An update on Australian businesses’ export propensity

19 Sep 2017

Tags

  • Mark Thirlwell
  • Australian Economy
  • International Trade

Each year we take a look at the ABS report on the Selected Characteristics of Australian Businesses, which provides us with some numbers on the share of Australian firms that sell overseas. This provides an alternative perspective to the annual count of exporter numbers that is also released yearly by the ABS. Unfortunately, the two sets of data are not directly compatible, based as they are on different sources and targeting different things. Still, they both tell interesting stories about Australia’s export profile.

For example, as we noted back in July, the latest release of the exporter count showed that Australia continued to grow the total number of exporters in 2015-16, with an increase of 2,454 (five per cent) in exporter numbers that year, following a (revised) increase of 3,840 in 2014-15. The main story from this set of exporter data is the modest but sustained growth in overall exporter numbers, and in particular in the number of goods exporters, that we’ve seen in recent years. In the case of the latter, after seven consecutive years when the total number of goods exporters seemed capped at less than 44,000 despite a large level of churn in exporting firms, three years of increases has seen the number of goods exporters rise to more than 50,000:

Australia: Number of goods exporters

The main story told by the overall business characteristics data is somewhat different: the message here is that selling into overseas markets is a relatively uncommon phenomenon. I noted this result in the 2014-15 data published last year, and this year’s release again showed that exporting remains a relatively rare activity, with less than eight per cent of exporters selling goods or services into an overseas market in 2015-16. Indeed, as I've pointed out before, most businesses remain resolutely local in their focus according to the ABS: while 80 per cent sell locally, less than 40 per cent sell outside their locality but within the same state, and only about 22 per cent sell outside their home state but within Australia. According to this data, at least, if technology has produced the death of distance, nobody appears to have told most Australian firms!

Geographic market in which businesses sold goods or services, per cent of total, all Australian businesses

The numbers also continue to show no big shifts in the propensity to export over time. The 2015-16 7.6 per cent ratio for firms selling into overseas markets is only a little up from 2014-15's 7.1 per cent and is below 2013-14's 7.9 per cent. The rise seen in exporter numbers over the past three years doesn't seem to appear in this alternative data set.

Share of businesses selling goods or services in overseas markets, per cent of total

As I noted above, and when commenting on this discrepancy last year, the two sets of data are not directly compatible, so we wouldn’t necessarily expect the two series to match each other anyway. But it might also be the case that growth in the number of total businesses has been skewed more towards businesses in non-exporting sectors, a trend that could be consistent with both an increase in the total number of exporters and with no rise in the share of firms selling into overseas markets.

On the other hand, the data are consistent with the traditional story about the relationship between firm size and exporting, with the ABS numbers indicating that propensity to export is increasing in size: while 29 per cent of large firms (those with 200 or more employees) sell into overseas markets, that ratio falls to 15 per cent for medium-sized firms and to less than seven per cent for firms with four employees or fewer.

Share of businesses selling goods or services in overseas markets, by size, per cent of total, by employment size of business

Finally, the new ABS data continue to show that export propensity varies quite significantly by industry (suggesting that an old economist's distinction between 'traded' and 'non-traded' sectors remains alive and kicking, just like distance). The group with the highest share of businesses selling overseas is the set of information, media and telecommunications firms, followed by mining, wholesale trade and manufacturing.

Share of businesses selling goods or services in overseas markets, per cent of total, by industry

It's also worth noting here that the information and media sector has seen export propensities increase for three consecutive years.