Economy of Australia

Economy of Australia

Sydney's central business district is Australia's largest financial and business services hub.
Currency	Australian Dollar (AUD)
Fiscal year	1 July – 30 June
Trade organisations	APEC, G20, OECD, WTO
Statistics
GDP	$1.258 trillion (nominal) $1.187 trillion (PPP) (IMF, 2016)
GDP rank	14th (nominal) 20th (PPP) (World Bank, 2016)
GDP growth	1.8% annual 0.8% quarterly (Jun Qtr 2017, seasonally adjusted)
GDP per capita	$51,850 (nominal) $48,899 (PPP) (IMF, 2016)
GDP per capita rank	12th (nominal) 19th (PPP) (World Bank, 2016)
GDP by sector	Services: 61.1% Construction: 8.1% Mining: 6.9% Manufacturing: 6.0% Agriculture: 2.2% (2016)
Inflation (CPI)	1.9% (Jun Qtr 2017)
Gini coefficient	0.333 (2014)
Labour force	12.6 million (2016)
Labour force by occupation	Services: 79.2% Construction: 8.8% Manufacturing: 7.4% Agriculture: 2.7% Mining: 1.9% (2016)
Unemployment	5.6% (August 2017)
Average gross salary	$52,063 (2016 PPPs)
Main industries	Financial and insurance services Construction Healthcare and social assistance Professional, scientific and technical services Manufacturing Mining
External
Exports	$190.2 billion (2016)
Export goods	iron ore, coal, petroleum gases, gold, synthetic corundum, wheat and meslin, bovine meat, wool, meat of sheep or goat
Main export partners	China 31.6% Japan 13.9% European Union 7.5% South Korea 6.7% United States 4.6% Other 35.6%
Imports	$196.1 billion (2016)
Import goods	cars, petroleum, automatic data processing equipment, medicaments, other food preparations, cigars, wine, baked goods, alcohol of less than 80% volume
Main import partners	China 23.4% European Union 19.3% United States 11.5% Japan 7.7% Thailand 5.7% Other 32.5%
FDI stock	$614.5 billion (31 December 2016 est.)
Gross external debt	$1.692 trillion (31 December 2016 est.)
Public finances
Government debt	18.0% of GDP (2015-16 outcome)
Revenues	$395.1 billion (2015-16 outcome)
Expenses	$428.7 billion (2015-16 outcome)
Economic aid	donor: ODA, $3.2 billion (2015)
Credit rating	Standard & Poor's: AAA (Domestic) AAA (Foreign) AAA (T&C Assessment) Outlook: Negative Moody's: AAA Outlook: Stable Fitch: AAA Outlook: Stable
Foreign reserves	$52.017 billion (August 2017)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars.

The economy of Australia is developed and one of the largest mixed market economies in the world, with a GDP of AUD$1.69 trillion as of 2017. Australia is the second wealthiest nation in terms of wealth per adult, after Switzerland. Australia's total wealth was AUD$8.9 trillion as of June 2016. In 2016, Australia was the 14th largest national economy by nominal GDP, 20th largest by PPP-adjusted GDP, and was the 25th-largest goods exporter and 20th-largest goods importer. Australia took the record for the longest run of uninterrupted GDP growth in the developed world with the March 2017 financial quarter, the 103rd quarter and 26 years since Australia had a technical recession (two consecutive quarters of negative growth).

The Australian economy is dominated by its service sector, comprising 61.1% of the GDP and employing 79.2% of the labour force in 2016. East Asia (including ASEAN and other Northeast Asia) is a top export destination, accounting for about 64% of exports in 2016. Australia has eighth highest total estimated value of natural resources, valued at US$19.9 trillion in 2016. At the height of the mining boom in 2009-10, the total value-added of the mining industry was 8.4% of GDP. Despite the recent decline in the mining sector, the Australian economy has remained resilient and stable and has not experienced a recession since July 1991.

