Australia – Asia Business Engagement Index (Q2)

“The index shows that Australia’s engagement with Asia is dominated by product imports and not surprisingly, our engagement is clearly strongest with China across all sizes of business. But, it is higher for SMEs than the ASX 300” said Alan Oster.

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The NAB Australia-Asia Business Engagement Index provides a unique measure of the size and intensity of business relationships of all Australian firms trading with Asia.

It draws on NAB’s Business Surveys to ask Australian businesses (from SMEs to the ASX300) to assess their level of trade engagement.

Traditional measures of engagement using the volume or value of trade, typically weight engagement heavily toward commodity exports and larger firms.

This index differs from other measures of trade by capturing engagement at the business level rather than at the output level.

NAB Chief Economist Alan Oster said “the index provides a unique picture of where, to what extent, and how Australians firms are engaged”.

The survey measures all areas of trade in which Australian business is engaged (i.e. imports, exports and off-shoring of products and services). Engagement is captured across the types of trade, by country, by business size and by industry.

Mr Oster said, “the index shows that Australia’s engagement with Asia is dominated by product imports and not surprisingly, our engagement is clearly strongest with China across all sizes of business. But, it is higher for SMEs than the ASX 300. Outside of China, engagement is typically higher for the ASX 300 compared to SMEs for all countries except Taiwan and Hong Kong. The ASX 300 has a particularly strong level of engagement in relation to services imports and offshore products to Singapore”.

By industry, while overall engagement is strong for Mining and Manufacturing product exports, it is also strong for Retail, Wholesale and Manufacturing through product imports, and Construction, Finance, Business, Property and Recreation, Personal Services, & Hospitality for service exports.

Mr Oster also said “there are sound reasons why Australian business has a strong level of engagement in relation to imports from Asia. But, there are clear opportunities for Australian firms to broaden this relationship”.

“With the currency expected to continue to ease, export opportunities are also likely to rise. The challenge for Australia is to rebalance the economy with new sources of growth to supplement our traditional strengths in minerals and energy”.

Of concern, said Mr Oster, “very few Australian businesses not currently engaged with Asia have any plans to commence a business relationship over the next year”.

For further analysis download the full report.