1 00:00:04,140 --> 00:00:06,930 Sean Aylmer: Welcome to the Fear & Greed daily interview. I'm Sean Aylmer. 2 00:00:07,230 --> 00:00:10,440 Sean Aylmer: Exports play a crucial role in the strength of Australia's 3 00:00:10,440 --> 00:00:13,620 Sean Aylmer: economy. We're a nation whose products are in demand from 4 00:00:13,620 --> 00:00:17,280 Sean Aylmer: mining giants, exporting iron ore and coal to small and medium- 5 00:00:17,280 --> 00:00:21,360 Sean Aylmer: sized businesses, sending products right around the globe. A new 6 00:00:21,360 --> 00:00:25,110 Sean Aylmer: report from Austrade paints a very clear picture of just 7 00:00:25,110 --> 00:00:29,340 Sean Aylmer: how integral exports are to our economic future and how 8 00:00:29,340 --> 00:00:33,479 Sean Aylmer: exporters have weathered the pandemic. Heather Cotching is Chief Economist 9 00:00:33,479 --> 00:00:36,659 Sean Aylmer: at the Australian Trade and Investment Commission, otherwise known as 10 00:00:36,659 --> 00:00:38,580 Sean Aylmer: Austrade. Heather, welcome to Fear & Greed. 11 00:00:38,850 --> 00:00:39,720 Heather Cotching: Thank you for having me. 12 00:00:40,320 --> 00:00:42,810 Sean Aylmer: So let's start with some of the key stats from 13 00:00:42,870 --> 00:00:46,590 Sean Aylmer: the report. The data focuses on the 2020- 2021 financial 14 00:00:46,590 --> 00:00:49,710 Sean Aylmer: year right in the middle of the pandemic. How much 15 00:00:49,710 --> 00:00:53,910 Sean Aylmer: did the exporters contribute in perhaps one of the toughest times 16 00:00:54,120 --> 00:00:55,650 Sean Aylmer: in many decades? 17 00:00:56,040 --> 00:01:02,310 Heather Cotching: So Australia's exports were worth $ 459 billion in 2021, and 18 00:01:02,400 --> 00:01:05,910 Heather Cotching: it has been a particularly difficult couple of years for 19 00:01:05,940 --> 00:01:08,970 Heather Cotching: exporters because of COVID and everything else that's been going 20 00:01:08,970 --> 00:01:12,390 Heather Cotching: on in global trade. But we had some really interesting 21 00:01:12,420 --> 00:01:15,750 Heather Cotching: findings from this report because we wanted to understand exporter 22 00:01:15,750 --> 00:01:19,949 Heather Cotching: behaviour more deeply and using more data sets than we'd 23 00:01:19,950 --> 00:01:24,209 Heather Cotching: seen previously. So we saw, for example, that exporters were 24 00:01:24,209 --> 00:01:26,970 Heather Cotching: actually more resilient than other businesses, and that was a 25 00:01:26,970 --> 00:01:30,510 Heather Cotching: really interesting finding despite the challenges that many of them 26 00:01:30,510 --> 00:01:34,740 Heather Cotching: faced with global shipping, air freight, port closures, all of 27 00:01:34,740 --> 00:01:35,850 Heather Cotching: those sorts of challenges. 28 00:01:37,050 --> 00:01:40,440 Sean Aylmer: That suggests they're almost more entrepreneurial or I wouldn't say 29 00:01:40,440 --> 00:01:44,160 Sean Aylmer: more resilient, but certainly able to find other ways perhaps. 30 00:01:44,670 --> 00:01:46,920 Heather Cotching: Well, this was the interesting thing when we looked at 31 00:01:46,920 --> 00:01:52,260 Heather Cotching: it, because on average, exporters have some different characteristics to 32 00:01:52,260 --> 00:01:56,280 Heather Cotching: Australian businesses overall. So for example, exporters tend to be 33 00:01:56,280 --> 00:02:00,120 Heather Cotching: 16 years old compared to the average Australian business, which 34 00:02:00,120 --> 00:02:02,970 Heather Cotching: is 6 years old. So there's about a decade of 35 00:02:02,970 --> 00:02:05,940 Heather Cotching: difference in experience, and that means they also tend to 36 00:02:05,940 --> 00:02:09,270 Heather Cotching: be larger and employ more people. And so that means 37 00:02:09,270 --> 00:02:11,970 Heather Cotching: that there is a different profile for exporters. And I 38 00:02:11,970 --> 00:02:15,180 Heather Cotching: think it does mean that that experience and that interest 39 00:02:15,180 --> 00:02:18,660 Heather Cotching: in what's happening in global markets means they've got some 40 00:02:18,660 --> 00:02:19,859 Heather Cotching: additional advantages. 