The Australian Securities Exchange in Sydney is the 16th largest stock exchange in the world in terms of domestic market capitalisation and has the largest interest rate derivatives market in Asia. Some of Australia's large companies include but are not limited to: Wesfarmers, Woolworths, Rio Tinto Group, BHP Billiton, Commonwealth Bank, National Australia Bank, Westpac, ANZ, Telstra and Caltex Australia. The currency of Australia and its territories is the Australian dollar which it shares with several Pacific nation states.

Australia is a member of the APEC, G20, OECD and WTO. The country has also entered into free trade agreements with ASEAN, Canada, Chile, China, Korea, Malaysia, New Zealand, Japan, Singapore, Thailand and the United States. The ANZCERTA agreement with New Zealand has greatly increased integration with the economy of New Zealand and in 2011 there was a plan to form an Australasian Single Economic Market by 2015.

History

Main article: Economic history of Australia

Annual percentage growth in real (chain volume) GDP per capita since 1961

20th century

Australia's average GDP growth rate for the period 1901–2000 was 3.4% annually. As opposed to many Southeast Asian countries, the process towards independency was relatively peaceful and thus did not have significant negative impact on the economy and standard of living. Growth peaked during the 1920s, followed by the 1950s and the 1980s. By contrast, the late 1910s/early 1920s, the 1930s, the 1970s and early 1990s were marked by financial crises.

Economic liberalisation

From the early 1980s onwards, the Australian economy has undergone a continuing economic liberalisation. In 1983, under Prime Minister Bob Hawke, but mainly driven by Treasurer Paul Keating, the Australian dollar was floated and financial deregulation was undertaken.

Early 1990s Recession

Main article: Early 1990s recession

The early 1990s recession came swiftly after the Black Monday of October 1987, resulting from a stock collapse of unprecedented size caused the Dow Jones Industrial Average to fall by 22.6%. This collapse, larger than the stock market crash of 1929, was handled effectively by the global economy and the stock market began to quickly recover. However, in North America, the lumbering savings and loans industry was facing decline which eventually led to a savings and loan crisis which compromised the wellbeing of millions of Americans. The following recession thus impacted the many countries closely linked to the United States, including Australia. Paul Keating, who was Prime Minister at the time, famously referred to it as "the recession that Australia had to have." During the recession, GDP fell by 1.7%, employment by 3.4% and the unemployment rate rose to 10.8%. However, the recession did assist in reducing long-term inflation rate expectations and Australia has maintained a low inflation environment since the 1990s to the present-day.

Mining

The establishment of a mining industry has contributed to the high level of economic growth from the gold-rush in the 1840s to the present day. The opportunities for large profits in pastoralism and mining attracted considerable amounts of British capital, while expansion was supported by enormous government outlays for transport, communication and urban infrastructures which also depended heavily on British finance. As the economy expanded, large-scale immigration became necessary to satisfy the growing demand for workers, especially after the end of convict transportation to the eastern mainland in 1840. Australia's mining operations secured continued economic growth and Western Australia itself benefited strongly from mining iron-ore and gold from the 1960s and 1970s which fueled the rise of suburbanisation and consumerism in Perth, the capital and most populous city of Western Australia, as well as other regional centres.

Global financial crisis

Main article: 2007–2012 global financial crisis

Further information: Rudd Government (2007–10)

The Australian government stimulus package ($11.8 billion) helped prevent a recession.

The World Bank expected Australia's GDP growth rate to be 3.2% in 2011 and 3.8% in 2012. The economy expanded by 0.4% in the fourth quarter of 2011, and expanded by 1.3% in the first quarter of 2012. The growth rate was reported to be 4.3% year-on-year.

The International Monetary Fund in April 2012 predicted that Australia would be the best-performing major advanced economy in the world over the next two years; the Australian Government Department of the Treasury anticipated "forecast growth of 3.0% in 2012 and 3.5% in 2013", the National Australia Bank in April 2012 cut its growth forecast for Australia to 2.9% from 3.2%., and JP Morgan in May 2012 cut its growth forecast to 2.7% in calendar 2012 from a previous forecast of 3.0%, also its forecast for growth in 2013 to 3.0% from 3.3%. Deutsche Bank in August 2012, and Societe Generale in October 2012, warned that there is risk of recession in Australia in 2013.

