Taking Australia’s agribusinesses to the world
Ken Henry is Chairman of the National Australia Bank and a former Secretary of the Department of the Treasury. This is an edited version of a speech Dr Henry delivered in Moree on 16 February.
Since the start of 2016, we have witnessed considerable oil and equity market volatility across the world. Oil and Chinese equities have fallen by over 20% and 16% respectively. And the volatility is more widespread than these two indicators, with markets in some advanced economics down over 10%.
But while there is clearly a lot of uncertainty in global markets, there are still reasons for Australian businesses to be optimistic – particularly if we take a long-term view. The underlying fundamentals are positive.
For the agriculture sector, a lower Australian dollar, historically low interest rates and a suite of free trade agreements will help businesses access new overseas markets and support growth.
Demand continues to grow in our region. Today, there are an estimated 500 million people that make up Asia’s middle class and this figure is expected to rise to 1.7 billion people in 2020 and to more than 3.2 billion by 2030. Between now and 2050, it is estimated that Asian food imports alone will grow by US$470 billion.
And at the same time, Australia’s traditional trade markets like the United States are continuing to vie for our products. The value of Australian fresh, chilled and frozen beef exports increased 20% last year, with much of this growth coming from the US market.
But how businesses go about growing their overseas footprint in an increasingly competitive world is vitally important.
Successful businesses are those that understand that exporting is a long-term proposition. They are businesses that have an eye to smart marketing, build the right relationships and understand the overseas markets they are targeting.
NAB understands that to succeed our customers have to know their product, differentiate their product, and move up the value chain to deliver a premium product.
As a country of nearly 24 million people and with some natural constraints, we cannot produce enough to support the whole growing Asian middle class.
But Australia doesn’t need to become Asia’s food bowl.
We don’t want to operate in the low-cost food production and manufacturing space. The Australian brand is very much one where consumers have confidence in our ability to deliver high quality, premium goods. A focus on quality and reliability of supply is rational positioning. It plays to our country’s strengths.
And this brand is tied to Australia’s natural assets. The healthy soil, clean air and water that produces beef and lamb for five star hotels. Or the ‘clean and green’ products where consumers know they can trace provenance and be assured of quality.
It’s why NAB champions the concept of natural value: the way businesses find opportunities and address risks from the services natural ecosystems provide us and that our economy is dependent upon.
Building resilience into businesses will result in improved profitability, through reduced inputs costs and smoothing of yields to achieve more consistent results.
In a survey of 5000 customers, over 70% of agribusinesses told us that they had made changes to their business as a result of natural resource sustainability – changes that have allowed their businesses to improve profitability or support growth as they look overseas. These sustainable practices will continue to play a large part in helping to secure the future of Australian agriculture.
NAB was founded as an agriculture bank more than 155 years ago, helping grow primary production and post-farm gate enterprises into successful businesses.
It remains our firm goal to help our customers grow, access the increasingly globalised market we now operate in, and take Australia to the world.