Inquiry into diversifying Australia's trade and investment profile - 2020 submission

This submission focusses on the important role that small and medium sized enterprises can play in diversifying and growing Australia’s exports.

The lack of diversification in Australia’s trade may be a matter of perspective, but there is much room for improvement, in both the type of goods exported and market destination.

There are strong arguments for diversifying Australia’s trade, including for the purposes of managing risks, such as economic downturns of key partners and the impact of ‘trade wars’.

Diversification would best be advanced through small and medium sized firms increasing their contribution to total exports. SMEs are more likely to be responsive to any government action, and more likely to deliver the required economic impact, such as building livelihoods and creating jobs.

SME exporters will require additional funding assistance to ride the current Covid-19 crisis, and to boost their competitiveness in the longer term. Additional targeted support is required for research and development, for broader efforts to realise overseas market opportunities, and to reduce overall trade transaction costs.

Initiatives should also be developed to build the entrepreneurial and exporting capacity of SMEs. These should include individuals and firms in regional and from Indigenous communities, as part of a process of building the pool of exporters for the future.

The very low level of SME contribution to Australian exports (at just 4% of total goods exports by value) suggests that there might be fundamental economic hurdles. A separate comprehensive investigation of this must be undertaken.

A strategic approach must include international efforts, including more ‘aid for trade’, and co-ordinated action between Australia and relevant trading partners in the region to encourage SME trade and to strengthen supply chains.