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Asia and Oceania
Australia |
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Last updated: 21 May 2009 |
Country information
Economy
Overview
Almost two decades of continuous economic growth, a low unemployment rate and a strong banking system which is the result of a series of structural and policy reforms have all left Australia better placed in the face of a global economic downturn than many other developed nations.
Although analysts warn that the worst is far from over and we may yet see one or two quarters of negative growth, it appears that Australia has so far avoided a technical recession. This is partly due to the Government’s early intervention in pumping billions of dollars into the economy through cash handouts and the announcement of major infrastructure expenditure, and partly to favourable terms of trade and a limited exposure to toxic overseas assets.
The country however is currently facing a significantly changed economic environment, and although Australia’s economy will out-perform those of other advanced nations this year, recovery will be slow and fragile. A run of encouraging news on employment, which, although stalled at 5.8 per cent, is not growing, house prices and consumer spending has seen confidence soar after a shaky start to the year. There is debate over the need for further stimulus, but most commentators agree that now is no time to curb spending. Interest rates are at a low 3 per cent and are expected to begin an upward climb within months. Overall, risks to growth have diminished, but the downward drag from low business investment, employment and household incomes will preclude a quick recovery.
The economy continues to benefit from demand for resource and minerals, and it is generally accepted that China’s continued growth - albeit slower than previously thought - holds the key to Australia’s recovery on the other end of the current crisis.
Trade
Rich in natural resources, Australia has a largely affluent society and open and innovative economy, resulting in growing foreign investment over the past decade. Australia continues to be a strong advocate of increased trade liberalisation in the World Trade Organisation and plays an active role in global trade talks. Japan remains Australia’s largest export market, followed by China, the United States, the Republic of Korea and New Zealand. Strong political, economic and cultural links to the UK make Australia a more significant market for UK exports than its comparatively small population might suggest. In 2007-08, the UK was Australia's sixth largest merchandise trading partner and seventh largest source of merchandise imports. Today the UK remains Australia’s top European Union trading partner.
The UK sells more to Australia than to India or China, and Australia is the UK’s 5th largest market for goods outside the EU. Agriculture, Mining, Oil and Gas, Information and Communication Technology, Biotechnology, Creative and Media, Marine, Railways, Food and Drink, Recreation and Leisure, and Aerospace are all sectors identified as offering significant opportunities for British companies.
In 2007-08, two-way merchandise trade between Australia and the United Kingdom was worth approximately A$16.8 billion. The services trade was also strong in 2007-08, around A$4.7 billion in exports and A$4.2 billion in imports. Recreational travel on both sides remains the strongest contributing factor to the services sector. The UK recently overtook the US as the largest investor in Australia.
Global Trade
Australia’s trade policy is geared to increasing economic activity, liberalising trade and maximising access for Australia in the international market place. Australia is an active player in the WTO, in particular on agriculture. Australia is actively pursuing regional and bilateral free trade agreements, which, it hopes, will deliver stronger trade and economic growth. FTAs have been completed with the US, Singapore, Thailand, New Zealand and Chile, and negotiations are underway with China, Malaysia, Japan, Korea and ASEAN. Further bilateral FTA’s with India, and Indonesia are also under consideration.
Economic indicators (US$)
Economic indicators Australia UK
GDP growth 0.3% -0.7%
Inflation (CPI) 1.5% 1.8%
Interest rate 3.0% 0.5%
Unemployment 5.8% 7.8%
Exchange rates (30 April 2009)
Aus$/US$ 0.8649 Aus$/£ 0.5167
Longer historical perspective
In 1768 the British Admiralty instructed Captain James Cook to begin a search for the 'Great South Island' first reached by Dutch sailors in the early 17th century. The crew of The Endeavour subsequently landed at Botany Bay in April 1770 and claimed the island for the British. The government decided that, following the loss of Britain’s American colonies, Botany Bay should become the new destination for British convicts under sentence of transportation. On 26 January 1788 the First Fleet, sailing under the command of Captain Arthur Phillip, reached Australia (26 January is celebrated annually as Australia Day). A penal colony was also established in Van Diemen’s Land (later renamed Tasmania). In total more than 168,000 convicts were transported. But free settlers were also attracted to Australia by its agricultural potential and, from the 1850s, the discovery of gold. Exploration and expansion followed and by the 1890s, calls for the colonies of New South Wales, Western Australia, Tasmania and Victoria to federate became increasingly strong. Australia became a nation on 1 January 1901.
