The world-awaits: Europe, China named as top spots for growth

Nina Hendy

Jan 28, 2020 – 11.57am

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Early signs that the country's brimming mid-market sector are quietly plotting a path into new international markets have been revealed in a promising new report.

More than eight in 10 (84 per cent) of businesses expect their sales to grow in the next year, which is above the global average (79 per cent) and the average for Asia-Pacific (77 per cent). Take that to a five-year forecast, and the percentage of businesses feeling upbeat about growth rises to 85 per cent, the new HSBC Australia Navigator report reveals.

Where that forward thrust will come from is an interesting mix of factors — new markets opening up, improvements in productivity, favourable changes in interest rates, and investment in technology. Australian firms are more optimistic in regards to Europe and North America than last year, while China remains the most important partner in the Asia-Pacific region.

The research echoed Australia's International Business Survey, which reveals that 55 per cent of businesses view their financial outlook for the next two years as being better than the previous two years.

This survey, run by the Export Council of Australia, indicates that businesses still intend to push into new markets, and that 66 per cent of businesses, whose top international markets include the US, have the most positive outlook.

Meanwhile, businesses that plan to expand named China as their top choice, which makes sense given Australia's strong trading ties with China and its strong economic growth rates.

On the ground support

Businesses interested in exporting need to undertake some careful planning and be strategic about the best approach for their circumstances, advises HSBC Australia's Head of Commercial Banking, Steve Hughes.

However, even successful businesses feeling optimistic about international growth may need a helping hand to take full advantage of the opportunities in the market.

"Embracing low rates to build and expand into new markets using new or existing trade pacts could help businesses navigate challenging conditions," Hughes says. "Australia is on the brink of introducing a number of intra-regional free trade agreements. These deals will reduce barriers for Australian exporters and should encourage them to maintain long-established trade ties, while embarking on new partnerships close to home and further abroad."

Despite the enviable optimism, mid-market operators are still taking measures to counter threats or business contraction, Australian firms are prioritising investment in innovation (27 per cent), customer experience (25 per cent), offshore expansion and employee wellbeing (22 per cent).

Navigating a clear path

However, our country's mid-market enterprises aren't immune to the negative impacts of protectionist policies in markets where they trade. To this point, 29 per cent revealed that they're affected by imposed changes on their supply chain.

The primary coping strategy is cutting costs (35 per cent). This is followed by sourcing from local suppliers and focusing on digital sales channels. A point of note is that service businesses in particular put considerably greater stress on cutting costs than those in the goods sector.

Understanding where to divert funds within a mid-market enterprise for optimum success is crucial, Mr Hughes says.

"Nearly all businesses are feeling the pressure to become more sustainable, while savvy businesses are making the shift to improve efficiency and drive sales. Businesses need to consider whether they’ve unlocked the full potential of moving to a sustainable future."

HSBC is a trusted partner of Australian MME's, helping businesses thrive internationally.