New HSBC forecast tool predicts continued International Trade boom for Australia to 2025

Australia will have the fourth largest increase in trade growth in Asia over the next 15 years according to HSBC Trade Connections, the new quarterly global trade forecast tool launched by HSBC. 

HSBC Trade Connections forecasts that Australian trade will increase by 129% by 2025, nearly double the pace of world growth (73%) and exceeding Asia (96%) over this same period. Australia will be the world’s second fastest growing export market (equal to China) and the seventh fastest growing importer (equal to the Czech Republic). 

HSBC Trade Connections predicts how trade is going to develop over the next 5, 10 and 15 years. Spanning 37 countries, it covers the top 10 sectors in each for both export and import goods. It forecasts overall trade growth (exports, imports and total trade) globally, regionally, and in-country. The forecast has a unique approach to understanding the drivers of trade from a business perspective informed by: trade trends, macroeconomic and market influences on trade (for example GDP, oil prices, inflation, foreign direct investment), and business environment influences on trade (including regulation, demographics, access to capital and finance). 

The report found that Australia’s strongest trade growth between now and 2025 will be in the next five years when it will hit 7.7% annually (8.9% in 2012 and 2013), almost four times world growth (2% in those years). The doubling of Australia’s trade will bring merchandise trade volumes to US$702.5 billion from US$347 billion today. 

Commenting on Australia’s immediate trade horizon, James Hogan, Head of Commercial Banking for HSBC Bank Australia said, “HSBC Trade Connections forecasts a strong trade pipeline for Australia with a particular sweet spot in the next two years. This trade growth is consistent with HSBC’s own Australian experience where, despite AUD/USD appreciation, our trade export turnover saw strong double digit growth year-on-year to June 2011. It sends an encouraging message to Australian companies to seize the opportunities now to establish overseas trade relationships for short-term and future growth.” 

Australian trade flows steady in immediate future
Within the HSBC Trade Connections report, the HSBC Trade Confidence Index shows a dip in the short-term confidence amongst Australian traders who expect global economic headwinds to impact global trade over the next six months. However, the sentiment amongst traders is that Australia will be relatively protected with the index revealing that 85% of Australian traders predict that their trade volume will either be maintained or will increase over the next six months, citing Asia as their most promising market for trade growth. 

Australian traders falling behind in Chinese reminbi
The forecast predicts that China’s share of world trade will reach 13% by 2025, overtaking the US as the top exporting nation, driven both by commodities trading and by an increase in manufacturing in China. According to HSBC Trade Connections, China will remain Australia’s largest trade partner with total trade between the two countries estimated to reach US$148 billion by 2025 – more than double that projected for Japan.
The report further notes that, despite the fact 48% of Chinese companies surveyed are likely to use the reminbi (RMB) currency for settlement in the next six months, only 7% of Australian traders plan to settle in RMB, falling behind other markets like Hong Kong, Malaysia and Vietnam in their expected use of RMB for trade. 

New HSBC forecast tool predicts continued trade boom for Australia to 2025/2
Hogan continued, “China is by far our largest trading partner. As the use of RMB becomes more commonplace, Australian companies that do not have the capability to transact in RMB may be disadvantaged if Chinese traders prioritise RMB-ready businesses.”