Deloitte Access Economics in conjunction with Chartered Accountants Australia and New Zealand have released the latest report in the thought leadership series, Future [inc]. The report, The Future of Trade, notes that while there is growing economic nationalist sentiment in parts of the world, global trade remains important to access a wider range of goods and services, ensure competitive markets and improve our living standards.
With 98% of the global economy beyond the shores of Australia and New Zealand, international trade presents exciting opportunities for businesses seeking to expand.
Between 1985 and 2007 international trade was growing, on average, twice as fast as world GDP. However, the rate of growth in international trade has slowed in recent years; a result of slower growth in China’s industrial capacity, as well as an increasing appetite for services, which continue to grow as a share of spending.
But the tides are turning. Global trade has been gathering pace in late 2016 and into 2017 with improvements in container volumes, rising orders of manufacturing globally, and an increase in the number of businesses going global. And while services are generally less trade-intensive than goods, technology and policy mean that the value of trade in services is also likely to increase.
We forecast Australia’s exports will increase by $80 billion between 2016 and 2021, building on recent improvements in container volumes and manufacturing orders. Globalisation, technology and policy will be key factors in determining the future of trade.
Globally, there has been greater uncertainty around trade with Brexit and the election of President Donald Trump last year. Yet strong growth and pro-trade policies in Asia mean that the APAC region will be increasingly important for Australian businesses. In fact, by 2025 we expect our top three export destinations to be from the APAC region: China, Japan and India, with the latter overtaking the US to claim the third spot.
While primary goods and commodities will remain a vital component of Australian trade, service exports are expected to average 5.8% growth per annum to 2026 and reach nearly one quarter of total exports in five years. The demand of services, led by education, tourism and professional services, will be supported by strong growth of the middle class in Asia and be facilitated by technology.
Technology and digital technology are changing how we trade. Of the 1,500 businesses surveyed for the report, the majority (59%) will continue to sell directly to customers and bypass traditional intermediaries. Yet online platforms will be the fastest growing means to reach international customers over the next five years. The number of surveyed businesses that expect online platforms will be their main method of delivery to customers is expected to double in the next five years compared to current levels.
David Rumbens is a Deloitte Access Economics partner and co-author of our Weekly Economic Briefing.