Australian businesses expect international trade conditions to considerably improve over the next six months with businesses in construction and wholesale/retail most positive, according to HSBC's latest Trade Confidence Index. According to the index, Asia will continue to overwhelmingly be Australian businesses' key trade destination and exchange rate volatility their biggest trade challenge.

HSBC's Trade Confidence Index comprises the six-month outlooks belonging to 5,800 exporters and importers from small and mid-market enterprises across 23 markets, including Australia, on trade volume and buyer and supplier risks. Any reading above 100 signals anticipated trade expansion amongst businesses.

HSBC's latest Trade Confidence Index for Australia reached 106 - its highest level for two and a half years. The index found nearly half (46%) the Australian respondents expect trade volumes to rise over the next six months (up from the previous reading of 40% six months earlier).

At the sector level, Australian importers and exporters working within construction and wholesale/retail sectors are most optimistic about the six-month outlook. The survey found stronger trade flows were expected by 50% of Australian respondents in the construction sector and 49% in the wholesale/retail sector.

Andrew Skinner, Head of Trade and Receivables Finance for HSBC Australia, said improvements in the UK and US economies, loose monetary policy conditions in Australia and the continued depreciation of the Australian dollar are driving a more bullish trade outlook from Australian businesses.

"The improving UK and US economies have clearly had a positive impact on Australian exporters, as has the shifting of China's focus towards more consumer-led economic growth."

"And on the importing side, the rebalancing of Australian economic growth away from mining investment is clearly evident with both retail sales and housing construction being supported by low interest rates and increasing house prices.

"We have seen a 30% pick-up in building approvals in the past year which will likely prompt a rise in the importing of construction materials. Similarly, the recent rise in retail sales will prompt a pick-up in the importing of consumer goods for both wholesale and retail businesses," Skinner said.