General Information

Economic Indicators

Trade Indicators

Economic Overview

The increasing integration of Australian trade with the Asian region, coupled with the government's efforts to promote regional trade through bilateral agreements and multilateral forums, such as APEC and IOR-ARC, has enhanced Australia's attractiveness as an export base. 1

Non-discriminatory immigration policies over several decades have resulted in diverse ethnic communities that, though well integrated into mainstream Australian life, have helped to establish extensive overseas trading networks. 2 Trade with Asia and the Indian Ocean Rim is growing strongly, producing a relative fall in the share of Australia's trade conducted with Europe and North America. 3

Although the Australian economy has historically retied on mineral-resource and agricultural exports, the most rapidly growing category of exports at present is manufactures, particularly the high-tech and high-value-added goods classified as elaborately transformed manufactures. 4

The ultimate goal is for Australia to become a competitive producer and exporter, not just of traditional farm and mineral commodities, but of a diversified mix of value-added manufactured products, services and technologies. While progress has been made on this economic reform agenda, more can be done. Herein, lie some of the most promising opportunities for business and investment. 5

Reform, deregulation and sound financial policies at home, and the pursuit of open and liberalised trade and investment policies with other countries, have delivered a strong, soundly based and growing economy. The federal government gives top priority to keeping the economic fundamentals in good repair while pursuing a positive agenda of change and growth. 6

Australia is unique in being a developed country with a strong comparative advantage in the rural and mining industries, while manufactures, and the services sector in particular, are rapidly becoming more competitive. 7

It has a mature industrialised economy with a rapidly expanding base of high technology and a growing services sector. Information industries are among the fastest growing sectors. Exports of telecommunications equipment are rising. 8

The increasing penetration of the world's markets by Australian technology, expertise and manufactured goods signals the evolving transformation of Australian industry and society. Elaborately transformed goods account for 24 per cent of Australia's merchandise exports. 9

Manufactures and services, particularly tourism, have played a major role in boosting exports and diversifying the export base in the past decade. Export earnings from the tourism industry are nearly twice those of coal, Australia's largest merchandise export. 10

The outlook is for continued strong growth, low inflation and faster growth in employment. There is no end in sight for investment in large-scale resource development. Australia's traditional rural and resource-based industries continue to grow even as the economy diversifies. 11

In recent years Australia has maintained an inflation rate among the lowest in OECD countries, having reached its lowest level for 35 years in 1997. Interest rates are also at historic lows. 12

Wage restraint, improved productivity, and responsiveness to global pressures have increased Australia's competitiveness. Real unit labour costs are significantly lower than in the mid-1980s. 13

Regulatory Environment

Australia's regional trade policy aims to build upon the trade and investment liberalisation goals and gains of the multilateral system. Regional trade policy complements in an important way Australia's multilateral and bilateral policy activities and objectives. 14

Australia is a signatory to the GATT and a founding member of the WTO, and employs a tariff classification system based on the Harmonised System. 15 Some restrictive standards requirements and design rules have been maintained which have an impact on the free flow of goods. However,

Australian standards are being rewritten in a number of areas to bring them into conformity with Australia's new international obligations under various trade agreements. 16

On a trade-weighted basis, Australian duties on manufactured goods average just over 4%, with 94% of its industrial tariff lines GATT-bound. 17

Australia seeks to be a positive force for change, committed to trade liberalisation throughout the world. It embraces policies promoting the liberalisation of trade and investment through the removal of tariffs and non-tariff barriers, to give scope for competitive advantage to operate for the benefit of all countries and their citizens. 18

Tariffs have been cut progressively, and the current average tariff on manufactured goods entering Australia is about 5 per cent. 19

Current Process of Liberalisation

Australia's long-standing policy of using tariffs to protect its local industry began changing in the early 1970s, and was accelerated in 1988 by the Federal Government's program of economic reform directed toward moving the country toward a globally competitive economy. Initially general in scope, the program now is focused on microeconomic changes to help business become more competitive. The strategy has three principal premises: tariffs and other forms of protection must be reduced; industry must drop its preoccupation with protection and turn its attention to becoming more competitive; and, improvements must come from both labour and management. 20

The result has been a transformation from an inward looking, import-substitution country to an internationally competitive, export-oriented one. Key reforms include the unilateral reduction of high tariffs and other protective barriers, floating the Australian dollar exchange rate, deregulating the financial services sector (including a decision in late 1992 to allow liberal access for foreign bank branches), rationalising and reducing the number of trade unions, restructuring the highly centralised system of industrial relations and labour bargaining, better integration of the State economies into a national federal system, improvement, standardisation of the national infrastructure, and privatising many government-owned services and some public utilities. 21

The Australian Government is firmly committed to trade liberalisation and the goal of free and open trade by 2010 as agreed in the Bogor Declaration by APEC leaders in 1994. Recently it has been decided to legislate to reduce substantially tariffs in the motor vehicle and textiles, clothing and footwear industries from 1 January 2005 after holding them constant from 2000. 22

Australia has made progress in microeconomic reform in the financial markets and in taxation, primary and manufacturing industry protection, the maritime, aviation, and rail industries, telecommunications and government business enterprises, and electricity, gas and water supply. 23

The government has announced a policy of reform and modernisation of the Australian taxation system, and established a taxation task force to prepare suitable options. It has also announced a corporate law reform program involving a fundamental review of key areas of regulation that affects business and investment activity. 24

Initiatives since 1996 include:

• opening Australia's telecommunications to full market competition, and the partial privatisation of the national telecommunications carrier, Telstra
• moves to introduce more efficient work practices and manning regimes on the waterfront and in Australia's shipping industry
• privatisation of airports through the sale of long-term leases
• releasing for private sale of federal railway enterprises and interests
• establishment of a national heavy vehicle regulation and charging regime
• steps towards the establishment of national electricity market in which electricity retailers can compete, and towards free and fair trade, including national access in gas markets. 25

1. Country Reference: Investing, Licensing & Trading Conditions Abroad: Australia: 1996, (The Economist Intelligence Unit, London, 1996), p. 45.
2. Ibid..
3. lbid., p.44.
4. Ibid..
5. Trade Compass Country Commercial Guides,
   (http://www.tradecompass.comAibrary/books/com_guide/).
6. Australia in Brief 98, (http://www.dfat.gov.au/aib98/aib98CI .html).
7. Ibid..
8. Ibid..
9. Ibid..
10. Ibid..
11. Ibid..
12. Ibid..
13. Ibid..
14. Trade Outcomes and Objectives Statement 1998, (Commonwealth of Australia, Canberra, 1998), p. 135.
15. Country Reference: Investing, Licensing & Trading Conditions Abroad: Australia: 1996, (The Economist Intelligence Unit, London, 1996), p. 45.
16. Trade Compass....
17. Ibid..
18. Australia in Brief 98....
19. Ibid..
20. Trade Compass....
21. Ibid..
22. Trade Liberalisation: Opportunities for Australia, (Commonwealth of Australia, Canberra, 1997), p. 14.
23. Australia in Brief 98....
24. Ibid..
25. Ibid..
26. Ibid..