Competition Coupled with Clarity

Growing Markets in Australia

Published June 2017

 

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rowing Markets In Australia

Competition is invigorating when it’s coupled with clarity. Rules of participation—from imports to trade agreements—are precise in Australia. That makes entering the competitive environment doable, if formidable.

Australian Pump, Gerni, Spitwater, and Jetwave, as well as Kärcher Australia and Nilfisk Australia, are among the many players in our industry doing business in the country that spans a continent. It’s a keen mix made stronger by those who value competition.

Warwick R. Lorenz, owner of Australian Pump in Castle Hill, New South Wales, Australia, started his business after working for 29 years at a company focused on earthmoving and mining. He had many roles at the firm, but it was in running the company’s pump business that he was introduced to pressure cleaning equipment manufacturing. (See the profile of Lorenz in the November 2011 issue of this magazine via adpub.com/ctimes/pdfdocs/warwick.pdf.)

“Australia’s population is only seven and a half percent of the U.S. population, but we are a sophisticated and progressive country,” says Lorenz. In short, the market in absolute numbers is smaller.

Markets, of course, cannot be measured in terms of population size alone. Residential and commercial use of cleaning equipment may be quickly saturated in a country with fewer than 25 million people. The industrial market is quite robust, however, because mining accounts for much of the economic activity in Australia.

Lorenz’s company not only manufactures equipment and has distribution arrangements for its equipment, but it also serves as a distributor for other manufacturers. “We have a major interest in developing machines that are not necessarily available from other parts of the world,” he explains.

With an acute emphasis on quality, Lorenz laments that there are some issues with imports from certain nations. Less-expensive products that are not well-made do enter the market. It is something those who hold to the highest-quality standards, as Lorenz and colleagues in the industry do, are “fighting continuously against,” he says.

With the industrial niche for products being so defined by mining, machine durability takes on added significance. Australia leads the world in the export of coal. And among exports, coal ranks second only to iron ores and concentrates. In the interval 2015–2016, iron ore and concentrates accounted for 15.3 percent of exports from Australia, while coal accounted for 11.1 percent.

Machines, pumps, water reclamation systems, and ancillaries that see service in Australia’s mining sector must be tough and reliable. Moreover, they must be environmentally friendly. The driest inhabited continent, Australia has a particular interest in water conservation. Many plants and animals are unique to the continent, which boasts 10 percent of the biodiversity in the world.

Parameters

Looking at a flat projection map of the world, Australia appears quite large, though it is actually slightly smaller than the 48 contiguous states in the United States. As a country, Australia ranks as the sixth largest in the world.

The U.S. CIA Sourcebook put the population of Australia at 22,992,654 in July 2016. The environment is widely arid or semiarid. There’s a bit of rainforest in the northeast and temperate areas in the south and east.

To protect its flora and fauna, Australia has strict rules regarding quarantine. Cargo, vessels, mail, and people are all screened before entry to the country is permitted. Failure to declare anything made from plants or animals could result in a huge fine or imprisonment. Do not overlook wooden articles, such as pallets and crates or wood fiber (corrugated), as a potential problem when planning shipments or hand-carrying prototypes.

In addition to coal and iron ore, bauxite (aluminum ore), copper, tin, silver, uranium, nickel, tungsten, lead, zinc, diamonds, mineral sands, and rare earth elements make Australia rich in resources that contribute the raw materials to development. The country also has significant natural gas and petroleum resources.

How important is coal? Data from the minerals division of the country’s government (www.minerals.org.au/resources/coal/exports/facts_and_figures) sum it up in many ways, but try this one: During the global recession in 2009, Australia was the only one of the world’s 33 developed economies to grow. Coal led the way.

Technological innovation and automated processes gird coal mining in Australia. As early as the beginning of the 1980s, aluminum wagons with rotating couplings had been developed to allow rail cars to be unloaded faster by being turned 180 degrees.

Raw materials are highly represented among the top 25 exports (goods and services) from Australia. Finished products have a high representation among the top 25 imports.

