Infrastructure investment needed for trade growth
(22 June 2015 – Australia) Greater government investment in infrastructure would improve business sentiment and investment, particularly amongst Australia’s exporters and importers, according to the Citi Trade Finance Index.
The survey, undertaken by East & Partners for Citi in May, found that 70 percent of the 800 Australian exporters and importers surveyed said investment in port, rail and road infrastructure was important if they were to grow their trade business.
A similar percentage, at 77 percent, said they did not expect recent interest rate cuts to flow through to their cost of funding.
Scott Southall, Citi head of Treasury and Trade Solutions for Australia and New Zealand said there was a convergence of opinion that monetary policy had run its course and government investment in infrastructure is needed to spur growth in the economy.
“As infrastructure is developed, companies will typically work out how to capitalise on the development and invest accordingly.
“Government investment in infrastructure is likely to improve both sentiment and economic growth over time.”
Citi’s economists in Australia noted that public sector sentiment fell in the past 12 months with a large decline in government investment spending.
Currently New South Wales (NSW) is the only State with a strong pipeline of significant and well advanced infrastructure projects.
The Citi Trade Finance Index revealed that NSW-based exporters expect trade volumes to increase by 12 percent over coming quarters, while in Victoria exporters predict only 4.4 percent growth.
“We believe there would be broad corporate support for a ramp up in infrastructure and with a relatively low cost of debt, the Federal Government has the right conditions to invest intelligently,” Southall said.
The survey also found that China is the standout export destination for exporters in the upcoming quarter, selected by 74.4 percent of enterprises as one of their top three export destinations.
India is increasing in importance at the fastest rate, nominated by 32.9 percent of exporters, after increasing from 30.8 percent in the last round of the survey.