ECONOMICS: Australian exports
Far Eastern Economic Review
Sept 24, 1998
Trade: Up Down Under:
Australian exporters ward off region's economic chill
By Salil Tripathi in Perth
On a crisp August morning at the aquamarine Jervoise Bay outside
Perth, nearly 100 Australians swarm the beach. But this is no pleasure
outing: Clad in helmets and overalls, this group is here to fix modules
and weld components for a $40 million aluminium catamaran that will one
day slice through water at 40 knots, carrying 200 cars and 800 people.
Their employer John Rothwell, who is chairman and managing director
of Austal Ships, is beaming. "My order book is full 'til 2001," he
boasts. Every ship Austal makes is sold overseas, and this year turnover
rose to A$182 million ($108.1 million), from A$145 million last year.
A weak Australian dollar has boosted Austal's competitiveness and
made the country itself a leader in this niche market of cargo-ferry
making. "This industry is now one of the most internationally
competitive sectors of the Australian economy. The world is their
market," says Mark Beeson, an economist at Murdoch University in Perth.
But that's the case for more than just shipbuilders. Despite
that Australia's economy is more closely linked with Asia than it was 10
years ago, exporters of all kinds have managed to ward off -- at least
in part -- contagion from the region's meltdown. "The conventional view
was that the Asian-led global slowdown would affect Australia more, but
that has not happened," says Helen Camp, senior international economist
at Westpac Banking Corp. in Sydney. "Exports have held up much better
than we had expected."
True, Asia bought 61% of all of Australia's exports in the year
June 30, 1998 -- up from 55% a decade earlier. But two-thirds of that
went to North Asia, which continues to import crucial raw materials such
as Australian minerals. Exports to Southeast Asia have fallen, but that
region accounts for only 13% of Australia's total exports. Meanwhile,
booming markets in places like Europe and the Americas have mostly
compensated for Asian losses. All told, Australia's manufactured exports
rose 16.6% in the first half of 1998 from a year earlier in
Australian-dollar terms (although they declined 6.6% when translated
into U.S. dollars).
Most of the credit for Australia's resilience goes to exporters'
quick reflexes. When cattle farmers in Western Australia were faced with
the collapse of exports to Indonesia, they began shipping cattle to
Egypt; fear of mad-cow disease had led Egyptians to stop buying British
A belief in diversified markets saved some. "I realized early
depending on only one market is a bad idea," says Austal's Rothwell.
"Way before the Asian crisis, we had found other markets."
Australian firms have also gained because they rely less than
rest of Asia on imported components, says an economist at an American
bank in Sydney. That means their costs don't increase as much when the
local currency depreciates.
This is not to say that Asia's weakness is Australia's strength.
Stephen Bell, an economist at the University of Tasmania, warns that
Australia's current-account deficit could worsen if the severity of
Asia's recession translates into even-smaller orders for Australian