Australia

Australia has a stable Western-style capitalist economy that is one of the fastest growing industrial nations. Due to reforms implemented over the past two decades, Australia has a high-growth, low-inflation and low-interest rate economy, which has outperformed most of its OECD peers in recent years.

With a stable, democratic society, skilled workforce and strong competitive economy, Australia is unique in world terms in being the only nation to govern an entire continent. Australia’s population of 20 million comprises a multicultural society including indigenous peoples and migrants from over 200 countries. With its abundant mineral and petroleum resources, Australia has maintained a high standard of living since the nineteenth century, and has also made a significant investment in social infrastructure.

Economic growth has been supported by robust business and consumer confidence, an efficient government sector, a flexible labour market and very competitive business sector – together with rising exports of raw materials and agricultural products.

GDP growth was 2.5% in 2005, slightly below the robust levels of the previous three years (3.5% in 2004, 3.1% in 2003, 4.1% in 2002), but is forecast to increase to 2.9% in 2006 and further to 3.7% in 2007, well ahead of the forecast 2007 OECD average of 2.9%. Reflecting the strong performance of its economy, in 2005 the Australian share market posted the second highest returns of any country in the world, significantly outperforming many of the world’s largest economies.

In recent years, Australia has been a major beneficiary of surging demand for minerals and energy, particularly in the Asian region. Its top three exports in 2005 were coal (A$21.8 billion), iron ore (A$11.0 billion) and crude petroleum (A$6.3 billion).

Oil and gas forms an important component of Australia’s economic output. Australia’s combined oil and gas industry generated approximately A$24 billion in 2005, or 2.1% of total GDP, as well as contributing an estimated A$7.6 billion in Government payments. Total oil production for 2005 was 26,896 million litres and total liquefied natural gas (LNG) production was 45.7 billion cubic metres. At current production levels, Australia has 17 years worth of oil reserves and 117 years of LNG reserves.

The value of LNG exports is forecast to increase by 56% to around A$5.0 billion in 2005-06. Higher production is projected to increase LNG exports steadily to around 20 million tonnes in 2010-11.In 2005-06 dollar terms, Australia’s LNG export earnings are projected to reach around A$6.4 billion in 2010-11, an increase of around 29% on 2005-06.

Despite the importance of its minerals and petroleum sectors, Australia has seen a major diversification of its export base over the past decade which has established sophisticated manufacturing and services industries, together with a thriving tourism sector. The value of Australia’s exports in goods and services reached A$151 billion in 2002, with service exports comprising A$31 billion of that figure.

In the past two decades, Australia's trade and investment links with the international community have been strengthened through extensive economic reform. Barriers to trade have been lowered, and initiatives have been introduced to enhance domestic productivity – including deregulation, taxation reform, strengthening of competition policies, and a focus on low interest rates and inflation.

Diplomatically, Australia’s most significant ties are with the United States, with whom it has a Free Trade Agreement which came into force on 1 January 2005. The United States is one of Australia's largest trading partners and is also a major source of foreign direct investment.

Asia is also a key economic focus, with Asian countries accounting for seven of Australia’s ten largest export markets, and also providing important sources of investment, major security ties and growing sources of skilled migrants. Australia currently has Free Trade Agreements in place with Singapore and Thailand, and is also exploring closer economic ties with Japan, China, Malaysia and Korea.

In November 2004, Australia commenced negotiations to establish a Free Trade Agreement between Australia, New Zealand and the member nations of the Association of South East Asian Nations (ASEAN) – being Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. There have now been five rounds of negotiations in regards to this FTA, with a completion date of March 2007 expected. ASEAN offers Australian exporters and investors a significant consumer market, with 572.4 million people, and a combined GDP of US$861.9 billion in 2005.

Australia is a member of the forum for Asia-Pacific Economic Cooperation (APEC), the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), the Pacific Islands Forum, and is a dialogue partner in the ASEAN Regional Forum.

In 2005 Australia secured an inaugural seat at the East Asia Summit following its signing of the Treaty of Amity and Cooperation, representing a major advancement in Australasian economic relations.