Economy of Australia

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Economy of Australia
Currency	1 Australian Dollar ($A or AUD) = 100 cents
Fiscal year	1 July - 30 June
Trade organisations	APEC, WTO and OECD
Statistics [link]
GDP ranking	16th by volume (at PPP) (2005); 13th by per capita (at PPP) (2005)
GDP (Nominal)	US9 billion (2006)
GDP (Nominal)	A4.2 billion (2005-2006)
Real GDP growth	3% (2005-2006) [link]
GDP per capita (Nominal)	A,980 (2006) US,311 (2006)
GDP by sector	agriculture (3.4%), mining (4.9%), industry (23.2%), services (68.4%) (2004/05 est.)
Inflation	2.75% (2005-2006) [link]
Pop below poverty line	N/A (2004 est.)
Labour force	10.65 million (December 2005 est.)
Labour force by occupation	agriculture (3.6%), mining (1.1%), industry (20.2%), services (75.1%) (May 2005 est.)
Unemployment rate	5.2% (February 2006) [link]
Main industries	mining, industrial and transportation equipment, food processing, chemicals, steel
Trading Partners [link]
Exports	7.3 billion (2004/05 est.)
Main partners	Japan 19.6%, China 10.2%, South Korea 7.7%, US 7.4%, New Zealand 7.2% (2004/05 est.)
Imports	9.5 billion (2004/05)
Main Partners	US 14.2%, China 13.2%, Japan 11.5%, Germany 5.8% (2004/05)
Public Finances
Public debt	colspan="2" valign="top"
External debt	colspan="2" valign="top"
Revenues	A2.9 billion (2005-2006) [link]
Expenses	A6.0 billion (2005-2006) [link]
Budget Surplus	A.8 billion (2005-2006) [link]
Economic aid	ODA, .5 billion (2005/06 Budget) [link]
[http://encycl.opentopia.com/ edit]

Australia has a prosperous, Western-style market economy, with a per capita GDP slightly lower than the United Kingdom and slightly higher than France and Germany in nominal terms as of 2006, and thanks to the lower cost of living, slightly higher 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.

Contents

1 History
2 Microeconomic reform
3 Economic growth
4 Taxation

4.1 Federal taxation
4.2 State taxation
4.3 Municipal taxation

5 Foreign trade
6 Economic indicators
7 References
8 See also

History

Microeconomic reform

Other key reforms include unilaterally reducing 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; rationalizing and reducing the number of trade unions; efforts to restructure the highly centralized system of industrial relations and labour bargaining; better integrating the State economies into a national federal system; improving and standardizing the national infrastructure; and privatizing much of the government-owned services and public utilities.

Since 1996, the Coalition government, led by Prime Minister John Howard, continued to implement microeconomic reform policies. The microeconomic reforms of the Howard government have focussed on the labour market, and has attempted to reduce union power and involvement in the workplace. The Coalition government deregulated numerous other industries, including the telecommunications sector, and privatised many of the pre-existing monopolies. Since the recession of the early 1990s, the Australian economy has not suffered a recession in over 14 years. As of May 2006, unemployment had fallen to a level of 4.9 per cent, the lowest level since the 1970s. The price of shares listed on the Australian Stock Exchange has also grown significantly since the early 1990s.

Many raw materials (including resources postulated to exist but yet to be discovered) remain mostly unexploited. Economists often refer to Australia as the "world's farm". The agriculture and natural resources sectors contribute significantly to GDP, both directly and indirectly, through associated services like road and rail transport networks, which in some areas exist entirely based on an industrial need, and supporting rural economies. In recent years the Australian government has been focusing on the development of the tourism, education and technology markets. The Australian government funds scientific research and development through universities, the Commonwealth Scientific and Industrial Research Organisation (CSIRO), and through joint ventures between the public and private sectors called Cooperative Research Centres.

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.

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 [link]. 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 some 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 AUD$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.

Taxation

As a Federation, the political power between Commonwealth and State Governments is evenly spread out. This is why both the Commonwealth and the States have their own taxes. Obviously, taxes vary from State to State due to their different needs, populations, economics and budgetary position. However the majority of income for State Governments remains the Federal Government, for which the largest sources of revenue is income tax and business tax.

Federal taxation

Income tax in Australia:

This will be the amount of tax that people will have to pay on their income from July 1 2006. Source: [click here]

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income

Taxable income Tax on this income
– ,000 Nil
,001 – ,000 15c for each over ,000
,000-,000 ,849.85 plus 30c for each over ,000
,001 – 0,000 849.85 plus 40c for each over ,000
Over 0,000 849.85 plus 45c for each over 0,000
– ,000 Nil
,001 – ,000 15c for each over ,000
,000-,000 ,849.85 plus 30c for each over ,000
,001 – 0,000 849.85 plus 40c for each over ,000
Over 0,000 849.85 plus 45c for each over 0,000
– ,000 Nil
,001 – ,000 15c for each over ,000
,000-,000 ,849.85 plus 30c for each over ,000
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,001 – ,000 15c for each over ,000
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Over 0,000 849.85 plus 45c for each over 0,000
– ,000 Nil
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,000-,000 ,849.85 plus 30c for each over ,000
,001 – 0,000 849.85 plus 40c for each over ,000
Over 0,000 849.85 plus 45c for each over 0,000

The Medicare levy applies to certain thresholds.

