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Ai Group trade report: Lower dollar a positive but challenges remain

18 August, 2016

An Ai Group National CEO survey released 15 August 2016 has found that the lower dollar is helping Australian businesses and manufacturers.

"An Ai Group National CEO survey released today has found that an exchange rate of 75 US cents to the Australian dollar is the sweet spot for business growth. The report tracks the positive impact of the lower dollar on Australian businesses and manufacturers in particular," Australian Industry Group Chief Executive, Innes Willox, said 15 August 2016.

"Importantly, the lower dollar is clearly helping Australian economic growth transition away from its reliance on mining-related resources investment and output growth, towards a pattern of growth that is spread more evenly across sectors and geographies.

"The new report: Business Responses to the Australian Dollar – drawing on responses from the CEOs of 248 businesses across Australia – sees the sustained lower Australian dollar together with greater trade opportunities as having long-term and overall positive impacts on Australian-based manufacturing and services businesses.

"At the same time, however, a negative naturally associated with the lower Australian dollar is the pressure it puts on the costs of imported inputs. Many businesses find it hard to pass on these cost increases in the face of intense competition and a generally weak inflation environment.

"As detailed in the report, 43% of exporting manufacturers expect their export income to increase in 2016 (up from a 24% actual increase in 2015). For services businesses, 25% of exporting businesses expect their export income to increase (up from a 19% actual increase in 2015).

"The lower dollar is a major factor in opening opportunities for exporters, with 61% noting that expanding overseas markets was one of their growth strategies. For service businesses, 48% nominated expanding overseas markets as a growth strategy. These proportions are significantly higher than in recent years. The lower dollar has assisted businesses take advantage of opportunities created by Free Trade Agreements and the growing middle class markets in Asia – particularly in sectors like food and beverage manufacturing, agribusiness and tourism.

"Opportunity itself is not enough to ensure the continuing success of Australian businesses. Australia's international trade competitiveness could be better. Many Australian businesses are still developing as exporters of high value-added goods and services and many are not as well integrated into global supply networks as a means of realising the value of more complex goods and services.

"Australian exporting businesses and those competing with imports need to be increasingly focussed on efficiency, reliability, innovation, collaboration and continuous improvement. They need to be looking at delivering a more diverse and higher value array of goods and services and becoming more tightly integrated into global supply chains and global marketing networks.

"For many of these businesses, future success in the global economy requires end-to-end product development, close collaboration with customers, suppliers and competitors, making better use of our Free Trade Agreements and continually exploring new opportunities in existing markets and expanding into new markets," Willox said.

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