Australian exporters battling toughest markets in 30 years, but more to be done on SME support: Experts

Australian exporters are battling the toughest market in 30 years, but small business is missing out on help from the Government’s export credit agency, experts say.

The Australian Institute of Export, which represents more than 100 export grant consultants, says as the Export Finance and Insurance Corporation is mostly focused on mid to larger exporters, a “significant number of exporters/business with potential fall outside the act during which EFIC currently operates.”

“The services provided by EFIC are an important part of the mix that contribute to Australia’s international competitiveness. The service however is limited by the EFIC Act particularly in relationship to the SME sector,” it says.

It’s a point picked up by the Australian Chamber of Commerce and Industry, which says that while there is a case for the body to focus on larger companies, an increased focus by Austrade into “frontier” markets rather than “traditional” markets boosts the case for greater SME help.

“EFIC’s provision of services have perhaps been weighted towards the larger transactions and companies but this is justified in the belief that smaller companies can then ‘coal tail’ into the large-scale projects as suppliers or inputs or services once the projects have commenced,” Bryan Clark, director of trade and international affairs at ACCI, says.

“It could be argued however that EFIC should more explicitly support smaller exporters, particularly when considered in the context of Austrade reforms where Austrade is reducing its support from ‘traditional’ markets in favour of ‘frontier’ markets and inbound investment.”

The business body adds that EFIC should be able to assist small and new exporters into relatively mature markets like Europe, North America and Japan at one level and also assist large established players into the “frontier” markets offered by the developing countries where commercial providers may not cope well with the sovereign risk.

The comments are part of a Productivity Commission inquiry into EFIC, announced in September last year, that is tasked with looking at the role for Government involvement in the provision of export credits, insurance, reinsurance and other financial services.

The commission will release its report this year.

In its submission, the Australian Institute of Export says:

• Concerns on the rise of the Australian dollar are most keenly felt in education, manufacturing, viticulture and services, and have become more pronounced since the local currency rose above the US dollar.
• A previous review into EFIC called for legislation to expand its role to allow it to provide financial support to a wider range of transactions for Australian SMEs exporting or investing overseas, but this did not happen.
• The high dollar, the global financial crisis, increased competition and high interest rates relative to other countries are creating the most difficult business environment for SME exporters in more than 30 years.
• There is an increasing interest by SME exporters in moving production or establishing global supply and distribution chains as a means of re-establishing margins
• Expanding EFIC’s direct lending limitations and better servicing smaller exporters will enhance Australian export capability and reduce market failure.

In its submission, ANZ Banking Group notes that the private sector has limited appetite to support “smaller but expanding exporters” and lending for some countries and markets.

It adds that the shift in Australia’s economic structure – with increasing pressure on exporters from the strong Australian dollar and relatively high labour costs – is “creating potential liquidity and growth challenges for companies, particularly SMEs, which are reliant on export markets”.