41 00:02:20,490 --> 00:02:25,620 Sean Aylmer: Okay. So if we talk about what we export goods and services 42 00:02:25,620 --> 00:02:29,790 Sean Aylmer: now, I would imagine, goods, things like coal, iron ore, 43 00:02:29,790 --> 00:02:33,780 Sean Aylmer: et cetera services, education's a big one, tourism. During the 44 00:02:33,780 --> 00:02:38,400 Sean Aylmer: period you are talking about though, goods would've been the 45 00:02:38,400 --> 00:02:40,169 Sean Aylmer: dominant export, I'm guessing. 46 00:02:40,770 --> 00:02:44,160 Heather Cotching: Absolutely. So you're right that when we think of exports, 47 00:02:44,160 --> 00:02:47,910 Heather Cotching: mining is what comes up first. But also Australia exports 48 00:02:47,910 --> 00:02:49,980 Heather Cotching: a lot of agriculture to the world. So if we 49 00:02:49,980 --> 00:02:54,330 Heather Cotching: look at beef, wheat, barley, poultry, all of those sorts 50 00:02:54,330 --> 00:02:57,600 Heather Cotching: of things, Australia is a major player there. So yes, 51 00:02:57,600 --> 00:03:01,649 Heather Cotching: it is true that particularly during COVID, services, exports faced 52 00:03:01,650 --> 00:03:05,160 Heather Cotching: additional challenges with border closures. So we saw for international 53 00:03:05,460 --> 00:03:08,669 Heather Cotching: tourism and education that they found it much more difficult 54 00:03:08,669 --> 00:03:09,959 Heather Cotching: and were most affected. 55 00:03:10,889 --> 00:03:14,130 Sean Aylmer: Okay. I think that the report actually suggests that merchandise... 56 00:03:18,240 --> 00:03:22,619 Sean Aylmer: well, I'm going to get this wrong, Heather, so correct me please, But it's something like 86% were goods versus about 14% 57 00:03:23,010 --> 00:03:24,840 Sean Aylmer: were services. Does that sound right? 58 00:03:24,930 --> 00:03:25,920 Heather Cotching: Yep, that sounds right. 59 00:03:26,430 --> 00:03:31,470 Sean Aylmer: Yeah. Well, when things get back to normal, do we 60 00:03:31,470 --> 00:03:33,960 Sean Aylmer: have a sense of goods versus services? 61 00:03:34,500 --> 00:03:37,440 Heather Cotching: Look, I think we've traditionally been a strong sort of 62 00:03:37,440 --> 00:03:40,770 Heather Cotching: mining and goods exporting country, and we are still looking 63 00:03:40,770 --> 00:03:44,280 Heather Cotching: to see recovery in the tourism and international education sectors. 64 00:03:44,520 --> 00:03:47,820 Heather Cotching: So we can see that post COVID, even though prices 65 00:03:47,820 --> 00:03:50,130 Heather Cotching: have been strong and particularly strong in some of our 66 00:03:50,130 --> 00:03:54,119 Heather Cotching: goods export categories, we haven't yet seen that same return 67 00:03:54,120 --> 00:03:58,140 Heather Cotching: in activity in tourism and international education yet. So I 68 00:03:58,140 --> 00:04:01,050 Heather Cotching: expect that they will continue to be a sort of 69 00:04:01,050 --> 00:04:04,770 Heather Cotching: smaller proportion of our export composition going forward. 70 00:04:05,910 --> 00:04:08,340 Sean Aylmer: So let's get back to who did do well during 71 00:04:08,340 --> 00:04:13,620 Sean Aylmer: the pandemic, during the 2021 financial year. What sectors performed 72 00:04:13,620 --> 00:04:14,430 Sean Aylmer: the strongest? 73 00:04:15,330 --> 00:04:18,990 Heather Cotching: So it's easy to start with mining, but when you 74 00:04:18,990 --> 00:04:22,890 Heather Cotching: looked at the actual count of exporting businesses, the largest 75 00:04:22,890 --> 00:04:26,070 Heather Cotching: numbers are actually in wholesale trade and manufacturing. So if 76 00:04:26,070 --> 00:04:29,250 Heather Cotching: you added all of them up, those two categories alone 77 00:04:29,279 --> 00:04:34,560 Heather Cotching: make up 53% of the total number of Australia's about 56, 000 78 00:04:34,560 --> 00:04:38,909 Heather Cotching: exporters. And in comparison, business counts of mining are about 1% 79 00:04:39,420 --> 00:04:42,359 Heather Cotching: of the total. Now, of course, the value story is 80 00:04:42,360 --> 00:04:45,270 Heather Cotching: different, but there's a lot of businesses in those two 81 00:04:45,270 --> 00:04:48,029 Heather Cotching: categories. So that makes them pretty important for Austrade to 82 00:04:48,029 --> 00:04:48,600 Heather Cotching: think about. 