While Australia's overall national economy grew, some non-mining states and Australia's non-mining economy experienced a recession.

Overview

Australia's annual inflation rate (percentage change in CPI) since 1949.

Australia's per-capita GDP is higher than that of the UK, Canada, Germany, and France in terms of purchasing power parity. Per Capita GDP (PPP) Australia is ranked 18th in the world (CIA World Factbook 2016). The country was ranked second in the United Nations 2016 Human Development Index and sixth in The Economist worldwide quality-of-life index 2005. Australia's sovereign credit rating is "AAA" for all three major rating agencies, higher than the United States of America.

According to the 2011 Credit Suisse Global Wealth report, Australia has a median wealth of $222,000 USD ($217,559 AUD) the highest median wealth in the world and nearly four times the amount of each US adult. The proportion of those with wealth above $100,000 USD was the highest of any country – eight times the world average, and Australia was the second wealthiest country in the world behind Switzerland based on average wealth per adult. Compared to the rest of the world, very few Australians had net worth less than $1,000 USD, which was attributed to relatively low credit card and student loan debt. These rankings continued to hold in 2014, despite the economic slowdown, with an average wealth per Australian adult of $430,800 USD. The 2014 issue of the Credit Suisse Global Wealth report explained that this partly reflects a large endowment of land and natural resources relative to population, as well as being a result of high urban real estate prices.

The emphasis on exporting commodities rather than manufactures underpinned a significant increase in Australia's terms of trade during the rise in commodity prices since 2000. However, due to a colonial heritage a lot of companies operating in Australia are foreign-owned and as a result, Australia has had persistent current account deficits for over 60 years despite periods of positive net merchandise exports; given the net income outlay between Australia and the rest of the world is always negative. The current account deficit totalled AUD$44.5 billion in 2016 or 2.6% of GDP.

Inflation has typically been between 2–3% and the pre-GFC cash rate typically ranged between 5–7%, however, partly in response to the end of the mining boom the cash rate has recently been steadily falling, dropping from 4.75% in October 2011 to 1.5% in Aug 2016. The service sector of the economy, including tourism, education and financial services, constitutes 69% of GDP. Australian National University in Canberra also provides a probabilistic interest-rate-setting project for the Australian economy, which is compiled by shadow board members from the ANU academic staff.

Rich in natural resources, Australia is a major exporter of agricultural products, particularly wheat and wool, minerals such as iron ore and gold, and energy in the forms of liquified natural gas and coal. Although agriculture and natural resources constitute only 3% and 5% of GDP, respectively, they contribute substantially to Australia's export composition. Australia's largest export markets are Japan, China, South Korea, India and the US.

At the turn of the current century, Australia experienced a significant mining boom. The mining sector's contribution to overall GDP grew from around 4.5% in 1993–94, to almost 8% in 2006–07. The services sector also gre considerably, with property and business services in particular growing from 10% to 14.5% of GDP over the same period, making it the largest single component of GDP (in sectoral terms). This growth has largely been at the expense of the manufacturing sector, which in 2006–07 accounted for around 12% of GDP. A decade earlier, it was the largest sector in the economy, accounting for just over 15% of GDP.

Regional differences

Between 2010 and 2013, much of the economic growth in Australia was attributed to areas of the country where mining- and resource-based industries and services are mostly located. Western Australia and the Northern Territory are the only states that have economic growth. During 2012 and 2013 Australian Capital Territory, Queensland, Tasmania, South Australia, New South Wales and Victoria experiences recessions at various times. The Australian economy is characterised as a "two-speed economy". From June 2012 to March 2013 Victoria experienced a recession. In 2012 the Government of Victoria cut 10% of all jobs in the public service. The period since has seen these trends reversed with West Australia and the Northern Territory, who are heavily dependent on mining, experience significant downturns in GDP while the eastern states returned to growth, led by strong upturns in NSW and Victoria. By 2016, West Australia was Australia's poorest performing state and was forced to seek a half billion dollar bailout from the federal government.

Taxation

Quarterly taxation revenue ($millions) since 1959.

