Australian trade and investment.

When you put a strong business trade and investment performance together with the Government having put in place the most sound economic fundamentals in a generation, there is still a good deal to be confident about in Australia's current economic situation.

Australian Exports in the East Asian region

So how are our exports faring in the East Asian region?

Certainly, the East Asian instability is having an impact. In recent months we have seen falls in exports to the hardest-hit East Asian economies of Indonesia, Korea and Thailand and some other regional markets have also been affected.

But, as I have said, Australian business has demonstrated its capacity to adapt to tough times by continuing to seek out opportunities both in the region and further afield.

As a result we've seen total exports continue to grow both in volume and in value terms. If we look at the figures for the eleven months to May Australian exporters have done well compared with the equivalent period to May 1997. For these eleven months merchandise and services exports reached $104.5 billion having grown 10 per cent compared to the same period a year earlier.

Even in East Asia there has been good growth in several key markets in the five months to May. In particular, merchandise exports to our largest market, Japan, grew 10 per cent compared to the same period in 1997. And this was despite the fact that Japan's imports in this period fell by over 11 per cent.

Over the same five months growth has also improved on 1997's level by 25 per cent to Hong Kong and 8 per cent to Taiwan. And it is worth noting that even in Korea, Australia's market share has increased by around 16% since the onset of the economic instability.

Moreover, I am pleased to say that the Government's efforts since coming to office in helping industry to diversify their trade and investment markets have borne fruit.

Exports to markets outside the region have boomed - growing by nearly 17 per cent over the eleven months to May - and that growth has been particularly strong in the last few months. Exports to the US grew by 41 per cent to reach $A7 billion and exports to the European Union increased by 22 per cent to reach $A9.1 billion.

And there has also been good growth in a range of emerging markets. For example, exports to the United Arab Emirates grew by 66 per cent to reach nearly a billion dollars.

I therefore congratulate Australian exporters who are working hard to diversify their markets and to take opportunities both in the region and beyond. By developing a more diverse export base they are effectively insuring themselves against downturns in specific markets.

Regional Developments

Now I want to make the point that while keeping our eyes open to the realities, we shouldn't swing from the optimism which prevailed just twelve months ago to an extreme pessimism.

The economic strengths which made East Asia highly attractive to global investors over the past two decades have not disappeared. High savings rates continue and an increasingly skilled and educated workforce will be all the better placed to respond positively to the reforms now under way.

But we certainly cannot afford to be complacent about the possibility of further economic instability in the region.

The Government is watching carefully developments which have the potential to delay regional recovery or perhaps even initiate another round of economic difficulties. How Japan approaches its necessary economic reform and whether China feels compelled to devalue its currency if the yen drops significantly are two key watchpoints.

If Japan fails to restore international confidence in its capacity and political will to manage the reform process effectively and restore economic growth, then we could see further financial and market setbacks in the region. This would seriously delay the timetable for the region's recovery.

The change in leadership in Japan provides Japan with an opportunity to strengthen its resolve to fix the Japanese economy.

I congratulate Japan's LDP on selecting a new leader and, subject to confirmation, the new Prime Minister, and acknowledge that the eyes of the world are on Japan, which is after all the world's second largest economy. I encourage Mr Obuchi to firmly commit to stimulating domestic demand in Japan and continuing with renewed urgency the process of structural reform, especially in the banking sector. These reforms are essential if the Japanese economy is to return to strong growth over the longer term.

We are therefore looking to the new Japanese leadership to take the decisive steps which will strengthen international confidence in Japan's economy.

I would make the point that Japan will still be the world's second largest economy at the start of the new millennium and will still require millions of tonnes of coal and other inputs simply to turn on the lights. It will still be Australia's leading export market by a wide margin.

It is crucial that the new Leader move decisively to address Japan's economic problems in a way that restores confidence in the banking sector and returns the economy to a growth path. For too long, the problems in Japan's financial sector have been talked about without effective action being taken.

I renew my congratulations to Mr Obuchi and urge him to overcome bureaucratic inertia and move resolutely to address these vital issues for the sake of economic health in both Japan itself and the wider region.

Again on the positive side I would note that while Alan Greenspan stated earlier this week that the Asian situation could deteriorate further, he also indicated that the impact of the region's difficulties on the US economy has been more benign than many had feared. We can be reasonably confident that the US economy will continue to be a positive factor in the regional equation.

