Market Overview
Australia is a relatively dry continent, and the Federal Government is investing approximately $2.5 billion through its National Water Grid Fund (a 10-year program of priority water infrastructure investments) to help safeguard Australia’s water security. This includes $53 million toward the construction of new and augmented water infrastructure projects. There are now over thirty construction projects in the investment pipeline.
The total environmental market (goods and services) values at $20 billion. The industry comprises of about 2,500 mostly small firms that employ a total of 100,000 people. Imports currently satisfy 70% of total demand for goods.
Community awareness and government policy initiatives are the two driving forces behind the demand for environmental goods and services. Factors related to overpopulation contribute to the increased demand for water and wastewater treatment.
The water and wastewater treatment sector have the strongest business opportunities, followed by the reclamation and remediation sector. In the past, wastewater treatment plants have been primarily managed by state government-owned utilities. The corporatization of many utilities has resulted in increased opportunities for private sector participation in the delivery of water and wastewater services. Some water authorities have outsourced the management and maintenance of existing water treatment plants, while new plants are also created under “build-own-operate-transfer” contracts by private sector interests.
Almost 95% of Australians are connected to a main water supply. There are approximately 300 urban water utilities in Australia. The largest 22 utilities service about 70% of the population. The smallest 200 utilities collectively service 13% of the population, which is less than the number of customers of Australia’s largest utility – Sydney Water. In addition, approximately 85% of the population currently has access to more than 700 community sewage treatment plants. Nearly half of these are based on biological filters, about 170 are lagoons, and 45 are based on primary treatment. Most new plants are implementing activated sludge processes.
The combination of rising costs associated with monitoring and managing landfill sites and the pressure on local government to reduce the volume of waste going to landfills is creating a market for technology with applications in minimizing waste, re-use, recovery, and recycling. Recycling remains a challenging sub-sector of the industry but the Australian Government seeks to increase recycling rates despite the challenges of monopoly buyers and low commodity prices.
Site remediation is considered the most competitive area within the Australian environmental management industry. Contracting companies are required to provide integrated solutions in site assessment and remediation as well as consultancies for decontamination projects in industrial metals, chemical contamination, and agricultural chemical contamination. Environmental liabilities associated with business and property transactions are increasingly making on-site treatment and soil remediation more economically viable than the alternative of disposing contaminants in landfills.
Market Opportunities
Water and Wastewater Treatment
Infrastructure Australia (IA) released its infrastructure priority list of 147 significant infrastructure proposals. IA has the responsibility of strategically auditing Australia’s nationally significant infrastructure and developing 15 year rolling plans that specify national and state level priorities. The list can be found at www.infrastructureaustralia.gov.au.
IA published its audit, covering transport, energy, water, telecommunications and social infrastructure. The main challenges identified include:
- Population growth - increased pressure on ageing assets, rising road congestion, crowding on public transport, and greater demands on social and infrastructure such as health, education, and green space.
- Large increase in network costs – surge in energy bills 35% higher over the past decade.
- Rollout of The National Broadband Network.
- Water security – vulnerable areas include regional areas with long-term drought.
In response to the challenges identified, Australia’s high priority infrastructure projects can be grouped into the following five areas:
- Town and city water security
- National water strategy
- Coastal inundation protection strategy
- National waste and recycling management
- National road maintenance strategy
American companies offering engineering, consulting or technology solutions that fit into any of these five priority areas are encouraged to contact the U.S. Commercial Service for assistance. Some foreign engineering companies have entered the market through acquisitions, but there are also opportunities to collaborate and partner with local firms on specific projects. The U.S. Commercial Service has engaged with both American and Australian engineering firms, so it is in a strategic position to offer introductions to potential partners in Australia, especially for those partners looking to address infrastructure capability gaps.
On the municipal side, water authorities, though relatively few, remain the main purchasers and users of goods and services in this sector.
On the industrial side, the market is smaller, and some industry commentators believe it is over-catered for by both foreign and local manufacturers. There are very few large Australian suppliers. Most are smaller companies, employing between less than 20 people. There are also some well-established local manufacturers/assemblers of water and wastewater treatment package plants.
Given the market structure, smaller vendors are targeting mining and other remote community applications. Other key applications include the following:
- Wool scour mills
- Steel processing
- Pulp and paper
- Breweries
- Chemical and petrochemical plants
- Pharmaceutical plants
- Abattoirs and canneries
- Food and beverage processing
Industry contacts advise that the removal of organics from water supplies remains a priority because of issues regarding taste, odor, and the formation of carcinogens when organics in the water react with disinfection agents such as chlorine. Most new water treatment systems in Australia incorporate some form of organics removal. The three commonly used processes for the removal of organics from drinking water in Australia incorporate ion exchange, activated carbon, and advanced oxidation processes.
