US sub-prime fall-out to hurt key trading partners in the Asia-Pacific region
AUSTRALIAN exporters are said to be entering rough seas as turmoil from the recent US sub-prime fall-out heightens pressure on the nation’s key trading partners in the Asia-Pacific region.
This assessment comes from the Dun & Bradstreet Country Risk Report which provides economic, risk and payments analysis on 131 countries around the world.
According to the report, the Asia-Pacific region will be buffeted by the flow-on effects of the US sub-prime crisis and resulting credit squeeze as demand for external products decreases and the US tightens its belt on spending.
A downturn in demand for goods from Asian countries by US consumers would in turn drive down the demand from Asian countries for internationally sourced products and services.
While the global environment is of concern for all trading nations, the outlook in Asia is particularly worrisome for Australian exporters.
According to data in the report, Australian exporters have a heavy reliance on Asia-Pacific trade with more than 40% selling to the region.
And while the mining sector dominates news coverage about export performance, the report shows that the majority of Australia’s exporting community is comprised of manufacturers and wholesalers, two groups likely to be the hardest hit by any regional slowdown.
They comprise 39% and 29% of Australian exporting companies respectively, with data showing that the vast majority of exporters are businesses with less than 200 employees and are said to be less able to withstand the pressure of global headwinds and delayed payments than their big business counterparts.
Dun & Bradstreet CEO Christine Christian believes that while domestically focused companies are so far relatively safe from the US sub-prime crisis due to the strength of the local economy, internationally focused companies may find their customers less willing to spend.
“The Australian economy has sailed through the recent global turmoil relatively unscathed. This is good news for domestically focused companies. However for those companies that have a reliance on overseas sales, particularly in the Asia-Pacific region, the outlook is less clear”, Christian said.
“Risk is greatest for small and medium sized exporters who don’t have a dominant market position and are reliant on a small number of overseas customers.”
China, India, Vietnam and New Zealand, some of Australia’s largest trading partners, are expected to suffer the greatest detrimental impact due to a combination of their dependence on exports to the United States, close links between their financial markets and Wall St and unique internal factors.
Dun & Bradstreet argues the recent sub-prime fallout has heightened economic tension in the Asia- Pacific region and created a more unstable trading environment for Australian exporters.
“The principal downside for countries in the region stems from external demand. We expect that a continuation of global risk aversion and further deterioration in US financial markets will cause significant economic strain for China, India and Vietnam due to the significant volume of exports these countries direct to the United States.
“Australia would suffer the flow-on effects of this trend as export markets in the Asia-Pacific region are forced to reign in spending or delay payments to trade partners as a means of managing the impact of reduced US demand on their own operations.”
For information email Dun & Bradstreet firstname.lastname@example.org or visit the website at www.dnb.com.au.