83 00:04:49,350 --> 00:04:52,620 Sean Aylmer: Heather, I'm going to show my ignorance, what sort of businesses are 84 00:04:52,620 --> 00:04:54,210 Sean Aylmer: we talking about in that category? 85 00:04:54,750 --> 00:04:58,230 Heather Cotching: So there's heaps of things that Australia might export small 86 00:04:58,230 --> 00:05:02,279 Heather Cotching: components for, or we might export clothing or we might 87 00:05:02,279 --> 00:05:08,730 Heather Cotching: export parts that feed into overseas production, all sorts of things. 88 00:05:09,480 --> 00:05:13,830 Sean Aylmer: So often perhaps more specialized types of inputs rather than 89 00:05:13,830 --> 00:05:14,820 Sean Aylmer: commoditized inputs. 90 00:05:14,970 --> 00:05:18,870 Heather Cotching: Exactly. And wholesale trade is a big sort of mysterious 91 00:05:18,870 --> 00:05:18,871 Heather Cotching: category. 92 00:05:18,871 --> 00:05:20,370 Sean Aylmer: A bit of a catchall. 93 00:05:20,730 --> 00:05:23,849 Heather Cotching: Indeed. But what it means is we are frequently part 94 00:05:23,850 --> 00:05:27,120 Heather Cotching: of intermediate trade, so we supply lots of components, we've 95 00:05:27,120 --> 00:05:29,820 Heather Cotching: got lots of specialized expertise, and so it doesn't show 96 00:05:29,820 --> 00:05:32,790 Heather Cotching: up as your product you might imagine that you get 97 00:05:32,790 --> 00:05:36,089 Heather Cotching: from a retail store, but it's still really important in 98 00:05:36,089 --> 00:05:38,100 Heather Cotching: terms of the global supply chain. 99 00:05:38,730 --> 00:05:40,440 Sean Aylmer: Stay with me, Heather, we'll be back in a minute. 100 00:05:46,860 --> 00:05:49,500 Sean Aylmer: My guest this morning is Heather Cotching, Chief Economist at 101 00:05:49,560 --> 00:05:53,669 Sean Aylmer: Austrade. So we have this abundance of exporters in a 102 00:05:53,670 --> 00:05:55,410 Sean Aylmer: sense, in an area that we didn't know much about or 103 00:05:55,620 --> 00:05:58,289 Sean Aylmer: I certainly didn't realize. And obviously in terms of value, 104 00:05:58,290 --> 00:06:00,570 Sean Aylmer: the miners are really big. What other parts of the 105 00:06:00,570 --> 00:06:01,620 Sean Aylmer: economy are exporting? 106 00:06:02,580 --> 00:06:05,339 Heather Cotching: Well, the interesting thing when we looked at it is 107 00:06:05,339 --> 00:06:08,850 Heather Cotching: when we looked at where do exporters actually employ the 108 00:06:08,850 --> 00:06:13,469 Heather Cotching: most people? Because there are about 3 million people employed 109 00:06:13,470 --> 00:06:17,670 Heather Cotching: in exporting businesses in Australia, and retail trading is the 110 00:06:17,670 --> 00:06:20,250 Heather Cotching: largest category of those. So this is the things when 111 00:06:20,250 --> 00:06:22,440 Heather Cotching: I think about it that I think about in consumer 112 00:06:22,440 --> 00:06:27,810 Heather Cotching: products, in cosmetics and clothing and games and toys and 113 00:06:28,080 --> 00:06:32,880 Heather Cotching: sporting goods, you know name it. But there were 657,000 114 00:06:32,880 --> 00:06:38,609 Heather Cotching: people employed in retail trading exporting, and that's surprisingly high. 115 00:06:38,610 --> 00:06:43,500 Heather Cotching: That's 22% of all employment. Now, we can't separate whether 116 00:06:43,500 --> 00:06:46,290 Heather Cotching: or not each of those individuals is directly associated with 117 00:06:46,290 --> 00:06:49,650 Heather Cotching: that business's exporting activity, of course. But it shows that 118 00:06:49,950 --> 00:06:52,979 Heather Cotching: we still export in retail a lot of things to 119 00:06:52,980 --> 00:06:53,460 Heather Cotching: the world. 120 00:06:54,480 --> 00:07:00,990 Sean Aylmer: Yeah. That really surprises me. I suppose the power of the digital 121 00:07:00,990 --> 00:07:03,450 Sean Aylmer: economy really, that people aren't buying that much from Australia. 