Remediation
The Australian Government’s Cooperative Research Center (CRC) for Contamination Assessment and Remediation of the Environment published the National Remediation Framework and Guidance of Australia (NRF). The NRF provides a nationally harmonized approach for the remediation and management of contaminated sites in both Australia and New Zealand. The Framework aims to create greater technical consistency in procedures and best practice. The informal alliance of environmental leaders from both Australia and New Zealand (HEPA) has already endorsed NRF as best practice.
Guidelines cover solutions and technology associated with containment, chemical stabilization, bioremediation, soil washing, thermal desorption, excavation, and soil vapor remediation. These solutions relate to soil contamination, but guidelines have also been developed for groundwater contamination. More information can be found on the National Remediation Framework Overview page.
State government-based environmental agencies have overall responsibility for contaminated sites. State and local governments share the management of sites, depending on the health risks of the contamination. State-based authorities are empowered to regulate contaminated sites that pose significant risk of harm to human health or the environment. Local councils manage other contaminated sites that do not pose a significant risk and are considered suitable for the current or approved use.
There are few equipment suppliers with the capacity to represent U.S. manufacturers of remediation technology. State-based EPAs are also able to assess proposed technologies for treating certain chemical wastes to establish their effectiveness. U.S.-developed remediation technologies can be presented to remediation contractors and certified consultants. U.S. suppliers have also successfully entered the market by partnering with remediation contractors on specific projects.
Recycling
Getting access to high-quality, low-cost material inputs is one of Australian manufacturing’s competitive pressures. As part of its efforts to develop Australia’s advanced manufacturing capabilities, the federal government is pursuing strategies to promote recyclable product manufacturing and cleaner feedstocks for remanufacturing.
Adopting innovative recycling technologies is an important step to improving processing efficiency and material consistency and reducing the cost gap between virgin and recycled feedstocks. These include: digital technologies such as AI and sensor networks; traceability technologies like pallet barcodes, blockchain, and digital product passports; and physical technologies such as robots that can increase recovery rates, more efficiently sort materials, and handle materials that are unsafe for workers.
Some of the key areas of focus include:
Plastics: There are established markets for polyethylene terephthalate (PET) and high-density polyethylene (HDPE), but markets for mixed plastic have not yet been found. As a result, mechanical recycling facilities and re-processors have many unused material stockpiles. Under the Australian Packaging Covenant Organization, over 1,500 industry participants, including supermarkets, packaging companies, and retailers, are pursuing targets to make packaging recyclable, reusable, or compostable. This is driving demand for recycling packing solutions.
E-waste: This is the fastest-growing waste stream in Australia and the world. In 2019, the combined value of raw materials in electronic waste in Australia and New Zealand was estimated to be approximately $700 million. Less than 10% was recycled. Emerging techniques to manage hard-to-recover and hazardous e-waste could be of interest to the Australian industry.
Textiles: More than 90% of textile waste currently goes unrecovered in Australia, with one of the lowest rates of any material stream. Opportunities for industry include recycling cellulose-based fibers (such as cotton and viscose), and finding solutions to reduce costs of recycling of blended materials. Potentially recoverable materials include PET, cotton, nylon, acrylic, and viscose.
Cement: More sustainable forms of cement and concrete are under development.
Tire-derived products (TDP): Australia now prohibits the export of used, unprocessed tires so alternative uses will need to be found to avoid waste management issues. The most common TDP is crumb rubber for use in roads and playground surfacing. In 2019, only 14% of Australia’s tire consumption was processed into TDPs or re-treaded for reuse. The rest was exported, sent to landfill or stockpiled.
Organic waste-derived products: Under the National Waste Policy Action Plan, governments have set a target to halve the amount of organic waste (mostly livestock manure, bagasse, food, and garden waste) sent to landfill by 2030. Around half of organic waste is unrecovered in Australia. Biofuels from waste—including organic, agricultural, and forest residues—are an emerging opportunity.
Market Entry
Distribution channels tend to be less industry sector-focused than those in the United States. Australian distributors are often open to exploring new industry channels and product applications. In most cases, Australia’s distribution and sales channels are comparable to those in other industrialized countries. U.S. exporters commonly use importers, distributors, agents, wholesalers, and manufacturers’ representatives. Foreign companies with subsidiary operations in Australia also sell directly to end-users.
