Growth and Trade

Growth and Trade

In contrast with their APEC colleagues, Australian business leaders continue their bullish outlook when asked about their organisational revenue growth over the next 12 months.

Australian respondents to our 2018 APEC survey show a four year upward trend, with 41% of local respondents very confident about revenue growth over the coming 12 months, while APEC colleagues show signs of caution – dropping from 37% to 35% over the past 12 months.

Australian confidence continues when asked about business investments, with 59% of respondents saying their investment will increase over the next 12 months, an increase year on year from 45%. For Australian business, 77% of that increase is allocated between APEC's 21 economies (up from 72% in 2017).

Australia’s trade effect leading into 2019

Trade has always been, and will continue to be, vital to Australia’s ongoing prosperity.

Australia’s free trade agreements (FTAs) play an important role as an enabler to Australian businesses. They represent a key pillar of the Australian Government’s trade policy and facilitation agenda, enabling the outbound growth of our business community and attracting innovative new goods, services and investment to our economy.

Our APEC 2018 survey showed a quarter of Australian respondents say they have seen an increase in revenue opportunities due to new bilateral trade arrangements in the last 12 months, and expect to see that increase for the next 12 months.

This points to business taking advantage of new and pending agreements (including plurilateral agreements) such as the Trans-Pacific Partnership (TPP-1, ratified 31 October 2018 and entering into force 30 December 2018), the recently signed Peru Australia FTA (PAFTA) and the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA)

The concerning news is when it comes to revenue opportunities from new multilateral trade arrangements, local respondents are less optimistic, especially compared to their APEC counterparts.

Almost one in four Australian respondents had experienced increased revenue opportunities in the last 12 months due to new multilateral trade arrangement but when looking ahead to the next 12 months, less than one in five feel the same (APEC sees an increase from 25% to 30%).

This may be explained by the brewing trade war between the US and China which is evidenced by recent 25% and 10% tariff impositions on steel and aluminium.

The current market uncertainty, stemming from US President Trump’s tariffs and resulting retaliatory tariffs has brought the impact of an all out trade war front of mind for governments and businesses.

The concerns this may spill over into other APEC territories is justified.

This has led to widespread uncertainty for businesses in Australia and abroad. In our upcoming ‘What you ‘GoT to know about the trade war’ publication we model several scenarios to establish a baseline and forecast the macroeconomic consequences of the current and threatened measures, these include:

  1. Reduced investment globally due to diminishing business confidence
  2. Reduced growth in China as a result of US tariffs influencing sourcing decisions by US companies and consumers
  3. Trade diverting tariffs on commodity trade between China, the US and European Union
  4. Generally higher tariffs worldwide.

We are yet to see what the effect will be of protectionist policies out of both the US and Brexit, and this will be a consideration of business in 2019.

The role of education & infrastructure in our growth

When asked what factors enable more people to participate in and benefit from growth and trade, two in three Australian respondents and three in four APEC respondents said ‘expanded access to high-quality education at all levels’.

In fact, access to high quality education ranked first, while improved transport ranked second for both Australian and APEC respondents.

Access to high-quality education is a factor to enable greater participation in and benefit from growth and trade for Australia, and our tertiary institutions are investing more in their cross-border partnerships with Asian counterparts.

Australian tertiary institutions require further development in understanding the tax and regulatory obligations and implications that come with their partnerships in Asian countries who are opening their doors to international education, particularly in China, Indonesia and Viet Nam.

We see ongoing growth in the Australian education and training sector due to demand from Asia for high quality educational outcomes.

64% Australian respondents and 61% APEC respondents identified improved transport (e.g. roads, rail, ferries, airports) as a factor that would enable more people to participate in and benefit from growth and trade in the APEC economies.
Australia’s Federal Budget includes over $24 billion for new transport initiatives that will benefit people and businesses nationally. An example is the building on of the Melbourne to Brisbane Inland Rail project and Melbourne airport rail link, which will also act as a tourism linkage.

Australia on the move

From a global perspective Australia has moved up from 10th to 4th place in terms of top 10 APEC economies for planned increases in cross-border investments. This sentiment could relate to factors such as favourable tax rates, skills/labour costs, property rights, commodity sources, exchange rates and relative political stability.

Also, considering the APEC countries surveyed and the timing of new or revitalised FTAs with China, Japan and Singapore, this may be signalling to the business community that Australia is a favourable destination for Foreign Direct Investment from the region.

It may also be linked to the growth story of Asia looking for destination investment for their growing and profitable companies.

Contact us

Andrew Parker

Andrew Parker

Partner, PwC Australia

Tel: +61 2 8266 0218

Sung Lee

Sung Lee

Director, PwC Australia

Tel: +61 2 6271 3539

Ben Lannan

Ben Lannan

Partner, PwC Australia

Tel: +61 (3) 8603 2067

Stephanie Males

Stephanie Males

Partner, PwC Australia

Tel: +61 (2) 6271 3414

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