Main article: Taxation in Australia

See also: Income tax in Australia, Goods and Services Tax (Australia), Passenger Movement Charge, and Fiscal imbalance in Australia

Taxation in Australia is levied at the federal, state, and local government levels. The federal government raises revenue from personal income taxes and business taxes. Other taxes include the goods and services tax (General Service Tax), excise and customs duties. The federal government is the main source of income for state governments. As a result of state dependence on federal taxation revenue to meet decentralised expenditure responsibilities, Australia is said to have a vertical fiscal imbalance.

Besides receipts of funds from the federal government, states and territories have their own taxes, in many cases as slightly different rates. State taxes commonly include payroll tax levied on businesses, a poker-machine tax on businesses that offer gambling services, land tax on people and businesses that own land and most significantly, stamp duty on sales of land (in every state) and other items (chattels in some states, unlisted shares in others, and even sales of contracts in some states).

The states effectively lost the ability to raise income tax during the Second World War. In 1942, Canberra invoked its Constitutional taxation power (s. 51 (ii)) and enacted the Income Tax Act and three other statutes to levy a uniform income tax across the country. These acts sought to raise the funds necessary to meet burgeoning wartime expenses and reduce the unequal tax burden between the states by replacing state income taxes with a centralised tax system. The legislation could not expressly prohibit state income taxes (s. 51(ii) does not curtail the power of states to levy taxes) but the federal government's proposal made localised income tax extremely difficult politically. The federal government offered instead compensatory grants authorised by s. 96 of the Constitution for the loss of state income (State Grants (Income Tax Reimbursement) Act 1942).

The states rejected Canberra's regime and challenged the legislation's validity in the First Uniform Tax Case (South Australia v Commonwealth) of 1942. The High Court of Australia held that each of the statutes establishing Commonwealth income tax was a valid use of the s. 51(ii) power, in which Latham CJ noted that the system did not undermine essential state functions and imposed only economic and political pressure upon them.

The Second Uniform Tax Case (Victoria v Commonwealth (1957)) reaffirmed the court's earlier decision and confirmed the power of the federal government's power to make s. 96 grants conditionally (in this case, a grant made on the condition that the recipient state does not levy income tax).

Since the Second Uniform Tax Case, a number of other political and legal decisions have centralised fiscal power with the Commonwealth. In Ha vs. New South Wales (1997), the High Court found that the Business Franchise Licences (Tobacco) Act 1987 (NSW) was invalid because it levied a customs duty, a power exercisable only by the Commonwealth (s.90). This decision effectively invalidated state taxes on cigarettes, alcohol and petrol. Similarly, the imposition of a Commonwealth goods and services tax (GST) in 2000 transferred another revenue base to the Commonwealth.

Consequently, Australia has one of the most pronounced vertical fiscal imbalances in the world: the states and territories collect just 18% of all governmental revenues but are responsible for almost 50% of the spending areas. Furthermore, the centralisation of revenue collection has allowed Canberra to force state policy in areas well beyond the scope of its constitutional powers, by using the grants power (s.96) to mandate the terms on which the states spend money in areas over which the it has no power (such as spending on education, health and policing).

Local governments (called councils in Australia) have their own taxes (called rates) to enable them to provide services such as local road repairs, local planning and building management, garbage collection, street cleaning, park maintenance services, libraries, and museums. Councils also rely on state and federal funding to provide infrastructure and services such as roads, bridges, sporting facilities and buildings, aged care, maternal and child health, and childcare.

In 2000, a goods and services tax (GST) was introduced, similar to the European-style VAT.

Employment

The seasonally adjusted unemployment rate since 1978

The number of job vacancies (thousands) since 1979

According to the Australian Bureau of Statistics (ABS), the unemployment rate in June 2017 was 7.6% and the youth unemployment rate (15 to 24 years) was 13.0%.

According to Roy Morgan Research the unemployment rate in June 2017 was 8.9%. while Australian workers who were considered either unemployed or underemployed was estimated to be 19.6% (2.65 million) in the same month. Around 4.2 million were estimated to be in part-time employment; about 32.8% of the Australian workforce.