GST (Goods and Services Tax)

The Goods and Services Tax, which the Australian equivalent of the VAT, is a 10% consumption tax imposed on goods which was introduced by the Howard Government in 2001. There are however, products which are GST-free, such as fresh foods.

The purpose of the GST is to provide the States with enough funds so that they can abolish and/or reduce some of their State taxes and expand the size of their services to the public. In the contract signed between the Commonwealth and the States and Territories in 1999, the distribution of GST revenue is decided by the Federal Government. This has resulted in disputes between the Commonwealth and NSW and Victoria who are aggrieved because they are receiving less GST revenue than the respective State generates; the excess revenue is then transferred to other states such as Queensland. The GST rate cannot be increased or decreased without the unanimous approval of Commonwealth and State Governments.

Corporate/Company Tax

All businesses pay a company/corporate tax of 30%.

Social Security Levies (this part needs to be expanded)

All people must pay Social Security levies so as to fund healthcare, retirement programs.

Medicare Levy: 1.5%

Capital Gains Tax (CGT)

The Federal Government collects Capital Gains Tax on assets acquired on or after 20 September 1985. It has the effect of including the capital gain as part of the individual or coporation's income, thereby subjecting it to income tax at the individual's appropriate tax rate. See Capital gains tax in Australia.

Fuel excise

38.143 cents per litre on petrol and diesel, and 12.5 cents per litre on LPG and ethanol.

State taxation

States also have their own taxes so that they can fund the services they offer. For obvious reasons, tax rates vary from State/Territory to State/Territory. Certain States and Territories may not even levy certain taxes that are mentioned below.

Payroll Tax: tax levied on businesses.
Pokies Tax: tax levied on businesses who offer gambling services.
Land Tax: tax levied on people and businesses who own land.
Capital Gains Tax (CGT): tax levied on people/businesses who sell the following assets: cars, properties (there are more)
Vendor's Tax: tax which is levied on people/businesses who sell property. It has been labelled as the world's dumbest tax by some economists, since people already pay CGT when selling a property.
Fuel excise: all States impose a fuel excise of 4c per $1 of petrol sold.

Municipal taxation

Local Governments, or as they are known in Australia, councils, have their own taxes so that they can provide garbage collection, park maintenance services, libraries and museums, etc.

Foreign trade

Weak foreign demand and strong import demand pushed Australia's trade deficit up from US$8 billion in 2002, to US$18 billion in 2003, US$13 billion in 2004, and US$16 billion in 2005. The government is pushing for increased exports of manufactured goods, but competition in international markets continues to be severe.

Economic indicators

Fiscal Year: 1 July - 30 June

Industrial Production Growth Rate: 2.6% (September 2005)

Agriculture - Products: wheat, barley, sugarcane, fruits; cattle, sheep, poultry

Exports - Commodities: coal, gold, meat, wool, aluminum, uranium, iron ore, wheat, machinery and transport equipment, liquified natural gas

Imports - Commodities: machinery and transport equipment, computers and office machines, telecommunication equipment and parts; crude oil and petroleum products

Exchange rates:
Australian dollars per US dollar: 1.31 (2005), 1.3598 (2004), 1.5419 (2003), 1.8406 (2002), 1.9334 (2001), 1.7248 (2000), 1.55 (1999), 1.5888 (1998), 1.3439 (1997), 1.2773 (1996), 1.3486 (1995)

Electricity:

production: 237 TWh (2004)
consumption: 221 TWh (2004)
exports: 0 kWh (2003)
imports: 0 kWh (2003)

Electricity - production by source:

fossil fuel: 90.8%
hydro: 8.3%
nuclear: 0%
other: 0.9% (2001)

References

Harcourt, T. (2005). [How the LNG deal was won]. Australian Trade Commission Website
Macfarlane, I. J. (1998). [Australian Monetary Policy in the Last Quarter of the Twentieth Century]. Reserve Bank of Australia Bulletin, October 1998
Parham, D. (2002). [Microeconomic reforms and the revival in Australia’s growth in productivity and living standards]. Conference of Economists Adelaide, 1 October 2002
Some statistics on this page have been drawn from publications of the Australian Bureau of Statistics.
This article contains material from the CIA World Factbook (2005 edition) which, as a US government publication, is in the public domain.

Australian Department of Foreign Affairs & Trade (http://www.dfat.gov.au/geo/australia/index.html - Australian Facts).