20 April 2009, Melbourne
EFIC Global Readiness Index Launch
Introduction
Thank you Angus, [Angus Armour, Managing Director and CEO, EFIC] for that kind introduction.
It's a pleasure to be here for the launch of EFIC's 2009 Global Readiness Index.
And it's great to see the level of interest this Index has generated in the media and among the business community.
The Index is an important annual survey and the 2009 update could not come at a more important moment for Australian exporters and the Australian economy as a whole.
In the midst of the global recession, there is a new focus on trade.
World trade has been impacted by the crisis. World trade isn't a cause of the crisis, it is however very much part of the solution.
Trade matters. It matters domestically and it matters globally.
As Trade Minister and former president of the ACTU, I am particularly aware of calls for protectionist measures similar to the "Buy American" scheme in the United States. This Government is totally committed to Australian industry and safeguarding Australian jobs. But this commitment must be done within the context of meeting our international trade obligations.
To do otherwise, would be detrimental for the Australian economy and Australian workers.
If there was a protectionist trade war Australia would be a big loser.
As a nation of just 22 million people our small domestic economy alone cannot support our national prosperity.
Australia's international engagement is crucial to generating wealth and safeguarding jobs.
Research commissioned by the Department of Foreign Affairs and Trade shows that more than 1 in 5 jobs in Australia is trade related.
Breaking it down further the research shows: 1 in 7 Australian jobs, or almost 1.4 million positions, are export related. Importantly another 1.1 million jobs, or 1 in 10 Australian jobs, are import related. These jobs are mainly in transport, storage, wholesale and retail trade.
These figures on trade related jobs are too often overlooked and underscore the fundamental point of the value of trade and keeping trade flows open. That is one of the key reasons why I was so pleased by the announcements coming out of the G20 meeting in London at the start of the month.
Global response to the economic crisis
World leaders in London drew a line in the sand firstly by renouncing protectionist measures.
They pulled the world back a few steps back from what could have been a disastrous descent into retaliatory trade restrictions.
Even more importantly, the G20 leaders sent a renewed message on concluding the Doha Round of trade negotiations. They acknowledged that we can't afford to take backward steps at this point. Future negotiations towards concluding the Round will be firmly based on the solid progress we made last year in Geneva.
We secured agreement on 80 per cent of the negotiating agenda and we are moving forward based on progress to date, not going back to the drawing board.
The successful conclusion of the Doha Round would be a great boost to international confidence and international trade in the midst of a global downturn.
Trade is a stimulus. There is no point coordinating a domestic stimulus strategy without also working on one of its multipliers.
The G20 summit also made major commitments in dealing with global financial architecture and this included an injection of US$250 billion to support international trade finance.
This was an acknowledgement that trade finance is the lifeblood of world trade.
The Global Recession
World trade of course has been has been hit hard by the Global Economic Crisis. Everyone in this room will be aware of the bleak forecasts made by the World Trade Organization and the OECD on prospects for the global economy in 2009. And just last week the IMF released new research suggesting that the global recession is likely to be unusually severe and followed by a slow recovery.
The WTO predicted global exports will drop by 9 per cent this year, the OECD went even further and predicted a drop in world trade of more than 13 per cent.
I often talk about trade as a multiplier for the global economy because since 1950 world trade has grown three times faster than world output.
We are now seeing the multiplier in reverse. Trade is dropping faster than the contraction in economic activity.
The upside here is that when the recovery comes, trade should pick up quickly - provided we have the right policies in place, keep our markets open and open up new opportunities for exporters.
Unique Advantages of the Australian Economy
I am pleased to say that Australia is uniquely placed to see out the global recession - hopefully without the level of pain that some of our counterparts will go through.
We are of course not immune from the downturn but there are important advantages for the Australian economy.
One of those is the fundamental repositioning we've undertaken over the past three decades to improve the competitiveness and productivity of the country: to focus the direction of our trade much more on Asia. That structural and strategic alignment continues to pay dividends.
Over most of the past 30 years, Australia was been able to improve productivity by opening up the economy.
This period also saw the creation of new better-paid jobs for Australians with net exports contributing strongly to our economic growth. This is a position we have returned to in the past 12 months - despite the global downturn.
It is also interesting to note that Australia's regional focus on Asia is also a great advantage.We are in the Asian time zone which is the fastest growing region in the world. Asia still presents opportunities for Australian companies to secure and build market share for Australian companies.
The Global Readiness Index
The 2009 Index being launched today is not only timely but I am pleased to say also shows that in general Australian companies are prepared to take up the challenges and remain optimistic - despite the global recession.
It reveals Australian exporters and offshore investors continue to aggressively look for opportunities.
That is precisely the sort of attitude that is needed in the current climate.
The Global Readiness Index reveals:
This willingness to push into overseas markets and establish a presence overseas indicates a number of factors influencing Australian exporters and one of the biggest of these is the importance of Asia.
When the spotlight is placed on Asia the Index reveals:
As I said earlier, Australia's strategic alignment with Asia is paying dividends.
Government delivering new opportunities
Australian exporters and offshore investors are at the frontline of our international engagement. The Government understands this and is working hard to help generate opportunities for Australian businesses.
We have recently, for example, concluded a Free Trade Agreement with New Zealand and the 10 members of the Association of South East Asian Nations (ASEAN).
Already, Australia's two-way trade with the ASEAN region is worth $80 billion a year and collectively is shaping as our biggest trading partner.