In 2007 228,621 Newstart unemployment allowance recipients were registered, a total that increased to 646,414 or 5.3% of the total labour force by March 2013. As of March 2017, the number of Newstart recipients stands at 746,681 or 5.8% of the labour force; a proportional increase of 0.5% in four years.

The accuracy of official unemployment figures has been brought into question in the Australian media due to discrepancies between the methods of different research bodies (Roy Morgan versus the ABS), differing definitions of the term 'unemployed' and the ABS' practice of counting under-employed people as "employed".

As of May 2017, the Australia labour force were employed in the following industries:

Rank	Industry	No. of employees ('000s)	% of total
1	Health Care and Social Assistance	1562.6	12.9%
2	Retail Trade	1228.4	10.1%
3	Construction	1108.3	9.1%
4	Professional, Scientific and Technical Services	1018.5	8.4%
5	Education and Training	971.8	8.0%
6	Manufacturing	906.5	7.5%
7	Accommodation and Food Services	872.1	7.2%
8	Public Administration and Safety	812.0	6.7%
9	Transport, Postal and Warehousing	614.0	5.1%
10	Financial and Insurance Services	436.1	3.6%
11	Administrative and Support Services	411.0	3.4%
12	Wholesale Trade	391.0	3.2%
13	Agriculture, Forestry and Fishing	296.7	2.4%
14	Mining	235.8	1.9%
15	Arts and Recreation	215.7	1.8%
16	Rental, Hiring and Real Estate Services	212.8	1.8%
17	Information Media and Telecommunications	211.4	1.0%
18	Utilities	125.5	1.0%
	Total Labour Force	12113.3	100.0%

Employment for newly qualified professionals

According to the Australian Graduate Survey done by Graduate Careers Australia, full-time employment for newly qualified professionals from various occupations (around four months after the completion of their qualifications) experienced some declines between 2012 and 2015. Some examples are:

Field of Education	2012	2013	2014	2015	Change since 2012
Dentistry	83.6%	83.3%	79.6%	86.7%	+3.1%
Computer Science	74.7%	70.3%	67.2%	67%	-7.7%
Architecture	63.9%	60.0%	57.8%	70.2%	+6.3%
Psychology	63.1%	56.1%	52.1%	55.2%	-7.9%
Business Studies	74.5%	71.8%	69.7%	70.8%	-3.7%
Electronic/Computer Engineering	79.5%	80.9%	74.9%	78.1%	-1.4%
Mechanical Engineering	88.4%	82.4%	71.0%	72.2%	-16.2%
Surveying	93.0%	86.5%	83.9%	90.7%	-2.3%
Health Other	73.3%	69.7%	70.4%	69.2%	-4.1%
Nursing (Initial)	92.2%	83.1%	80.5%	79%	-13.2%
Nursing (Post-Initial)	86.1%	71.4%	75.8%	74.9%	-11.2%
Medicine	98.1%	96.9%	97.5%	96.3%	-1.8%
Education (Initial)	74.9%	70.8%	70%	71.8%	-3.1%
Education (Post-Initial)	58.8%	71.4%	69.2%	72.7%	+13.9%

The Graduate Careers Survey 2014 explained, "However, GCA’s Beyond Graduation Survey (BGS) indicates that the middle- and longer-term outlook is very positive, with the employment figures for 2010 graduates growing by 14 percentage points three years later." The Beyond Graduation Survey 2013 included 12,384 responses and the Graduate Careers Survey 2014 survey included 113,263 responses ("59.3 per cent of the almost 191,000 Australian resident graduates who were surveyed responded to the AGS.")

The professional associations of some of these occupations expressed their criticism of the immigration policy in 2014.

States and territories ranked by unemployment rates

Rank	States	Unemployment rate (August 2017)
1	Victoria	6.1%
2	Tasmania	6.0%
3	Western Australia	5.9%
4	South Australia	5.7%
5	Queensland	5.7%
6	New South Wales	5.0%
7	Australian Capital Territory	4.7%
8	Northern Territory	3.6%

Note: All data are seasonally adjusted, except for the Northern Territory and the Australian Capital Territory, which are trend data.