Getting our economic fundamentals right

But I would make the point strongly that Australia is showing it is well-placed to withstand any further financial instability in the region.

Australia now has an inflation record virtually second to none and the lowest interest rates since the 1970s. In just two years, a budget deficit of $10.5 billion has been turned into a surplus of $2.7 billion.

And we have introduced a range of reforms aimed at making it easier to do business in this country.

This includes a clear commitment from the Government to those many small and medium enterprises which are bringing jobs and growth to their regions through taking on the challenge of export markets.

This commitment includes the Export Market Development Grants scheme - in which 70% of recipients have a turnover of $5 million or less, and nearly 40% of recipients have 5 employees or less.

TradeStart

The Government is particularly concerned to ensure that those exporters and potential exporters in rural and regional Australia are given the assistance they need to take on the world.

Tonight I announce a network of offices called TradeStart which will deliver direct export assistance and links to Austrade's export services for companies in rural and regional Australia. Eighteen TradeStart offices are being established around the country, working in partnership with State governments and local industry groups. These offices will act as a focal point for the delivery of export services in regional and rural centres, and supplement the existing Austrade Regional Trade Commissioner network.

TradeStart offices have commenced in Albany, Bathurst, Cairns, Coffs Harbour, Darwin, Geraldton, Launceston, Nowra, Rockhampton, Tamworth, and Wagga Wagga, with Ballarat, Berri, Gosford, Mt Gambier, Wangaratta, and more locations to come.

The Government is Opening Markets for Exporters

Australian companies continue to face considerable barriers to trade and investment. There is clearly no such thing as a level playing field in the world of international trade and investment.

That is why the Government has adopted an integrated strategy of coordinated bilateral, regional and multilateral action to secure some impressive gains in access for Australian goods and services.

In particular, the Market Development Task Force, which we established in 1996, has achieved considerable success by adopting a whole-of-government approach to opening markets and to facilitating and developing trade and investment in established markets.

Since October 1996, the Task Force has pursued 120 priority objectives, achieving positive outcomes or measurable progress in 98 cases, including creating greater opportunities for Australian sugar, rice and citrus in Japan and for financial firms in China and Thailand.

Also, the Australian Dairy Corporation welcomed Korea's announcement earlier this year that it would ease certain restrictions on imports of Australian UHT milk. This should see significant growth in what is already a $30 million trade.

In April we saw an important investment breakthrough where a major Australian insurance firm will now be able to establish itself in China following the granting of a licence. Also, since July last year the Government has facilitated investments worth around $A40 million in Thailand to supply automotive components.

The Task Force's targeted sectoral promotions have contributed to $200 million in information technology sales to Europe, $20 million in food exports to Japan, $23 million in building materials sales to Hong Kong, and $250 million worth of passenger ferries to Italy, Argentina and Singapore.

And just last week it was very pleasing to see a reciprocal agreement between France and Australia finalised on visa-free entry for short-term visitors. This will certainly facilitate the development of further trade links between our two countries.

APEC and the WTO

I want to assure you again tonight, that Australia is also pushing hard for freer and fairer trade at the regional and global levels.

In the region, Australia's principal interest is to continue the momentum of trade and investment facilitation within the Asia-Pacific Economic Cooperation forum. In addition to the important American and Asian markets covered in APEC, we have also put considerable effort into European and South Asian markets, particularly in raising awareness of Australian manufacturing's sophisticated capabilities.

And in the World Trade Organisation, I attended the Second Ministerial Conference in May. There Trade Ministers began laying the foundation for a decision, hopefully in late 1999, to commence a new round of global trade negotiations.

The figures at stake are huge. Global merchandise trade in 1996 was valued at USD 5,100 billion and services trade at USD 1,260 billion - and these figures are constantly increasing. Better access to world markets will deliver massive benefits to the Australian economy.

Conclusion

I would like to close tonight by congratulating all those here who are on the frontline of export success. You have had to fight hard to maintain your position in an uncertain climate in our regional markets, while taking up opportunities and creating export growth in other markets as well.

You are showing how exports create jobs, contribute to economic growth and improve our standard of living to the benefit of all Australians.

The Government congratulates your export efforts and will continue to work hard to open up new markets for Australia.