122 00:07:04,080 --> 00:07:07,529 Heather Cotching: We know that online trade and online purchasing is how 123 00:07:07,529 --> 00:07:10,860 Heather Cotching: everyone does it these days, and if you can supply 124 00:07:10,860 --> 00:07:13,350 Heather Cotching: it to a market, the demand is there. So it's 125 00:07:13,350 --> 00:07:17,430 Heather Cotching: really nice to see that Australian products are strongly represented 126 00:07:17,430 --> 00:07:18,330 Heather Cotching: overseas, frankly. 127 00:07:18,750 --> 00:07:22,230 Sean Aylmer: So another part of the equation here is who we're 128 00:07:22,230 --> 00:07:26,250 Sean Aylmer: selling to, and certainly in some sectors, the ogre of 129 00:07:26,250 --> 00:07:28,830 Sean Aylmer: protectionism isn't particularly from China, has hit some of our 130 00:07:28,830 --> 00:07:32,640 Sean Aylmer: exporters and they've felt that keenly. How good are we 131 00:07:32,940 --> 00:07:37,380 Sean Aylmer: at swapping from one customer to another as exporters? 132 00:07:38,130 --> 00:07:41,250 Heather Cotching: Yes. So the last three years have certainly shown us 133 00:07:41,250 --> 00:07:45,180 Heather Cotching: the importance of having a diversification strategy for exporters. So 134 00:07:45,180 --> 00:07:49,830 Heather Cotching: this is everything from geopolitics to shipping and logistics and 135 00:07:49,830 --> 00:07:53,910 Heather Cotching: the increasing costs of shipping containers. So it certainly is 136 00:07:53,910 --> 00:07:57,690 Heather Cotching: an important part of an exporter's strategy. The interesting thing 137 00:07:57,690 --> 00:08:01,110 Heather Cotching: that we found when we analyze this is that the 138 00:08:01,110 --> 00:08:04,680 Heather Cotching: median or the most common number of markets that exporters 139 00:08:04,680 --> 00:08:07,890 Heather Cotching: export to is only one. But when we compare that 140 00:08:07,890 --> 00:08:11,250 Heather Cotching: with the average, it's 2. 8 markets. And what that 141 00:08:11,250 --> 00:08:13,740 Heather Cotching: is really saying is that at the top end, our 142 00:08:13,740 --> 00:08:17,280 Heather Cotching: big exporters are huge. They're in up to 10, even 143 00:08:17,280 --> 00:08:21,600 Heather Cotching: 20 markets. But most of the median value suggests that 144 00:08:21,600 --> 00:08:25,200 Heather Cotching: exporters are only in one market. So even though exporting 145 00:08:25,260 --> 00:08:29,400 Heather Cotching: is really productive and successful, it's still hard to move 146 00:08:29,400 --> 00:08:32,970 Heather Cotching: from just exporting in one market to having a diversification 147 00:08:32,970 --> 00:08:35,520 Heather Cotching: strategy where you are actively in multiple markets. 148 00:08:36,150 --> 00:08:40,770 Sean Aylmer: That's fascinating. Another thing in the report suggests that exporters 149 00:08:40,770 --> 00:08:43,770 Sean Aylmer: are actually better businesses than non- exporters. 150 00:08:44,490 --> 00:08:49,620 Heather Cotching: Yes. This is interesting in that we saw that, again, 151 00:08:49,620 --> 00:08:53,610 Heather Cotching: using this kind of median set of calculations, the median 152 00:08:53,610 --> 00:08:58,110 Heather Cotching: exporter employs 16 people compared with 10 people for the 153 00:08:58,110 --> 00:09:02,459 Heather Cotching: median non- exporting business and has a median wage of $54, 154 00:09:02,460 --> 00:09:06,449 Heather Cotching: 000, which is higher than the average as well. So 155 00:09:06,750 --> 00:09:08,760 Heather Cotching: this is something we really want to look at more, 156 00:09:09,330 --> 00:09:14,400 Heather Cotching: but it certainly suggests that exporting requires and attracts a 157 00:09:14,400 --> 00:09:18,780 Heather Cotching: business that's really keen on maximizing productivity. And we know 158 00:09:18,780 --> 00:09:22,800 Heather Cotching: that international trade applies a kind of competitive pressure on 159 00:09:22,800 --> 00:09:25,710 Heather Cotching: businesses because they're competing with the rest of the globe. 