Generally, a foreign corporation cannot restrain a distributor from selling competitors’ products. Australian distributors often ask for exclusive geographic rights to market a foreign corporation’s products. Due to the size of the market, Australian distributors often request nationwide exclusivity.
American companies can choose to have Australian laws or U.S. laws govern their contracts when drafting an agreement. The choice of jurisdiction does not, however, preclude the application of mandatory provisions in Australian laws. Without a stipulation of law, Australian courts apply the law of the jurisdiction of where the agent or distributor works, which, in this case, are Australian federal laws and appropriate state and local laws.
Establishing a business in Australia, either individually or in partnership with a local company, is relatively straightforward, and a foreign company can choose from a range of business structures. The most common forms of business organizations are representative offices, branches of parent companies, subsidiaries, sole traders, partnerships, trusts, companies, and joint ventures. Overseas investors may set up an operation using any of these forms, irrespective of the business structure they have elsewhere.
Trade Barriers, Intellectual Property, Taxes
Standards
Australia is a signatory to the World Trade Organization’s (WTO) “Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures.” Australia’s quarantine measures cover imported products such as farm, mining and construction machinery, some packaged foods, and other products that may pose a contamination risk to Australia’s agricultural industry or natural environment. The Australian government enforces its quarantine measures very seriously. Importers have little recourse once a shipment encounters quarantine issues.
Customs Requirements
Machinery imports may require an import permit – especially for used machinery. For quarantine purposes, new field-tested equipment is classified as “used machinery” and will require an Import Permit. Packaging of imported goods can present a challenge to U.S. exporters, particularly where the packing materials include wood or other natural products.
Import Taxes and VAT
Goods entering Australia may incur duty, goods and services tax (GST), and/or additional charges. Customs duty rates vary, depending on factors such as type of goods and country of origin. Because of the preferential tariff arrangement under the Australia and United States Free Trade Agreement (AUSFTA), 99% of U.S.-origin goods enter Australia duty-free. Otherwise the maximum rate of import duty on the majority of goods is 5%.
Since July 2018, GST of 10% applies to sales of low value imported goods to consumers. A recipient is not a consumer if they are a GST-registered business who purchases the goods for use in their business in Australia. A U.S. exporter only needs to be registered for GST if the value of their sales of low value goods imported into Australia by consumers (plus any other sales made that are connected with Australia) is AUD75,000 or more in a 12-month period. If the U.S. exporter only makes sales to Australia of goods imported by GST-registered businesses, they will not be required to register for GST.
Intellectual Property
In any foreign market, companies should consider several general principles for effective management of their intellectual property. For background on these principles please link to the following article on Protecting Intellectual Property and Stopfakes.gov.
Finance
Australia has a wide range of export financing options available. U.S. companies should choose the option that is favorable to both transacting parties. Companies are recommended to consult the international services division of a U.S. or Australian financial institution for recommendations regarding the best options.
Australia does not restrict the flow of currency into or out of the country. There are, however, cash reporting obligations under the Cash Transaction Reports Act (CTRA). To control tax evasion and money laundering, the Australian Transaction Reports and Analysis Center (AUSTRAC) must receive reports of international currency transfers of AUD10,000 or more. AUSTRAC does not inhibit normal currency transfers associated with international trade.
The four largest retail banks in Australia are Westpac Banking Corporation, Commonwealth Bank of Australia, Australia and New Zealand Banking Group (ANZ), and National Australia Bank (NAB). They all have AA – ratings. Nevertheless, trade finance liquidity is an issue here as in the rest of the world. The Australian Government permits non-Australian banks to operate as branches to serve the wholesale market. However, banking regulations only allow retail banking activities through a locally-incorporated subsidiary.
Contact Us
John Kanawati, Commercial Specialist, U.S. Commercial Service Australia. Email John Kanawati.
John has been a Commercial Specialist with the U.S. Commercial Service in Sydney, Australia since 1997. Prior to joining the Commercial Service, John worked for the Australian Trade & Investment Commission, an export promotion agency, helping Australian companies do business internationally.
John has assisted numerous American exporters find local partners and expand their sales in Australia. He currently covers industrial equipment, machine tools, process controls, pumps and valves, materials handling, railroad equipment, chemicals and plastics; franchising; and environmental technologies. He has previously covered the agricultural technologies, energy, mining, and oil and gas sectors.
