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With the impending trans-Tasman ‘bubble’, is the Australian market now a must for New Zealand exporters?

From this side of the Tasman it appears that Australia is being affected less, and easier to export to, in this C19 crisis relative to disastrous situations elsewhere.

Australia is one of New Zealand’s biggest and most significant export markets, and our connections and dependance on each other are broad and deep – economic, cultural, geographic, political – these ties that bind, also provide security.

Australia has been highly effective in flattening the curve, and is closing in on  ‘elimination’. It has done so without putting the country into full lockdown, with many business sectors still performing well. The Government acted quickly and effectively, setting up economic support packages which have served to mitigate COVID-19’s impacts on people and industry.


What is being said ?

‘Business Insider’ reported last month that Australia was effective in implementing early mitigation strategies, with consequentially far lower infections and deaths from C19 compared to other major industrialised countries.

The ‘Diplomat’ agreed, stating ‘…with a globally connected economy, a predominantly urban population, and a large tourist industry, these figures can be considered positive in the larger scheme of the pandemic”. Australia’s chief medical officer, Brendan Murphy, said last month that his country’s high detection rate “showed the country’s testing and surveillance regime was very effective.”

NZ Herald wrote last month that the impacts on Australia and New Zealand economies are predicted to be similar – exports are forecast to drop marginally over the next 12 month, with international tourism, transport and education the hardest hit. Agriculture and food manufacturing will be less affected due to the ability to maintain production and stability or increase in demand. Australia is expecting unemployment to hit around 10 per cent, while New Zealand is expecting unemployment to peak at 13.5 per cent.


What is actually happening ?

NZTE have detailed the support packages and actions taken by the Australian government on their official website – in summary, the Australian Government has delivered over A$320B in economic stimulus to support households and businesses through the C19 crisis.

Much like New Zealand, businesses in the hospitality, tourism and leisure sectors, such such as bars, gyms and hotels, have been impacted the most. Schools are open, but attendance is minimal.

On the flipside, NZTE reports that the Australian construction industry, the health sector, food and beverage, defence, and digital services are all doing extremely well through this quarter – with opportunities for New Zealand exporters likely to be found in ‘food and beverage, manufacturing and technology’.

There is a general sense of optimism being reported – perhaps explaining the many photos we are seeing of Bondi beach, looking much the same as any other day on Bondi beach. The fact that many industry sectors are still performing well, and the way the virus has been contained, is indicating that ‘The Lucky Country’ may come out of this crisis well ahead of its counterparts in other parts of the developed world. The ‘Diplomat’ found that one positive impact of the crisis in Australia was that it has significantly increased the public’s understanding of the ‘collective greater good’, noting “the virus has provided a reason [for Australians] to put aside emotive and ideological considerations and to instead seek out quality information, and heed the advice of people who have relevant expertise.”

Snapshots

  • Supermarket retail spend is up 22% in this period over last year.
  • Online shopping is experiencing huge growth.
  • The food and beverage sector is struggling to ascertain what the new normal will be (or the old normal, just new again):
  • Cafes and restaurants are still only permitted to sell takeaways.
  • Consumers across Australia, as many other developed countries, are increasingly focused on home cooking and baking. 
  • Some consumers have been stockpiling (no, really?) which has led to supply chain and stock availability issues at supermarkets
  • Local markets remain open with a ‘deliver to boot’ service where you can drive up to the market and vendors put your pre-ordered fresh produce directly in your car. 
  • For food and beverage companies there will be a need to understand the drivers of this new consumer behaviour to maintain relevance, and equally identify the disruption in distributor, partner and channel relationships that has occurred to maintain margin.

  • Sea freight is moving between countries, with all ports open. Air freight is available, but limited  – and  passenger travel is still almost non-existent.
  • The state of Victoria has recently seen its highest increase in Covid-19 cases in weeks, and New South Wales is struggling with a cluster of infections at an aged care facility, as parts of the country begin easing social distancing rules.
  • Wellington based economist Elizabeth Kendall, who has spent years forecasting and modelling at both the Reserve Bank in Australia and the Reserve Bank of New Zealand, and has been watching consumer reaction closely across both countries through this crisis, recently said “…even though Australia’s lockdown has not been as strict, the behavioural response of people in the face of this outbreak is that they have stayed at home and not spent… so [economic] activity has been reduced in places even where it was permitted, and we’ve actually seen a reduction in activity in Australia that is more similar to New Zealand than you might expect.”


The Upshot

The ANZAC spirit is still strong – add in a little luck, and some good crisis management, and our neighbouring countries should benefit economically and socially in the months and years to come. With Australia and New Zealand committed to introducing a trans-Tasman travel zone “as soon as it is safe to do so”,  Jacinda’s giant antipodean ‘bubble’ would ease travel restrictions and allow significantly greater commercial and tourism activity for both countries. 

Is Australia now a must for New Zealand exporters? Low margins won’t magically disappear over the ditch, but it would be hard to prioritise a better market in the current global situation. 


If any of these aspects – on partner, channel or market triage assessment – are whirling around in your head, contact us on how we can help to provide clarity, with the time we have now to understand and plan in the best way.   Don’t hesitate to email  christopher.boys@katabolt.com or click here


SOURCES

NZTE Aus/Pacific page – https://covid19.nzte.govt.nz/page/australia-pacific

KPMG summary of Aus internal actions – https://assets.kpmg/content/dam/kpmg/au/pdf/2020/covid-19-government-assistance-programs.pdf

AUS & NZ Corona – https://www.businessinsider.com.au/experts-australia-new-zealand-examples-how-to-slow-coronavirus-2020-4?r=US&IR=T

The Diplomat Aus in COVID – https://thediplomat.com/2020/04/how-well-has-australia-managed-covid-19/

Graphs from the Guardian – https://www.theguardian.com/world/2020/apr/16/coronavirus-the-graphs-that-show-how-australia-is-containing-the-pandemic

NZ Herald on NZ v Aus response – https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12325474

Stuff – https://www.stuff.co.nz/national/health/coronavirus/300005745/nz-australia-covid19-lockdowns-not-as-different-as-they-seem

NZ Herald NZ/Aus Bubble – https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12329724



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