Doing Business In Australia

A Hot Tip about Business Practices in Australia

Last updated: 18 Dec 2011

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Market Overview

  • Total merchandise trade in 2008 (Jan-Sept) USD 1.2B (13% increase over 2007).
  • U.S. Exports to Australia in 2008 – USD 21 B (9% increase over 2007).
  • Australia’s rank as a U.S. export market in 2008 – 14th largest.
  • Principal U.S. exports to Australia in 2008: see Chapter 4.

Australia-U.S. Free Trade Agreement (AUSFTA) elimination of tariffs provided new market opportunities for U.S. companies. Australia enjoyed annual economic growth without interruption for nearly two decades. Growth of about 3.2%percent continued in 2008 (down from 4.3% in 2007), however, most economic forecasts expect growth to be negative in 2009.

  • Australia is a sophisticated and modern economy that is a major exporter of primary resources (such as mineral and agricultural commodities). Asian demand for minerals, metals, and energy resources had been an engine for growth nationally and in specific regions of the country - until the recent economic crisis. The resource boom had tested the limits of the infrastructure and many projects were on the books to invest in improvements. Due to the current global economic crisis, however, many of those projects are on hold.
  • While private investment has dropped substantially, the Australian government is still planning to complete some infrastructure projects to increase export efficiency.
  • The economic crisis is starting to affect the Australian economy with a slow-down in housing turnover, construction projects, commodity sales and increasing unemployment. The financial sector, however, is in better shape than in many parts of the world, in terms of liquidity and general banking health. Exposure to collateralized debt obligations was minimal in Australia and the top four Australian banks still enjoy a AAA rating.
  • These challenges provide opportunities for American exporters across multiple industry sectors. The need to increase productivity and reduce costs, remain keys to the future of foreign trade.
  • We advise American firms examining the Australian markets to pay attention to macro measures of opportunity, which give it more purchasing power relative to less developed economies. Along with the Free Trade Agreement, the case for entering or expanding in the Australian market is stronger than the population of 21 million might suggest.
  • Australia’s relative market appeal remains convincing with few barriers to entry, a familiar legal and corporate framework, sophisticated consumer and industrial sectors and a straightforward, English-speaking, business culture. The Australia-U.S. Free Trade Agreement enhanced the long and successful trading relationship by eliminating tariffs on almost all U.S. manufactured and agricultural goods.  We believe 2009 will continue to show demand for American companies with innovative products and technologies in the Australian market. We invite you to contact us to help you analyze and execute those plans.

 

Market Challenges

  • Competitive Market: Australia’s history, distance from the rest of the world, large land area and relatively small population led to market dominance by a few large firms in certain sectors.
  • Australia is integrated into the world economy and remains a commercial and financial center for the region. American companies will find that Australian and third-country competitors in Australia have some long-established brands with strong reputations and existing supplier relationships.
  • Australia has ready access to Asian and other, low-cost producers. American firms must therefore demonstrate sufficient added value to overcome the costs of getting the product to market, and to compete against lower-cost producers in the region.

 

 

Market Opportunities

The top performing export sectors from the US to Australia during 2008 were:

Specialty machinery; general industrial equipment; special purpose vehicles; transport equipment; special  instrumentation and miscellaneous manufactured goods.

 

Market Entry Strategy

  • Successful market entry strategies for Australia have three common elements: understanding the market, selecting the optimal partner, and providing ongoing support to that partner in the market.
  • A common language and familiar business framework may lead Americans to overlook Australia’s cultural and market differences. It is vital to first gain an understanding of the Australian context for a product or service, its competitors, standards, regulations, sales channels, and applications.
  • Success in the Australian market often requires establishing a local sales presence. For many American exporters this means appointing an agent or distributor. The bounds of that appointment are negotiated, and may include only certain states of Australia, the entire country, or New Zealand as well. An increasing number of businesses and investors see Australia as a secure platform from which to serve third markets in Asia.
  • The distance from many of their trading partners and the sheer size of the Australian continent - comparable to the continental U.S. - causes Australian firms to stress the importance of local support and service. American companies should visit Australia both to meet prospective partners and demonstrate ongoing support, as this is the common practice of their competitors.
  • Most of the criteria American firms use to select agents or distributors are applicable to Australia, with  expectations adjusted to the scale of the market. Performing due diligence is just as important as in the United States, and we offer numerous resources to assist in that work.

 

 

 

Read the full market research report


Posted: 17 December 2009, last updated 18 December 2011

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