A Look Inside Australia’s Economy

A Look Inside Australia’s Economy

A Look Inside Australia’s Economy

Highlights:

  • GDP of AUD$1.62 trillion as of 2015
  • In 2012, it was the 12th largest national economy by nominal GDP and the 19th-largest measured by PPP-adjusted GDP, about 1.7% of the world economy
  • The Australian Securities Exchange in Sydney is the largest stock exchange in Australia and in the South Pacific and ranks 14th in the world in terms of market capitalisation
  • 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
  • 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 fifth in the world (IMF 2011).
  • Australia has a median wealth of US$222,000 ($217,559), the highest in the world and nearly four times the amount of each US adult.
  • Inflation has typically been 2–3% and the base interest rate 5–6%.
  • In the past decade, one of the most significant sectoral trends in the economy has been the growth (in relative terms) of the mining sector (including petroleum)
  • Western Australia and the Northern Territory are the only states that have economic growth.

Top 6 Australian Industries:

  1. The Financial industry
  2. The Business Consulting Firms
  3. Metals and Mining Industry
  4. Energy and Utilities Industry
  5. Industrial and Material Industry
  6. Healthcare/Pharmaceutical Industry

The economy of Australia is one of the largest mixed market economies in the world, with a GDP of AUD$1.62 trillion as of 2015. Australia’s total wealth is AUD$6.4 trillion in 2013. In 2012, it was the 12th largest national economy by nominal GDP and the 19th-largest measured by PPP-adjusted GDP, about 1.7% of the world economy. Australia is the 19th-largest importer and 19th-largest exporter. The Reserve Bank of Australia publishes quarterly forecasts of the economy.

The Australian economy is dominated by its service sector, comprising 68% of GDP. The mining sector represents 7% of GDP; including services to mining, the total value of the mining industry in 2009-10 was 8.4% of GDP. Economic growth is largely dependent on the mining sector and agricultural sector (12% of GDP) with the products to be exported mainly to the East Asian market. Despite the recent decline of the mining boom in the country, the Australian economy has remained resilient and stable.

The Australian Securities Exchange in Sydney is the largest stock exchange in Australia and in the South Pacific and ranks 14th in the world in terms of market capitalisation. Australia is home to some of the largest companies in the world, including but not limited to: Wesfarmers (Coles Group), Woolworths, BHP Billiton, National Australia Bank, ANZ, Commonwealth Bank, Westpac, Rio Tinto Group, Telstra & Caltex – which are the 10 largest companies in Australia. The Australian dollar is the currency of the Commonwealth of Australia and its territories, including Christmas Island, Cocos (Keeling) Islands, and Norfolk Island. It is also the official currency of the independent Pacific Island nations of Kiribati, Nauru and Tuvalu.

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.

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 fifth in the world (IMF 2011). The country was ranked second in the United Nations 2011 Human Development Index and sixth in The Economist worldwide quality-of-life index 2005. Australia’s sovereign credit rating is “AAA”, higher than the United States of America.

According to the 2011 Credit Suisse Global Wealth report, Australia has a median wealth of US$222,000 ($217,559), the highest in the world and nearly four times the amount of each US adult. The proportion of those with wealth above US$100,000 is the highest of any country – eight times the world average. Average wealth was $US397,000, the world’s second-highest after Switzerland. The 2014 issue of the Credit Suisse Global Wealth report explains that this 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 has underpinned a significant increase in Australia’s terms of trade during the rise in commodity prices since 2000. Australia’s current account is about 2.6% of GDP negative: Australia has had persistently large current account deficits for more than 50 years.

Inflation has typically been 2–3% and the base interest rate 5–6%. 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 export performance. Australia’s largest export markets are Japan, China, South Korea, India and the US.

In the past decade, one of the most significant sectoral trends in the economy has been the growth (in relative terms) of the mining sector (including petroleum). In terms of contribution to GDP, this sector grew from around 4.5% in 1993–94, to almost 8% in 2006–07.

The services sector has grown 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.

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 have had recessions. 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 now in recession and the eastern states experiencing strong growth, led by 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.

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John Heffernan

John Heffernan is a Junior Analyst at HEFFX. John is studying Economics and is a contributor on equities at Live Trading News.

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