In 2015–2016, electrical machinery and parts accounted for one percent of imports (ranking 19) and pumps (excluding liquid) and parts accounted for 0.9 percent of imports (ranking 25). Both categories show growth as the five-year trend.

From 2013 to the present, the United States has been the second-largest, two-way trading partner of Australia, following behind China and ahead of Japan. Again, the five-year trend in trade between Australia and the United States is growth.

In 2015–2016, the aggregate two-way trade in goods and services between Australia and its top partners was $670 billion (Australian dollars). The U.S. share was 10.5 percent, or about $65 billion in U.S. dollars (with China’s share at 22.7 percent).

The U.S. Department of State points to 25 years of sustained annual economic growth in Australia as being largely attributable to exports of
minerals and other resources to China. It also ranks Australia as the 12th largest economy in the world with the sixth-highest per capita income. (Not surprisingly, no U.S. development assistance goes to Australia.)

The United States invests heavily in Australia, according to the State Depart-ment, and stands as the largest foreign investor, holding 30 percent of the total stock. Indirect (stock) and direct investment by the United States equal approximately $650 billion, of which some $160 billion is direct investment. U.S. interests in Australia are weighted toward mining, finance, and insurance.

Free Trade

The United States and Australia share a language—simplifying interaction. Since January 1, 2005, the two countries have had a free trade agreement (FTA). As soon as the FTA was implemented, duties on more than 99 percent of U.S. manufactured goods were eliminated. That’s a big positive because more than 90 percent of U.S. exports to Australia are manufactured products. (As an aside, U.S. farmers also benefit from the FTA. All U.S. farm exports to Australia are duty free.)

The FTA goes beyond tariffs. It aims to reduce barriers to trade between the two nations by streamlining activities related to commerce, such as government procurement, electronic commerce, investment, and intellectual property issues.

To qualify under the FTA, a product must meet strict rules of origin. In other words, content of materials in the product as well as assembly must have been done in the country (either the United States or Australia) from which it is being exported. Rule of origin varies with product. Thus, the only way to know whether a product meets criteria is to check.

Getting assistance with FTA is not difficult. Export.gov and Trade.gov websites on the U.S. side of the Pacific provide abundant assistance. Through its Department of Foreign Affairs and Trade (DFAT), Australia also gives robust help to free traders.

One particularly useful page at the DFAT website for getting grounded in the AUSFTA, the acronym for the bilateral FTA, is titled “Doing Business under AUSFTA” and can be viewed via dfat.gov.au/trade/agreements/ausfta/pages/australia-united-states-fta.aspx. There are reminders that the Harmonized System Code is used to assign tariff numbers to each product and to determine any levy. The code is also used to collect trade data.

U.S. manufacturers of pressure washers, wastewater collection systems, and all related equipment are likely to be able to meet the guidelines for free trade with Australia. As with expansion inside the United States, one way to think about entering the market in Australia is with a combination of goods and services. Look for an industrial or commercial enterprise in need of a product or a better product and offer a solution.

Australia takes pride in being transparent about trade policy and regulations. The clarity makes it easier for all honest parties to compete.

Learn

One way to get to know the market in Australia better is through the Australasian High Pressure Water Jetting Association (www.ausjetinc.com.au/about-us). Ausjet members include end users, as well as manufacturers and suppliers. The industries that members serve are wide ranging and representative of the big footprint of mining in the large island-nation.

Ausjet welcomes members from inside and outside Australia. Established in its current form in an effort to promote safety in the use of high-pressure waterjetting tools, the association works to develop and maintain industry standards. Ausjet facilitates training, communication, and knowledge across the industry.

Is the entry into a new market a good idea? It could very well be. According to the DFAT, Australia entered its 25th year of annual economic growth in 2015 with an annual growth rate averaging 3.3 percent across the quarter century. Add such an enticing economy to the welcoming outlook Australians have to bilateral trade with the United States, and the possibility of growing markets in Australia deserves thorough consideration.