Sectors

Gross operating profits across all industries since 1994 ($millions/quarter)

Main article: List of companies of Australia

Industry

Mining

Main articles: Coal companies of Australia, Energy in Australia, and Mining in Australia

Australian energy resources and major export ports map

Coal is mined primarily in Queensland, New South Wales and Victoria. 54% of the coal mined in Australia is exported, mostly to East Asia. In 2000-01, 258.5 million tonnes of coal was mined, and 193.6 million tonnes exported. Coal provides about 85% of Australia's electricity production. In fiscal year 2008-09, 487 million tonnes of coal was mined, and 261 million tonnes exported. Australia is the world's leading coal exporter.

Australia's Argyle mine is the second largest diamond mine in the world estimated to produce 12.6 million carats in 2014, worth over $500 million. Argyle is known for producing some of the world's most valuable pink and red diamonds.

Manufacturing

Main article: Manufacturing in Australia

The manufacturing industry in Australia has declined from 30% of GDP in the 1960s to 12% of GDP in 2007.

Agriculture

Main articles: Agriculture in Australia and Australian wine

Agriculture contributes 3% of Australia's GDP at the farm gate and when value-added processing beyond the farm is included this figure rises to 12%. 60% of farm products are exported. Irrigation is an important and widespread practice for a country where many parts receive low rainfall. Agriculture, Forestry and Fishing was the second strongest industry from 2013-2015, with the number of employees growing from 295,495 in February 2013 to 325,321 in February 2015.

Services

IT related jobs (such as computer system design and engineering) are defined as Professional, Scientific and Technical Services by the Department of Education, Employment and Workplace Relations of Australia. IT job creation occurs mostly in the state capital cities of Australia.

Finance

Australia's four 'Big Banks' are among the 'World's 50 Safest Banks' as of April 2012. The four largest banks in Australia are also known as the "Big Four".

Between 1991 and 2013, 36,720 mergers and acquisitions with a total known value of US$2,040 billion with the involvement of Australian firms have been announced. In the year 2013, 1,515 transactions valued at US$78 billion had been announced which was a decrease in terms of numbers (−18%) and value (−11%) compared to 2012. The largest takeover or merger transaction involving Australian companies was the 2007 takeover of the Coles Group by Wesfarmers, totalling A$22 billion.

Tourism

Monthly short-term arrivals in Australia since 1991

Main article: Tourism in Australia

In the financial year 2010–11, the tourism industry represented 2.5% of Australia's GDP, at a value of about $35 billion to the national economy – equivalent to $94.8 million a day to the Australian economy. Domestic tourism is a significant part of the tourism industry, and was responsible for 73% of the total direct tourism GDP. The 2010–11 financial year saw a record number of overseas arrivals in the financial year, with 5.9 million short-term visitor arrivals to Australia (588 extra visitors a day). Tourism employed 513,700 people in Australia in 2010–11, of which 43.7% were part-time. Tourism also contributed 8.0% of Australia's total export earnings in 2010–11.

Media

Main articles: Media of Australia and Telecommunications in Australia

In 2011–12, Australia was ranked 30th out of 179 countries in accordance to press freedom. Media is a strong industry in Australia, with Fairfax Media and News Corporation representing two of the country's largest media companies.

Education

Main articles: Education in Australia and Tertiary education in Australia

School attendance is compulsory in Australia, from the age of 5 up until approximately 16 (although it varies between each state and territory). Australia also has an adult literacy rate that was estimated to be 99% in 2003.

In 2004, the average educational acquirement of the adult population in OECD countries was 11.9 years. This is based on the duration of formal educational programmes. Australia ranked relatively highly in the study, with the population recording slightly over 12 years in education, ranking similarly to many European countries such as Sweden, Ireland and Poland. Australia was, however, outperformed by Canada, Germany and the United States—which all measured close to 14 years in education.

In the Programme for International Student Assessment, Australia regularly scores among the top five of thirty major developed countries (member countries of the Organisation for Economic Co-operation and Development). Catholic education accounts for the largest non-government sector.

