COVID-19 Clouds Australian Export Outlook
(29 April 2020 – Australia) The latest Australian Bureau of Statistics (ABS) data reveals 66 percent of Australian enterprises reported lower cash flow and negative impacts on turnover a direct result of the COVID-19 pandemic. Business confidence and conditions notched record declines in March as businesses prepare for an economic downturn of ‘unprecedented speed and magnitude’. The World Trade Organisation (WTO) predicts international merchandise trade will plummet by 12 percent to as much as 32 percent in 2020.
Export Finance Australia asserts that exporters were the first to be buffeted by coronavirus induced shut downs and likely will be the last to recover due to four important factors:
- Lower demand in major export markets amid factory closures and weaker consumer spending
- Border closures inhibiting market access
- Supply chain disruptions caused by lower production of intermediate inputs in countries like China and Korea
- Deferral of business investment denting future export potential, particularly in the resources sector
Services are likely to be the hardest hit sector and recorded one of the sector’s largest monthly declines in February, down ten percent to A$7.9 billon. International arrivals for short term education were down 40 percent year-on-year while foreign tourists were down 35 percent.
“Assuming China avoids a second wave of COVID-19, the outlook for Australia’s largest export is relatively favourable. Iron ore prices have been surprisingly resilient throughout the COVID-19 pandemic amid robust demand from Chinese construction and real estate sectors and multiple supply disruptions” the ECA said in a statement.
“Though this early recovery will be tested by the global economy’s expected subdued performance in the second half of the year. Other resources exports have performed well; for instance, metals exports surged in January and February amid increased demand for safe-haven assets like gold. Manufacturing and agriculture exports have thus far been relatively resilient, though performance has varied widely by industry. Those industries reliant on discretionary consumer spending are likely to see continued pressure”
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