Positive outlook for growth

Recent Australian Bureau of Statistics (ABS) figures show that the total number of Australian exports of goods and/or services increased by 9 per cent between 2013-14 and 2014-15. Encouragingly, the ABS figures also show that this increase was mainly driven by small businesses – exporters who were exporting less than $1m.

These figures are representative of the findings of Efic's latest SME Exporter Index, bi-annual research which captures insights from small and medium sized enterprises (SMEs) on current trends and issues in export markets. The research found that over a third of SME exporters are optimistic about growth for the year ahead. Small business optimism has continued to grow since we first conducted the research in March 2014, when only 25 per cent of exporting SMEs predicted their sales in offshore markets would increase in the upcoming quarter.

Promisingly, this optimism is translating into business activity for the year ahead. One in five SMEs intend to launch new overseas operations within the next six months, while a further five per cent intend to within the next year. This business optimism continues into the longer-term as well, with 41 per cent of small business owners planning to establish new subsidiaries abroad from 2017 or beyond.

Why exporters are right to be optimistic

1.Depreciating dollar

The Australian dollar has depreciated significantly over the previous three years and some commentators anticipate further falls in the year ahead. A lower dollar is great news for Australia's exporters because it makes their products and services more competitive overseas and, in turn, leads to stronger demand.

2.Free trade agreements

Australia has signed free trade agreements (FTAs) in recent years with China, Japan, and South Korea which have opened up these economies for Australian businesses through lower tariffs and preferential access. These FTAs are providing opportunities for exporters, with the manufacturing, agriculture and services sectors already taking advantage afforded by the agreements.

3.Growing middle class in Asia

The opportunities created by the FTAs are compounded by the rapidly changing demographics in the Asia-Pacific region – Australia's closest export region. There is a growing middle class in Asia and in particular China; a middle class which is significantly more affluent than their parents, and which has a desire for the high quality goods and services Australia's exporters can offer. In particular, there is strong and growing demand for Australia's premium food and beverages, services such as education and tourism, and high quality manufacturing. Small businesses in these sectors should be looking abroad to Asian markets to take advantage of this demand in the year ahead.

4.Technology breaking down borders

Improvements in digital technology and social media mean export markets are more accessible than they have ever been before, making it easier for exporters to communicate with international partners, and market their goods and services abroad. For example, a recent McKinsey study found that tapping into existing Facebook networks can help businesses gain immediate access to communities in international markets. Digital technologies also make it easier for exporters to gather quick insights into the behaviours of different market segments in target markets – a process that would have taken months a few years ago.

One such example is Sydney-based digital marketing company, Stackla, which has used digital technologies to rapidly build a portfolio of more than 500 blue-chip clients around the world. Stackla has partnered with Facebook and Twitter, which has allowed it to specialise in collating and analysing user-generated data across social media, which is sold on to clients. Stackla's strong digital presence enables the company to deliver software and interact with customers directly via its website and developer portal – resulting in hundreds of new clients across Europe, North America and the Asia-Pacific in the past four years.

Considerations for the year ahead

According to the Department of Foreign Affairs and Trade, in 2015 China was Australia's largest two-way goods and services trading partner, accounting for 23 per cent of total trade. The United States was Australia's second largest with 10 per cent of total trade, followed by Japan which accounted for 9 per cent of total trade. In the year ahead, we expect these three markets to continue to offer excellent opportunities for Australia's small businesses and exporters. And Europe, the Middle East, South Korea and New Zealand will also continue to offer considerable opportunities for exporters.

2016-17 – a great year for exporting

While predictions and forecasts are often packaged with caution, the conditions for exporting in 2016-17 are as good as they have been for years. Australia's small business exporters have excellent opportunities ahead of them, if they continue to take advantage of the depreciating dollar, recent FTAs, a growing middle class in Asia, and by using technologies to break down borders. 2016-17 has the potential to be a great year for Australia's exporters.

Andrew Hunter is Managing Director and CEO of Efic.