New research from the Export Finance and Insurance Corporation (EFIC) has found that Australian SME exporters' confidence is on the up, with 36 per cent of active SME exporters expecting overseas sales to increase in the next 12 months. Overall, 94 per cent said exports will increase or stay the same.
The research surveyed 853 active SME exporters on their sentiment in regards international growth in the face of challenging domestic conditions, revealing a promising outlook from SME when it comes to their exporting activities.
As a result of an expected increase in sales, 30 per cent of SME exporters surveyed also anticipate the profitability of their international operations to grow in the next year, with a total of 95 per cent expecting profitability to grow or remain the same.
Regional markets remain crucial
When asked to identify which export markets would be most important in 12 months' time, the SME exporters, who generate an average 13 per cent of their annual revenue from overseas, largely pointed to regional opportunities. Nearly 80 per cent think Asia and Oceania will be the most important market over the next year, with China, India and South Korea all expected to become more important.
Steady as she goes
Even for most of those who aren't predicting growth over the next year, it is 'business as usual' with 58 per cent expecting overseas sales to stay the same and 65 per cent anticipating no change in the profitability of their international operations.
Currency in the shape of the falling AUD was overwhelming identified by SME exporters as the reason for increases in overseas sales at 71 per cent. Many SME exporters of all sizes also noted the negative effect a dropping AUD/USD rate is expected to have on their cost base. The research also found that there are discrepancies in terms of the breakeven points for the dollar between larger and smaller exporters.
Competition obstacles remain
Beyond currency fluctuations, the research asked SME exporters to identify the factors that they believe impact on competitiveness, with market access (54 per cent), access to finance (28 per cent), and logistics seen as the main impediments. Almost 20 per cent expect access to finance to get more difficult over the next three months, and get harder still as the year goes on.
When it comes to expected changes in the cost of exporting, smaller SME anticipate an average increase of 9 per cent compared to the largest SME exporters who forecast an average increase of 5 per cent.
EFIC managing director Andrew Hunter said the research had shown access to finance is perceived by Australian SME as an increasing obstacle to overseas growth.
"SME exporters have told us that difficulty in accessing finance can hold them back from maximising opportunities in foreign markets. When faced with a knock back from a preferred source of funding, we know that many SME are unaware where to turn for assistance," he said.
"This indicates a key role for external bodies, from both government and industry bodies, including EFIC, Austrade and DFAT to help SME access much-needed funding and market access, as well as provide advice and education on overseas expansion."
He added that despite these challenges, the research is testament to the robustness of Australia's small exporters in the face of rapidly changing markets.
"It is great to see that so many SME exporters have an optimistic outlook in terms of profitability and growth. We expect this confidence to be reflected in an increase in export activity, with exporters telling us that they predict the highest growth in overseas activity to be in agriculture, forestry and fishing, mining and construction."
"The fact that world economic growth is accelerating, interest rates remain low, and Asia is continuing to move up the income scale and expanding its demand for resources, food and services – sectors which Australia should be highly competitive in – are all additional reasons SME exporters can look to the future positively."
