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Economy of Australia



Australia has a prosperous, Western-style market economy, with a per capita GDP slightly higher than France and Germany in nominal terms as of 2006, and with a lower cost of living, higher still in terms of Purchasing Power Parity. The Australian economy is dominated by its services sector (68% of GDP), yet it is the agricultural and mining sectors (8% of GDP combined) that account for 65% of its exports. Rich in natural resources, Australia is a major exporter of agricultural products, particularly grains and wool, and minerals, including various metals, coal, and natural gas. A downturn in world commodity prices can thus have a large impact on the economy.


 


Australia's competitive advantage in primary products is a reflection of the natural wealth of the Australian continent and its small domestic market; 20.3 million people occupy a continent the size of the contiguous United States. Service industries have expanded in recent decades at the expense of the manufacturing sector, which now accounts for just under 12 percent of GDP.


 


Australia's emphasis on reforms is a key factor behind the continuing strength of the economy. In the 1980s, the Australian Labor Party, led by Prime Minister Bob Hawke and Treasurer Paul Keating, commenced the modernisation of the Australlian economy by floating the Australian dollar in 1983, leading to full financial deregulation.


 


Current areas of concern to some economists include Australia's chronically high current account deficit and also the high levels of net foreign debt owed by the private sector.


Economic growth

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--such as in opening the telecommunications market to competition--much remains to be done, particularly in the domestic arena. These values of the share market comprises of many different telecommunication companies.


 


While the near-term outlook is for continued economic expansion, Australia's longer term prospects depend heavily on continued fundamental economic reform. There is a general consensus among the major political parties, management, and labour on the necessary features of this reform but significant divergence of views on the methods, pace, and degree of change required.


 


The influence of China's economic growth has also fuelled Australia's export growth in mineral and energy resources, with the recent Western Australian Liquified Natural Gas contract worth potentially $25 billion over the life of the project. China's industrialisation has resulted in an export boom for resource corporations, and thus contributed to increasing the Australian Federal Government's revenue stream from increased Company Tax takings. Australia's trade with China is currently the fastest growing in the past decade, to become the third largest trading partner overall.


 


Recent changes by the Coalition Government on industrial reform, with particular regards to new laws changing the regulation of workplace contracts for small businesses under 100 employees, has resulted in major discontent among union groups and employee advocates. Critics argue that the laws will result in reduced worker entitlements in return for nominal financial compensation, which will thus impact on the social needs of individuals. Furthermore, it is argued that there is no economic evidence to support the government's claims that the changes will stimulate productivity and raise wages. Nevertheless, businesses welcome attempts to improve productivity, and believe such reforms will benefit the Australian economic output as a whole.


 


The privatisation of Telstra will also be a major agenda for the government, potentially worth AU$30 billion, as it seeks to retire public debt and build upon successive federal surpluses for a future capital reserve. Telstra's privatisation is undergoing numerous consultations with various lobby groups, particularly rural areas which expect funds to be allocated for improving rural telecommunications infrastructure. Various proposals for privatisation to improve competition of Telstra's natural monopoly over fixed lines, including the separation of Telstra's wholesale communications and its retail division, have been seen as unsatisfactory by the current Telstra board for maximising the final share price.

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