Australia’s economic environment
“Canada and Australia have strong, sophisticated and developed economies in common,” says Sarah Quigley, Canada’s consul and senior trade commissioner with the Trade Commissioner Service (TCS) team in Sydney. “We both have high standards of living and well-educated workforces, and are extremely stable politically and legally. For these reasons and others, our countries rate highly in the international rankings for ease of doing business and for global competitiveness.”
Australia has enjoyed almost three decades of consecutive growth, largely because of its strong economic ties throughout the region and its position as a gateway to China. In fact, until COVID-19 came along, the country hadn’t had a recession for 29 years. Even so, Australia has fared reasonably well during the pandemic, and unemployment owing to COVID-19 is decreasing rapidly.
Canada-Australia trade and investment levels indicate how robust our relationship has become. Annual bilateral trade is around $4 billion and Canada exports about $2 billion worth of goods to Australia every year. On the investment side, Australia regularly receives more than 40% of Canada’s total direct investment into Asia.
Australia, Canada and free trade
Australia already has free trade agreements (FTAs) with New Zealand, Singapore, the United States, Thailand, Chile, the Association of Southeast Asian Nations (ASEAN), Korea, Japan, Pacific Agreement on Closer Economic Relations (PACER) Plus, Indonesia, Hong Kong, Malaysia, China and Peru, and is negotiating others—notably with the European Union (EU) and India. These FTAs can be an ideal reason for Canadian companies to do business in Australia: By partnering with an Australian firm, or by establishing a business operation in the country, you can benefit from Australia’s trade agreements when you export from there to its FTA partners.
At present, Canada’s most important trade agreement in the Pacific sphere is the recent Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It covers not only Canada and Australia, but also Japan, Mexico, New Zealand, Singapore and Vietnam. It’ll eventually include more counties, but even now, it’s a huge economic bloc, containing at least 500 million potential customers and accounting for 13.5% of global gross domestic product (GDP).
“The CPTPP opens up a huge market for Canadian businesses,” says Quigley, “and will help make you more competitive by eliminating or sharply reducing tariffs among the member countries. Once fully implemented, 99% of tariff lines among CPTPP parties will be duty-free, and some Canadian goods such as fish, seafood and forest products, can already enter CPTPP markets duty-free.”
Key opportunity sectors in Australia
At present, some of the key opportunity sectors for Canadian companies include:
- Infrastructure: “Australia is an infrastructure leader,” says Teri Nizzola, chief representative of Export Development Canada (EDC) in Australia. “Even before the pandemic, the country was in a major infrastructure boom. It has one of the world’s most advanced economies in terms of collaboration between the public and sectors, so we’re now seeing a lot of public-private partnership projects being delivered in transport, energy and social infrastructure. While there have been some delays because of COVID-19, new projects are still being announced.”
- Power and renewables: Some $300 billion has been or is being committed to greenfield and brownfield projects, and Australia is building numerous renewable energy zone frameworks using renewables such as solar, wind and pumped hydro. This offers opportunities not only for Canada’s engineering firms, but also for countless other Canadian companies that can supply innovative solutions and products and services for these projects.
- Digital industries and advanced technologies: The Australian government sees these industries as transforming how businesses will operate. According to a government paper, the evolution will include advanced automation and robotics, machine-to-machine communication, artificial intelligence and new sensor technologies. These will affect businesses in sectors such as manufacturing, cybersecurity, food and agribusiness, mining technologies, energy resources, and medical technologies and pharmaceuticals.
The creation, development and use of advanced technologies will be necessary for this digital evolution—or revolution—to occur. Consequently, there should be plenty of opportunities for Canadian firms that have sophisticated and/or innovative capabilities in these areas.
Challenges for doing business in Australia
These are the major challenges for Canadian firms planning to operate in Australia:
- Competition: Many exporters have long realized that Australia is a great place to do business. “Australia is a fully developed market, so you’re going to be up against leading-edge established global competitors, as well as established Australian companies with ready access to low-cost regional producers,” says Quigley.
- Distance: Even from Canada’s West Coast, Australia is a long way away. Making frequent visits to customers in the country was always a costly undertaking, and that was before the complications of the pandemic. The sheer size of Australia also means that providing local support for Canadian goods and services is vitally important for operating successfully in the country.
- Logistics: Distance can also make shipping from Canada to Australia unreliable or costly—or both. Long logistical chains are vulnerable to interruption. Currently, for example, there’s a global shortage of shipping containers owing to the pandemic.
- Extreme environmental conditions: Australia is subject to periodic drought, flooding and wildfires, which can disrupt supply and transportation chains within the country. Not to mention the risk of physical damage if you have operations on the ground.
Market entry and getting help
The first thing to consider, when investigating Australia’s market potential, is if there’s a clear business case for going there. Is there a demand for your product or service? Do you have a value proposition that will be convincing to potential Australian customers or partners? Does your company have the human, logistical and financial resources to operate at such a distance? Does your business model include the necessary support on the ground? Will you get a suitable return on your investment in the market?
Fortunately, you don’t have to find the answers to such questions on your own. Nor do you have to depend solely on your own resources when you’re entering and operating in the Australian market. Here’s where you can get help:
Canadian Trade Commissioner Service
The TCS can help you determine whether your company has the potential to succeed in the Australian market and find vetted business contacts and strategic partners for your export operations there. Once you’re doing business in Australia, the TCS can assist you in solving a range of business problems.
You can also access many funding and support programs through the TCS. These include:
- The Trade Accelerator Program to help with market entry planning
- The Canadian Technology Accelerator, a month-long mentorship program
- The Accelerated Growth Service to help companies find and use sources of government support
- Business Women in International Trade, an advocacy program for Canadian women entrepreneurs
- Indigenous business export support for Indigenous-owned Canadian businesses
- CanExport, the TCS flagship program for helping small and medium-sized companies break into international markets
For more information, visit the TCS pages about Australia.
Export Development Canada
EDC can leverage its relationships with Australian businesses and institutions to find opportunities that Canadian companies might otherwise overlook. In the infrastructure sector, for example, EDC works with Downer Group, which provides a full spectrum of social and urban infrastructure services in Australia and New Zealand. For more details, watch the up-to-date EDC webinars on Doing Business in Australia and Doing Business with the Downer Group.
EDC also provides many other financial and knowledge services for Canadian firms that want to do business in Australia and elsewhere. These include:
- A full suite of insurance products to lower your risk for doing business abroad
- Help with getting access to working capital
- Expertise that will help you learn more about international markets
- Connections to Canadian and international companies that can use your products and services
For more details, visit EDC’s Solutions pages.