University attendance in Australia is expensive, particularly in comparison to other developed nations such as the New Zealand, Canada, and France.

Logistics

Main article: Transport in Australia

Infrastructure

Australian renewable power plants

Main articles: Energy in Australia and Transportation in Australia

Energy

The Australian economy is dependent on imported crude oil and petroleum products, the economy's petroleum import dependency is around 80% – crude oil + petroleum products. Despite that Australian oil exports are very high and comprise a relatively big part of its GDP.

Trade and economic performance

See also: List of the largest trading partners of Australia and List of exports of Australia

In the second half of the 20th century, Australian trade shifted away from Europe and North America to Japan and other East Asian markets. Regional franchising businesses, now a $128 billion sector, have been operating co-branded sites overseas for years with new investors coming from Western Australia and Queensland.

In the late 19th century, Australia's economic strength relative to the rest of the world was reflected in its GDP. In 1870, Australia had the highest GDP per capita in the world due to economic growth fuelled by its natural resources. However, as Australia's population grew rapidly over the 20th century, its GDP per capita dropped relative to countries such as the US and Norway. However, the Australian economy has been performing nominally better than other economies of the OECD and has supported economic growth for over 20 consecutive years. According to the Reserve Bank of Australia, Australian per capita GDP growth is higher than that of New Zealand, US, Canada and The Netherlands. The past performance of the Australian economy has been heavily influenced by US, Japanese and Chinese economic growth.

Australian national debt

Further information: Australian government debt

Australia's net external debt exceeded $1 trillion in April 2017 as a result of Australia's structural current account deficits. Although these deficits have narrowed over the last decade due to an increase in net merchandise trade, this effect has been partly offset by the return of Australian government debt; net federal debt was estimated at $326.0 billion in the 2016-17 federal budget of which 60% is owed to foreigners. The entirety of the debt has been accumulated through ten straight budget deficits as Australia had negative net government debt (i.e. The Australian government had net positive bond holdings) a decade earlier in the 2006-07 fiscal year.

Chinese investment

There is substantial export to China of iron ore, wool, and other raw materials and over 120,000 Chinese students study in Australian schools and universities. China is the largest purchaser of Australian debt. In 2009, offers were made by state-owned Chinese companies to invest 22 billion dollars in Australia's resource extraction industry.

The Signing of the China-Australia Free-Trade Agreement, signed November 2014, has the potential to drastically increase Chinese Investments as agriculture and services become more lenient.

Australia's special investor visa program introduced in 2012 encouraged Chinese investment. The visa program fast tracks visas and eases the residency requirement for a permanent visa for those ready to invest over 5 million Australian dollars into state government bonds, specific infrastructure and property investments. Wealthy Chinese interested in retirement houses, top schools and cleaner air, began looking to Australia after Canada started scaling back it’s investment visa program in 2012 and eliminated it's main investor visa program in 2014. In early 2014 it was reported that the Australia's special investor visa was granted to 65 mostly Chinese millionaires who brought over $440 million into the country. By 2017, almost 90% of the more than 1,300 foreigners who used Australia's special investor visa program were from China. Australia also has an investor visa program with a required investment of 1 million Australian dollars but with more restrictions and a lengthier period of time to get a permanent visa.

In 2017, it was reported that Australia is the third most popular destination for Chinese to invest wealth offshore, with a 7% increase in Chinese private wealth flowing into Australia while interest in the top two investment destinations, Hong Kong and the United States, fell by 18% and 3% respectively. In 2017 there were 1.6 million high net worth Chinese (with at least 10 million Chinese yuan to invest) and 24 percent of the 3000 wealthy Chinese surveyed had private investments in Australia. Migration was one of the top three reasons for Chinese investment offshore.