The agreement has enormous potential to increase job opportunities for Australian workers and to deliver new openings across the board for Australian companies.
I want to encourage Australian companies to take maximum advantage of these new opportunities.
Within three years of the FTA's entry into force:
The ASEAN FTA is a comprehensive agreement that opens access for Australian goods, services and investment in a fast growing region.
At present around 18,500 Australian exporters are doing business in ASEAN countries.
Austrade is rolling out a commercial strategy to take advantage of the market openings created by the agreement .
The Austrade strategy includes boosting awareness of the tariff changes amongst Australian companies and matching new ASEAN customers with capable Australian exporters.
Australian companies looking for more information can visit my departmental website (www.dfat.gov.au). Or even better for many small firms, they can call the Austrade hotline on 13 28 78.
As Trade Minister I am absolutely committed to opening up new opportunities for trade liberalisation.
This Government is working on trade liberalisation on many fronts. At the multilateral level through the Doha Development Round, on the regional level with agreements like the ASEAN FTA and also at the bilateral level with a range of important trading partners.
For instance, as significant as the ASEAN FTA is, we are not just stopping there. We are building off the platform it provides by undertaking further individual negotiations for improved access with Indonesia, Malaysia, Vietnam, Thailand and the Philippines.
Further, we have unfrozen FTA negotiations with our largest trading partner China and I have made four visits to China since taking up the portfolio.
We are also engaged with Japan and have agreed to commence FTA negotiations with Korea.
Access to Finance
This Global Readiness Index shows that almost half of Australian businesses identify the size of our domestic market as a reason to go global. Size dictates the need for companies to seek growth through overseas markets.
But not surprisingly the global recession has thrown up some barriers for Australian companies looking to expand offshore.
Economic conditions overseas were identified by almost half of businesses surveyed as a barrier to offshore expansion.
And the lack of liquidity of international finance has meant some Australian businesses are finding it difficult to access the financial support they need to break into overseas markets.
This is especially the case for smaller firms.
That's why the Government is working to help business looking to export.
EFIC, of course, has products to help Australian SMEs looking to expand their overseas operations.
EFIC's Headway scheme, in particular, helps firms with a turnover of less than $50 million. Broadly speaking, Headway is a guarantee from EFIC to an exporter's bank, allowing exporters to extend existing finance relationships to support exports without requiring additional security.
With products like Headway, EFIC has leant a hand to Australian exporters with the expertise, but not the finance, to crack tough international markets.
Working with EFIC, our exporters have won a tender to supply a satellite ground station in Hong Kong, secured a contract to provide lighting features for the Dubai Metro and sold Tasmanian espresso machine accessories to international kitchen suppliers.
A key pillar of our financial assistance to exporters is the Export Market Development Grants Scheme managed by Austrade.
This is a vital scheme and particularly important to help companies impacted by the economic downturn.
But this Government inherited an EMDG scheme with an unsustainable Budget position. In our first Budget, we acted decisively and committed an extra $50 million to fully fund the enhancements we made to the scheme.
The extra $50 million is specifically aimed at funding the eligibility changes related to costs to be incurred in 2008-09.
This year's low payout factor is directly attributable to the failure by the previous Government to adequately fund the costs incurred in 2007-08.
However, I accept that exporters are no longer interested in who is to blame for the problem. The bottom line reality is that the EMDG is under funded. I recognise the problem and will continue to make every effort to ensure the scheme is properly funded.
The Challenge for Australian Companies
Let me turn to the challenges ahead. The key point is that there are opportunities for Australian companies despite the global recession.
The message I am delivering is to work in partnership with the Federal Government. There are challenges, but through adversity comes opportunity.
There are chances to grab market share and crucially, now is the time to position for the recovery when it eventually comes.
It is vital that exporters are not caught on the back foot as the recovery takes shape.
The Government understands the importance of engaging with Asia and we will be out there fighting to make sure Australian exporters get the best possible deal as they enter or expand in overseas markets.
And part of being ready to exploit advantages overseas is to invest in infrastructure and skills back in Australia.
In our first Budget we establsihed the Building Australia Fund that has $12.3 billion to build and renew our road, rail and port infrastructure. This month the Government announced that in partnership with the private sector up to $43 billion will be invested in a National Broadband Network.
It is one of the most important pieces of infrastructure a country can invest in. Telecommunications and broadband infrastructure is the great enabler and the National Broadband Network will be an exciting foundation for Australia's future growth and prosperity.
As a Government we are also being creative, even in the downturn, to ensure we invest and develop the skills the country will need when we come out of the global downturn. We are investing in 700,000 new government-funded training places.
We are investing in infrastructure and skills which are the critical drivers of economic growth.
So let me close where I began, talking about Australian jobs.
We all feel the pressures of the Global Financial Crisis and there is a natural reaction in business management to contain costs when times are tough.
But as a nation, particularly in the export sector, we need to think carefully before cutting jobs.
Instead we need to look at creative ways to invest in the skills training needed to take advantage of new and emerging opportunities.
It is only with the right people and the right skill sets that we will take full advantage of the economic recovery - when it arrives.
In this spirit, I thank EFIC and Austrade for their support for our exporters. This index is an important snapshot and it underscores a nation confident in itself and with its future.
Our task together is to secure that future.
[ENDS]
Media Inquiries: Departmental Media Liaison 02 6261 1555