160 00:09:25,770 --> 00:09:29,100 Heather Cotching: And so it suggests that there really is value from 161 00:09:29,100 --> 00:09:32,670 Heather Cotching: exporting that it increases the kind of productivity gains for 162 00:09:32,670 --> 00:09:33,630 Heather Cotching: the Australian economy. 163 00:09:35,429 --> 00:09:39,030 Sean Aylmer: Okay. So what are the key takeaways from the report? What I have learned today 164 00:09:39,030 --> 00:09:44,520 Sean Aylmer: talking to you, Heather, is just how entrepreneurial exporters are, 165 00:09:44,550 --> 00:09:47,069 Sean Aylmer: how important they are to the economy in terms of 166 00:09:47,070 --> 00:09:50,370 Sean Aylmer: employment, how diverse they are as a group, as in 167 00:09:50,490 --> 00:09:53,069 Sean Aylmer: the sectors they come from. What are the key takeaways 168 00:09:53,280 --> 00:09:53,910 Sean Aylmer: for you? 169 00:09:54,780 --> 00:09:56,760 Heather Cotching: Well, I want to leave you with a couple of 170 00:09:56,790 --> 00:09:59,580 Heather Cotching: other really interesting facts. And the first one is that, 171 00:10:00,179 --> 00:10:03,929 Heather Cotching: look, unsurprisingly, China is our most valuable export market, but 172 00:10:03,929 --> 00:10:07,440 Heather Cotching: our most popular export market is New Zealand. So if 173 00:10:07,440 --> 00:10:12,030 Heather Cotching: you were to look at our total of 56,000 exporters, 16, 174 00:10:12,120 --> 00:10:15,059 Heather Cotching: 000 of them are doing business with New Zealand. So 175 00:10:15,059 --> 00:10:20,100 Heather Cotching: that's 29% of all our exporters. And why is that? Well, it's close 176 00:10:20,100 --> 00:10:22,679 Heather Cotching: to us. So logistically it's easier if you're dipping your 177 00:10:22,679 --> 00:10:25,440 Heather Cotching: toe in, but it's also a market which Australians would 178 00:10:25,440 --> 00:10:28,650 Heather Cotching: understand. There's lots of synergies there. The governance is quite 179 00:10:28,650 --> 00:10:32,280 Heather Cotching: similar. They're also a much smaller country than ours, so 180 00:10:32,760 --> 00:10:34,709 Heather Cotching: it makes sense that there'd be lots of things that 181 00:10:34,710 --> 00:10:37,890 Heather Cotching: Australia can often that New Zealand might demand. So I 182 00:10:37,890 --> 00:10:39,990 Heather Cotching: think it's that New Zealand is a good place to 183 00:10:39,990 --> 00:10:42,960 Heather Cotching: start. It's really valuable in terms of thinking about an 184 00:10:42,960 --> 00:10:47,070 Heather Cotching: exporting businesses strategy. But the other thing is that in 185 00:10:47,070 --> 00:10:50,910 Heather Cotching: the whole scale of looking at international trade, the majority 186 00:10:50,910 --> 00:10:53,579 Heather Cotching: of our exporters are actually small to medium businesses, so 187 00:10:53,580 --> 00:10:56,429 Heather Cotching: they employ less than 200 people, and that makes up 188 00:10:56,490 --> 00:11:00,720 Heather Cotching: 93% of the total exporting businesses. So it's impressive for 189 00:11:00,720 --> 00:11:03,780 Heather Cotching: me to see in particular just how many businesses are 190 00:11:03,780 --> 00:11:06,839 Heather Cotching: there and are actively giving it a go and did so 191 00:11:06,960 --> 00:11:10,950 Heather Cotching: throughout COVID with a kind of remarkable level of resilience. 192 00:11:11,700 --> 00:11:13,530 Sean Aylmer: Heather, thank you for talking to Fear & Greed. 193 00:11:13,980 --> 00:11:14,310 Heather Cotching: Thank you. 194 00:11:15,150 --> 00:11:18,420 Sean Aylmer: That was Heather Cotching, Chief Economist at Austrade, which is 195 00:11:18,420 --> 00:11:21,780 Sean Aylmer: a shortened version of the Australian Trade and Investment Commission. 196 00:11:22,230 --> 00:11:24,750 Sean Aylmer: This is the Fear & Greed daily interview. Join us every 197 00:11:24,750 --> 00:11:27,179 Sean Aylmer: morning for the full episode of Fear & Greed, Australia's most 198 00:11:27,179 --> 00:11:30,209 Sean Aylmer: popular business podcast. I'm Sean Aylmer. Enjoy your day.