Trade agreements

FTA (Free Trade Agreement) effective FTA with New Zealand (effective January 1983) FTA with Singapore (effective July 2003) FTA with United States (effective January 2005) FTA with Thailand (effective January 2005) FTA with Chile (effective March 2009) FTArea with AANZFTA (ASEAN, New Zealand) (effective January 2010) FTA with Malaysia (effective January 2013) FTA with South Korea (effective December 2014) FTA with Japan (effective January 2015) FTA with China (ChAFTA) (effective December 2015)

FTA (Free Trade Agreement) negotiation FTA with GCC (Cooperation Council for the Arab States of the Gulf) (negotiation since 2007) FTA with PACER Plus (Pacific Agreement on Closer Economic Relations) (negotiation since 2009) FTA with Indonesia (negotiation since 2010) FTA with India (negotiation since 2011) FTA with RCEP (Regional Comprehensive Economic Partnership) (negotiation since 2012) FTA with TiSA (Trade In Services Agreement) (negotiation ongoing) FTA with TPP (Trans-Pacific Strategic Economic Partnership) (negotiation concluded October 2015, not yet into force)

Australia's balance of payments

Australia's current account (in $M) since 1959

Australia's current account as a proportion of GDP since 1959

Main article: Balance of payments of Australia

In trade terms, the Australian economy has had persistently large current account deficits (CADs) for more than 50 years. One single factor that undermines balance of payments is Australia's narrow export base, making it highly sensitive to the volatility of global primary product prices. In addition, due to a colonial heritage a lot of companies operating in Australia are foreign-owned and as a result, Australia's net income outlay between it and the rest of the world is always negative; this results in persistent current account deficits even during times of positive net merchandise exports.

Dependent upon commodities, the Australian government endeavoured to redevelop the Australian manufacturing sector. This initiative, also known as microeconomic reform, helped Australian manufacturing to grow from 10.1% in 1983–1984 to 17.8% in 2003–2004.

There are other factors that have contributed to the extremely high current account deficit in Australia such as lack of international competitiveness.

However, as Australia's CAD is almost entirely generated by the private sector, as outlined in Professor John Pitchford's 'Consenting Adults Thesis' in the early 1990s, there is an argument that the CAD is not a significant issue. Historically, Australia has relied on overseas capital to fill the gap between domestic savings and investment, and many of these investment opportunities could not have been pursued if Australia did not have access to foreign savings. This suggests that Australia's apparently low savings level and CAD are not necessarily a significant problem. As long as the investment that is being funded by overseas capital inflow generates sufficient returns to pay for the servicing costs in the future, the increase in foreign liabilities can be viewed as sustainable in the longer term.

Wealth

GNI per capita in 2015

In 2013, Australia was identified by the Credit Suisse Research Institute as retaining it's 2012 position as the nation with the second-highest average wealth per adult, a position it also retained in 2016. The nation's poverty rate was also reported to have increased from 10.2% in 2000-01 to 11.8% at the time of the 2013 report on the nation's wealth.

In 2017, Australia was the world’s top destination for millionaires, beating the United States for the second consecutive year. An estimated 11,000 millionaires moved to Australia in 2016, compared with the 10,000 who moved to the United States. Australia was especially attractive to Chinese millionaires due to it's relative proximity, cleaner environment, political and economic stability, and investor visa programs. Also, the primary reason for millionaires leaving China is top schools abroad that will give their children a better education and career connections.

See also

• List of the largest trading partners of Australia
• Home-ownership in Australia
• List of Australian states and territories by gross state product
• Median household income in Australia and New Zealand
• Ranked list of states and territories of Australia

References

• Macfarlane, I. J. (1998). "Australian Monetary Policy in the Last Quarter of the Twentieth Century". Reserve Bank of Australia Bulletin, October 1998
• OECD Factbook 2006 (Gini coefficients) OECD Factbook 2006 pdf
• Parham, Dean. (2002). "Microeconomic reforms and the revival in Australia’s growth in productivity and living standards". Assistant Commissioner – Productivity Commission, Canberra Conference of Economists Adelaide, 1 October 2002 (Adobe Acrobat *.PDF document)
• Some statistics on this page have been drawn from publications of the Australian Bureau of Statistics.

External links

• World Bank Trade Summary Statistics Australia 2012
• Quick Reference Tables for the World Bank's 2005 data
• Tariffs applied by Australia as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements