Commonwealth of Australia
Mason Norsworthy
Chris Tyler
Dylan Franklin
Table of Contents
1. History
2. Culture
3. Political/Legal System
4. Predominant Business/Economic Model
5. Trade and Finance
6. Energy
7. Defense and Security
8. Immigration
9. Health
10. Environment
11. Poverty
12. US Relations
13. Hofstede/Gray
14. Australian Accounting
15. References
History
Australia, which is located in the South Pacific is a continent and a country. The first
people to live in Australia arrived between 40,000 and 60,000 years ago. These people were
called the Aboriginals. These indigenous people were hunter gatherers. The Aboriginals are
credited with establishing the spiritual and artistic traditions that can be found throughout the
country. In fact, the art of these people is one of the oldest continuing traditions in the world.
These people mostly lived in the Southern and Eastern regions of Australia. Similar to the United
States, during the 1600 and 1700’s Australia was a location for European settlers. In 1606,
Willem Janszoon, who was from Holland, arrived on Australian coastline. The Dutch navigator
arrived on the present day Australia and named it New Holland. Janszoon felt that the land was
too swampy to build on, and left. However, over a hundred years later in 1770, Lieutenant James
Cook claimed the east coast of Australia for Great Britain. Great Britain was the first country to
bring settlers to live on the land. The first governor of this new found land was Arthur Phillip.
The first fleet of ships bringing people to Australia arrived in 1788 into Botany Bay. The original
purpose for Australia was to be a penal colony for Great Britain. This is similar to what the
British used Georgia for in the United States. The colony was named New South Wales. The first
fleet of ships brought 778 convicts to the country. Of these convicts, 192 were women and 586
were men. Between the years 1788 and 1868 the British shipped over 161,700 convicts to this
area. The people who were sent to live in Australia brought disease to the country, including
smallpox, measles and influenza. These diseases spread and killed thousands of the aboriginal
people. Another similarity to when the British came to the New World in America was the
killing of the indigenous people. There were several wars that were fought between the
aboriginals and the British. The main style of combat seen in these wars was Guerrilla warfare.
There were three main conflicts that took place between the English settlers and the aboriginal
people. The three main wars that took place were the Pemulwuy’s War (1795-1802), Tedbury’s
War (1808-1809), and Nepean War (1814-1816). These wars were responsible for the defeat of
the Hawkesbury and Nepean clans. One of the main reasons for these wars was to gain more
land. The first government was established by the Magna Carta and the Bill of Rights in 1689.
This created the first political party in Australia, which was the Australian Patriotic Association.
The first attorney general was John Plunkett. He had the task of applying Enlightenment
principles to establish equality before the law. One thing that brought people to Australia was the
promise of gold. The first gold rush in Australia started in May of 1851. This brought people to
the country in search of their share of the millions of dollars worth of gold that was in Australia.
It was not until 1901 that the Australia that is known today was officially formed. The
Commonwealth of Australia formed when the Federal Constitution was proclaimed by
Governor-General Lord Hopetoun. This allowed for the six Australian colonies to govern
themselves as part of the Commonwealth of Australia. However, it was not until March 3, 1986
when Australia was fully independent from Great Britain.
Culture
In simplified terms, Australia is a Western culture influenced by a number of things that
have given the country its uniqueness. The culture of Australia does not differ too much from
that of the United States. The two have similar historical influences; starting under British rule.
Australian culture is heavily influenced by the Aboriginal people that lived there before the
British arrived with the goal of setting up penal colonies. Australian culture is also greatly
affected by its location; an island surrounded by reefs and in somewhat close proximity to Asia.
The migration of people from all over the world after WWI and WWII and during Australia’s
gold rush brought in different ethnic groups that have greatly diversified the culture of Australia.
British influence on Australian culture is evident in almost every aspect of their lifestyle.
While there is no official language, English is predominantly spoken. However, Australian
English is distinct and easily identified by the unique accent and vocabulary. Another British
influence is on Australian religion. Again, there is no official religion and the Australian people
are free to practice whatever religion they want, but Christianity prevails. Also, Australian
government draws upon British traditions, utilizing a democratic system along with
Parliamentarianism and a monarchy. Sport is also heavily influenced by Britain, with cricket and
rugby being among the most popular sports of Australia.
The Aboriginal people also play a huge part Australian culture, still making up around
2.5% of the population. The conflicts and compromises throughout history between the
Aboriginal people and the new settlers created inspiration for much of the art, literature, and
folklore of Australia. Aboriginal inventions like the boomerang and the didgeridoo have become
synonymous with Australian culture. Indigenous Aboriginals also have a major influence on
traditional Australian music. While not all early contact with the Aboriginal people was violent,
there were still many conflicts and the Aboriginal people were almost entirely wiped out due to
the disease spread by the Europeans.
The unique geography of Australia also adds to its diverse culture, encouraging many
different activities. The sport of surfing is huge in Australia, originally adopted from Hawaii.
The Great Barrier Reef is one of the best scuba diving sites in the world. The beautiful beaches,
diverse landscapes, and unique wildlife make Australia a popular tourist destination. Its
geography also lends Australia to Asian and Mediterranean influences, especially in cuisine.
Another huge influence on cuisine is the amount of seafood available, making Australian seafood
restaurants among the best in the world.
The Australian people are known for being extremely laid-back and having a great sense
of humor and they tend to be open and direct with each other. Australia has a culture of
“mateship”, or friendship and loyalty among men, and more recently among women as well.
This culture has led to a more egalitarian society, staying away from any hierarchical or formal
class distinctions. Australians are expected to be modest and humble, and to treat others with
respect. Acting as though you are better than anyone else is frowned upon and referred to as “tall
poppy syndrome”. Australians are mostly open to all different types of people and stress equality
regardless of sex, religion, nationality, or sexual orientation.
While there is certainly immense British and Aboriginal influence on Australian culture,
as well as influences from all over the world, Australia has forged its own path and created a
unique culture of its own.
Political/Legal System
The Australian government is labeled as a parliamentary democracy and almost perfectly
mirrors that of England. Like the United States, it can also be split into the executive, legislative,
and judicial branches. Technically, at the head of the executive branch is the Chief of State,
Queen Elizabeth II, who has been on the throne since 1952. Like England, she is virtually a
figurehead and is represented in politics and to Parliament by the Governor General. The active
executive branch of Australia is headed by a Prime Minister who is elected from among
Parliament. The Prime Minister is fairly similar to the Majority Leader in the United States
Senate. He is elected after every Parliamentary election and is sworn in by the Governor
General. Whichever party or coalition of parties holds the majority in Parliament gets to choose
who the Prime Minister will be. In similar fashion to the United States, the Prime Minister then
elects his cabinet from members of Parliament, forming the Executive branch.
The legislative branch is also bi-cameral and consists of a Federal Parliament and a
House of Representatives. Australia is divided into six states and two territories; from these
municipalities are elected 76 representatives to Federal Parliament and 150 to the House of
Representatives. States possess more power than territories do in Federal Parliament because
they are allowed more representatives and their representatives stay in office for six years as
opposed to three. Each state has twelve representatives, half of which are voted upon every three
years when elections are held. Both state and territory representatives to the House of
Representatives are elected every three years. Although there are several different parties
throughout both chambers, power is mostly split between the Liberal-National Coalition and the
Australian Labor Party.
Australia’s judicial branch is fairly complex, but also closely mirrors that of the United
States. Australia’s High Court closely resembles the United States Supreme Court. It is the final
appellate court in the nation and its rulings have similar effects to the Supreme Court on law and
constitutional issues. The Governor General, who represents the Queen, elects the judges from
the states and territories. This is also similar to the United States in that our Supreme Court
Judges are appointed by the executive rather than legislative branches. These judges are also
appointed for lifelong terms but with mandatory retirement at age seventy. There are only seven
seats on the High Court however, while the United States maintains nine. Immediately below
the High Court are nine Supreme Courts, one for every state, territory and one for Norfolk
Island. Below the High Court and the Supreme Courts exist several other courts that deal with
different issues at both a federal and state level. There are two courts at the Federal Level: the
Family Court and the Federal Magistrates’ Court. Most of the courts that exist at the state level
are made up of Magistrates’ Courts and District Courts for the various states and
territories. These courts deal with lesser issues but like the United States, depending on the type
of case, the High Court could have the last ruling on a Constitutional or otherwise important
case.
All of these courts practice law under the same legal method as the United States and
Great Britain. All case law flows from the rulings of previous cases in what is frequently known
as common law. This means that the majority of cases are dictated from precedencies set by
judge or jury rulings that have already occurred. Oddly enough, Australia does not have any
document comparable to the United States’ Bill of Rights. It would make sense that Australia, as
a colony of Great Britain, would chose this method of law just like several other former colonies
have.
Predominant Business/Economic Model
Australia mixes American capitalism with European welfare. For example, there is universal
healthcare in Australia. There is also more egalitarian policies found in Australia then the United States.
Another aspect of the Australian economic structure is the limited role of government. The top individual
tax rate in Australia is 45%, and the top corporate rate is 30%. Australia also ranks as the 12th largest
economy in the world according to nominal GDP. The largest part of their economy is the service sector,
which makes up 68%. The next biggest is mining, which makes up 7%. Similar to the United States, there
is a stock market. The Australian Securities Exchange was formed on April 1, 1987. The ASX is
governed by the Australian Securities and Investments Commission (ASIC). It is there job to supervise
real-time trading of Australia’s domestic licensed financial markets. In 2006, ASX merged with Sydney
Futures Exchange to create the exchange market that is seen in Australia today. The exchange group is
one of the world’s largest exchange groups, with a daily turnover of 4.685 billion Australian dollars a day.
The market capitalization is at 1.6 trillion Australian dollars.
Trade and Finance
Australia has a strong financial system, backed by a mixed economy consisting of
capitalist ideals of free trade and a democratic socialist government providing benefits like
universal healthcare. In 2006, Australia underwent a Financial Sector Assessment Program and
the Financial Stability Board found these results: "Australia's financial system is sound and
healthy, having benefited from sustained favorable macroeconomic conditions over the past 15
years." Of course that was in 2006, before the global financial crisis struck. However, Australia
weathered the storm fairly well due its strong economic foundation. The Financial Stability
Board attributed the success of Australia to their macroeconomic policies and the strength of
their supervisory framework. According to the World Bank’s Doing Business Report, Australia
is in the high income category and the country has a GNI per capita of just under $65,000 USD.
They were ranked the 13th country worldwide for doing business.
In terms of international trade, Australia relies heavily on its Asian partners, China and
Japan. Australia’s leading import and export market is with China, with Japan coming in as the
second biggest market. Australia and China very recently negotiated a Free Trade Agreement,
which was just signed in June 2015. The agreement allows for 95% of Australian exports into
China to be tariff free and for up to 5,000 visas to be granted to Chinese nationals for work and
holiday. Australia also has a trade agreement with Japan, called the Japan-Australia Economic
Partnership Agreement. This was also very recently put into effect, in July 2015, and makes it
easier for Australia to do business with another economic power.
Australia also trades heavily with the EU, their 3rd largest trade partner after China and
Japan. The partnership was put into effect October 2008, with the EU-Australian Partnership
Framework. The framework was put in place to facilitate multilateral cooperation and increase
trade in industrial products by reducing the barriers in place. Australia’s exports to the EU are
mostly minerals, like fuel and mining products, and agricultural goods, while their imports from
the EU are mostly manufactured goods. After meeting in November 2015, leaders of the EU and
Australia announced plans to work toward negotiating a Free Trade Agreement to decrease
barriers and facilitate trade even more.
Australia trades a good amount with the US, though those numbers have decreased in the
last decade. They have the Australia-United States Free Trade Agreement in place, put into effect
in 2005. This agreement resulted in an increase of imports of US products into Australia, but a
decrease in Australian exports to the US. This imbalance greatly increased in 2007, when the US
was actually Australia’s largest import source. While the agreement was made with the good
intention of increasing trade between the two countries, it may have done more harm than good.
Shiro Armstrong from the Crawford School of Public Policy at the Australian National
University claimed that the two countries greatly decreased their trade with the rest of the world
due to this agreement and were worse off for it in the end.
On top of these major trade relations, Australia has a Free Trade Agreement with Chile,
Singapore, and Thailand. Australia also has close ties with its neighbor, New Zealand. They
trade under the Australia New Zealand Closer Economic Relations Trade Agreement set up in
1983. There have been calls to extend this agreement to other Pacific Island nations with the goal
of creating a single Australasian market and facilitating the free movement of goods and people.
References:
Energy
Global energy consumption and production has increased dramatically as globalization
leads to ever-increasing demand. Australia currently has reserves of petroleum, natural gas, and
coal. In 2010, Australia was the largest exporter of coal in the world and is still one of the
leading exporters. The country was also the 3rd largest exporter on liquefied natural gas (LNG) in
2013. In terms of global energy use, Australia was the 9th total primary energy producer and the
18th total energy consumer worldwide in 2012. While they export a great deal of coal, Australia
also imports a large amount of oil. Their oil production has decreased since 2000. Australia’s
dependence on imported oil has been steadily increasing due to the insufficiency of domestic
production to meet the demands of domestic consumption. As previously mentioned, Australia is
a leading exporter of liquefied natural gas, which is due to the results of new projects in the past
decade, both onshore and offshore. The main country receiving Australia’s exported LNG is
Japan, followed by China. The country has become a leader of liquefied natural gas exportation
in the Asia-Pacific region and production and exportation is only expected to increase in the near
future.
The Australian government passed the Clean Energy Finance Corporation Act in 2012,
which in turn created the Clean Energy Finance Corporation (CEFC). The organization is to
receive $2 billion AUD every year from 2013-2017 with the goal of increasing renewable energy
and energy efficient technologies in Australia. In 2012, 11% of all electricity generated in
Australia was from renewable sources. The main source of renewable energy in Australia is
hydropower, followed by solar power and wind power. A few months ago, in August 2015, the
CEFC was directed to stop investing in wind technology in order to increase focus on developing
new and innovative technologies. While Australia still generates most of its electricity from
fossil fuels, there is a push for cleaner energy and for more renewable sources.
Graph Source: International Renewable Energy Agency
Defense and Security
The current Australian military organization was technically formed in 1976, although
the groups that comprise it were constituted with the Defence Act 1903. The current formation
came to be when the Royal Australian Navy, the Australian Army, the Royal Australian Air
Force, and a few other smaller groups were combined to form the Australian Defence Force
(ADF). The Australian Defence Force is made up of over 80,000 full-time and reserve personnel,
is funded by Australia’s Department of Defence, and is charged with defending Australia against
armed attack, as well as assisting in global defense and security issues. Although the ADF is a
small organization, it is technologically advanced and is the largest military in the Oceania
region.
Australia has participated in many of the major conflicts since the 1900’s. During World
War One, Australia threw their support in with Britain in 1914. Getting involved early, the Royal
Australian Navy and the Australian Army made an impact by taking New Guinea from German
control. The Royal Australian Navy made another significant impact when it destroyed the
German raider SMS Emden in late 1914. Australia was on the same side as Britain again in
World War Two, joining the fight in September 1939. Almost 1 million Australians served in the
war. For the first time, the Australian mainland was attacked, when Japan bombed towns in the
Northwest region and Japanese submarines attacked Sydney Harbor. After the war, Australia
helped the British Commonwealth Occupation Force in occupying Japan. Australia was also
involved in the Korean War, defending South Korea, and in The Vietnam War from 1962-1975,
the longest conflict in Australian history. Australia also invaded Iraq alongside the US and
Britain in 2003, searching for weapons of mass destruction and helping to overthrow the regime
of Saddam Hussein.
Australia has forged several strategic relationships among other countries, becoming
strong allies with the US and Britain. Australia also has extremely strong ties with their
neighbor, New Zealand. The country is steadily strengthening ties with Indonesia and the
Republic of Korea. Australia is also strengthening ties with Japan, who have been allies in WWI,
enemies in WWII, and economic partners during times of peace. The strong economic
relationship that Australia has forged with Japan may hinder future conflict between the two
countries, which would be economically unfavorable to both. Australia also has valuable bonds
with Malaysia, Singapore, Thailand, the Philippines, and Papua New Guinea and has recently
began growing relationships with India, China, and Vietnam. Australia assists Pacific Island
countries to help in securing and stabilizing them and helps countries in South Asia, the Middle
East, and Africa with law enforcement and counter-terrorism. The country also assists the
NATO-led International Security Assistance Force in Afghanistan. With the increased
globalization of the world, and the economic reliance of countries on one another, it’s hard to
imagine many economic allies severing ties in future conflicts.
Immigration
Australia began as a nation of immigrants, as Europeans arrived as early as the 17th
century and the British began colonization in 1788, mostly as penal colonies. Immigration to
Australia increased dramatically after the Second World War, with 7 million immigrants arriving
since 1945. This was due to Australia launching a huge immigration program after nearly being
invaded by Japan. They believed that they needed a higher population in order to fend off any
possible future invasions. Under this new program, immigrants needed to be under 45 years old
and of sound health.
Australian immigrants historically come mainly from European backgrounds, but more
recently, from Asian backgrounds. In the 2014 Australian census, over 25% of Australia’s 22
million people were born in other countries. The main areas that immigrants descend from are:
the UK, New Zealand China, India, and Italy. There are currently a number of ways to migrate to
Australia. These include work visas, student visas, family visas, and skilled visas, with special
programs in place for refugees and people that have faced substantial discrimination in their
home countries.
While Australia has been seen as mostly receptive to immigration (a 2014 sociology
study claimed that Australia and Canada were most receptive to immigrants of western
countries), the country has received some backlash for its controversial policies regarding
unauthorized arrivals by boat. In 1992, Australia put in place a mandatory detention policy
regarding all persons entering the country without a valid visa, allowing authorities to detain
them indefinitely while they are processed and health and security checks are done. These people
are usually asylum seekers, but can be people that have lived in Australia for a long time that
have had their visas cancelled by the Minister for different crimes, allowing them to be detained
and deported. In 2005, a number of wrongful immigration detention cases were brought to light,
with one man being detained for more than seven years. Recently, tough immigration policies
have seen a number of New Zealanders detained or deported from Australia. In December 2014,
Australia adopted a strict new law “in which non-Australian offenders are sentenced to a year or
more in jail, or those judged to fail a character test, are detained and deported.”1 These offenses
include things like repeat shoplifters and drunk drivers. Currently, the Australian government has
plans to take in 12,000 refugees displaced by the turmoil in Syria. Every refugee will be screened
and vetted rigorously before being resettled and granted residency. The first wave of Syrian
refugees is expected to arrive in December of this year.
There are many concerns from people in Australia about the number of immigrants that
the country continues to take in. People are worried about an increasing trade imbalance due to
higher imports and greater domestic consumption with the increasing population. Also, there is
concern about greater gas emissions and reduced air quality, especially in urban areas. People are
concerned about the overuse of soil and other agricultural resources due to overpopulation.
Currently, there is a lot of increasing concern with the country’s plan to accept Syrian refugees,
after the recent terrorist attacks in Paris, with many groups calling for the Australian government
to reverse their decision and close the borders.
1http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11551598&ref=rss
Health
In terms of healthcare, Australia is doing rather well. In 2013, the country was ranked 3rd
in overall life expectancy, with males expected to live 80 years and females 85. Compare this to
the United States, with males only expected to live 76 years and females expected to live 81
years. Australia spends around 9.4% of their total GDP on healthcare, while the US spends
17.1% of GDP. Clearly, Australia is doing something right if they’re spending less money and
living longer. Furthermore, in a study comparing Australia, Canada, Germany, New Zealand,
UK, and US, Australia ranked highest in healthy lives. The Australian health care system is a
universal health care structure, with the government paying for most of it and a private health
insurance system in place to cover private health. The government pays for patient health costs
through a Medicare system created in 1984, which is funded by a 2% tax on Australian citizens
and an extra 1% on high income earners. Through this program, about 75% of general
practitioner costs, 85% of specialist costs, and 100% of public in-hospital costs are covered. The
remainder is paid by patient co-pays and their private insurance. The Australian government
advocates for its citizens to take out private insurance through insurance organizations, called
health funds, and has put several incentives in place to encourage them to do so.
While Australia seems to be doing very well in the healthcare department, the country is
not without its problems. Australians are affected by chronic illnesses such as cancer, heart
disease, and diabetes. Diabetes is the fastest growing chronic illness, with one new Type 2
diagnosis every five seconds. Also, the Aboriginal Australian population is much worse off than
the rest of Australia in terms of health. The Aboriginals have double the rate of infant mortality
and much lower overall health. HealthWorkforce published a report in 2012 predicting a major
shortage in nurses and doctors by 2025, unless a change occurs.
Environment
One of the main themes of the last few decades has been increasing awareness of the
environment and the impact that we have on it. The discovery and the slow but steady
acceptance of the concept of global warming has led us to reconsider the way that we treat the
world we live on and search for less destructive options. Australia is no exception to this, as
climate change is currently a huge political talking point and has been for the last decade.
The early 2000’s saw persistent drought and subsequent water restrictions across
Australia, which many blamed on global warming and climate change. Australia is among the
top ten countries in the world for greenhouse gas emission per capita. The country is a huge
exporter and consumer of coal, which leads to emissions of carbon dioxide. The country is also
one of the most urbanized in the world, leading to environmental problems like land clearing,
pollution, increased emissions, and increased energy consumption. Waste management is also a
large issue due to a lack of toxic waste sites and loose regulations.
Australia is home to many unique species and has several areas of rainforests. The
protection of the remaining rainforests is one of the most stressed areas of conservation. Since
arrival of humans in Australia, 97 plant species, 23 bird species, 4 frog species, and 27 mammal
species are known to have become extinct, mainly due to land clearing. Land clearing creates
other problems as well, such as dryland salinity and soil erosion. Reforestation helps to combat
this, along with protection of certain areas. Australia currently has six Commonwealth national
parks to encourage land conservation. To help protect the wildlife, Australia has enacted a
threatened species commissioner to increase conservation efforts.
With Australia being surrounded by water, marine conservation is also a huge issue.
Threats to marine conservation include overfishing, shipping accidents, water quality from
runoff, ocean dumping, and oil spills. Oil spills have been a cause of environmental degradation,
with the largest spill occurring in 1991, leading to 17,280 tonnes being released into the water.
Australia is also home to the Great Barrier Reef, which is the largest coral reef system in the
world. It’s one of the most diverse ecosystems in the ocean and is a major focal point for
conservation efforts. Around $200 million AUD is invested annually to help manage and protect
the reef. The major threats to it are water runoff and crown-of-thorns starfish outbreaks.
Australia has a number of environmental threats, but is putting forth efforts to help maintain and
conserve their country’s environment.
Poverty
While Australia has long taken pride in the egalitarian roots the country is known for, a
trend quite opposite of that ideology has been taking place. Income inequality and poverty levels
have steadily increased in Australia, especially in the last decade. In 2014, the Australian
Council of Social Service (ACOSS) released a report revealing the levels of poverty and
inequality. Their report used the international accepted poverty line of 50% of median household
income, which they found to be $400 per week for single adults and $841 per week for couples
with two children. Using these measurements, ACOSS found that an estimated 2.5 million
Australians, 13.9% of the total population, were living below the poverty line. This number is up
almost 1% from 2010, when the poverty level was 13% of the population. In their report,
ACOSS claimed that 603,000 children were impoverished, which is roughly 17.7% of all
children in Australia. In addition to these statistics, 40% of people that were receiving social
security benefits were below the poverty line, as well as over 61% of the unemployed. Income
inequality in Australia is higher than the average for the 34 countries that make up the
Organization for Economic Cooperation and Development (OECD), but is not quite as high as
the UK or the US. In addition to this, Australian Aboriginals are much worse off than the rest of
the Australian population. While having a much lower life expectancy, they also have a much
higher rate of poverty. Australian Aboriginals rank alongside poor countries like Bangladesh in
terms of poverty levels.
The ACOSS has stated that the findings in their reports are very disturbing. They claim
that these reports emphasize the need for reform and for a national plan to help the impoverished
people in Australia.
US relations
The United States and Australia have a strong relationship. They have been allies with the
United States military dating back to World War II. On September 1, 1951 the United States,
Australia, and New Zealand entered into the ANZUS treaty. This was formed after the close
relationship that formed by working together in WWII. The ANZUS treaty states that “The
parties will consult together whenever in the opinion of any of them and territorial integrity,
political independence or security of any of the parties in threatened in the Pacific.” Since the
treaty was enacted, the United States and Australia have kept a close bond. After the events on
September 11, Australia supported the United States entering into Afghanistan. In fact, they were
the largest non-NATO contributor of troops, with 1,550 Australian soldiers. There has also been
in increase in the allowance of aircraft carriers and nuclear powered submarines to port in
Australia. In 2011 the Force Pasture Agreement was reached between the governments of
Australia and the United States. This agreement allowed a rotation of United States military
involvement on Australia. It was made in order to help strengthen the relationship of the
countries militaries. In addition to having a close military relationship, there is also strong trade
activity between the two countries. On May 18, 2004 the Australian - United States Free Trade
Agreement was signed. Some of the items that are traded between the countries are beef, dairy,
tobacco, cotton, peanuts and avocados. Additionally, these two countries trade textiles. The
agreement has led to a decrease in tariff prices. The United States and Australia governments are
both members of the G20. Additionally, they are also members of United Nations, the World
Bank, and the World Trade Organization. There is a strong relationship between the United
States and Australia. The countries work together in military conflicts, such as World War II and
the War on Terror. There is also a strong trade relationship that is seen between the two
countries.
Hofstede/Gray
Using Hofstede’s cultural dimensions, Gray’s Hypotheses, and Australia’s scores on the
sampling, we can make a pretty good assumption of what type of accounting system we would
expect to see in Australia. Australia’s most dominant score of the five dimensions is their
individualism. With a score of 90, Australians are some of the most culturally individualistic in
the world. Australia also scored low in both Power Distance and Long Term
orientation. Because Australia scored fairly average in both Uncertainty Avoidance and
Masculinity, we should be somewhat hesitant to believe that Gray’s hypotheses regarding these
categories will be absolutely accurate. Using Australia’s high score in individualism we can
assume that they will use a professional organization rather than the government to dictate their
accounting practices and principles. In fact, the Australian Accounting Standards Board was
created in 1991 and now lays down the blueprint for all public accounting in the country. Due to
Australia’s score of 36 in Power Distance, 61 in masculinity, and aforementioned 90 in
individualism we can also predict that they would be very transparent in their disclosures. We
would expect them to have thorough regulations about what must be disclosed in their financial
statements and to whom. They would be closer to the United States in that their books will be
more accessible to the public investor. This is common for countries that have good financial
markets as opposed to countries in which lending is the prominent source for financing. In these
more secretive cultures disclosures and even the financial statements may only be available to
the government and to lenders. Similarly, we would expect Australia to be more flexible in their
regulations regarding how you report and how often you have the option of how to report. This
hypothesis makes sense for the same reasons we would expect Australia to be very
transparent. In a country in which public investment is prominent, the people would want
companies to better reflect the underlying transaction. This way odd accounting standards or the
requirements of lenders would not misrepresent the actual health and success of the
company. By allowing more options but requiring more disclosures, investors are better able to
accurately assess a company. Based on the country’s scores we would also expect them to be
more optimistic in the numbers they do report, although less so than the other predictions. Upon
assessment of Australia’s actual accounting system we can see that Gray’s hypothesis and the
country’s scores are pretty accurate.
Australian Accounting
Australia’s primary source for accounting standards is the Australian Accounting Standards
Board, or AASB. This organization is responsible for creating standards and promoting the
consistency and comparability of Australian financial documents. Australia has a separate
organization similar to the United States’ SEC, called the Australian Securities and Investments
Commission that is responsible for the enforcement of these standards. Australia recently
adopted IFRS in 2005, with several amendments that mostly dealt with requiring more
disclosures and non-for-profit reporting. On July 1, 2007 the AASB rescinded those differences
and fully adopted the use of IFRS standards. The AASB now mainly operates as a research
organization for the IASB and is a part of several international groups that work to better global
accounting practices. The AASB has also agreed to immediately adopt any standards that are
issued by the IASB. This means that from this point forward the Australian accounting standards
will immediately reflect IFRS. This is even more prominent because both standards are written
in English, so they are literally word for word the same. The AASB requires reporting of all
domestic companies, private and public, to be done in IFRS, with the exception of non-forprofits. Although it is vastly prominent for non-for-profits to report under IFRS, it is actually
only permitted rather than required. IFRS requires large amounts of disclosures, which would
reflect the transparency prediction under Gray’s hypothesis. In fact, the AASB requires a couple
more disclosures than IFRS that relate to laws that are only applicable to Australians. IFRS also
allows for the write-up of assets to fair market value and has lower requirements for the reporting
of litigation liabilities. Both of these differences from US GAAP also reflect the more optimistic
culture of Australians and their accounting system.
There are several differences between AASB, and therefore IFRS, and the United States
GAAP. One of the largest of these differences is the actual layout of the financial
statements. Under AASB there are required line items whereas under GAAP there is a
commonly used set, but the only requirement is that they be specific enough to sufficiently
identify the account. This would create the possibility for GAAP financial statements to have
accounts that may not be identifiable for users of IFRS or AASB. GAAP companies also
generally list their assets and liabilities in order of liquidity and IFRS reports tend to do the
opposite. This reflects the fact that Americans pay attention to the liquid, and changing, aspects
of a company more than IFRS users do. IFRS users prefer the larger, more permanent assets first
because they tend to reflect the company itself rather than the frequent changes. IFRS also
requires the re-assessment and adjustment of assets on a periodic basis in order to more
accurately reflect market values of the company. US GAAP does not accept the write-up of
assets because of the general desire to remain conservative in their accounting principles. As the
Hofstede scores and the Gray hypothesis predicted, Australian accounting was more optimistic
than US GAAP. Australians also focus more on the power to control when reporting
consolidated statements whereas Americans define control strictly on a financial interest
basis. This would allow more flexibility under AASB than US GAAP because power to control
could be much more judgmental than financial interest. Australians also do not allow the LIFO
method but rather require the use of standard costing. This difference is actually contrary to the
Gray hypothesis regarding flexibility but in agreement with predicting that America would be
more conservatism. The use of LIFO tends to produce lower profits due to increased Cost of
Goods Sold. This could potentially be explained by differences in the tax codes of the two
countries.
References
History:
https://en.wikipedia.org/wiki/History_of_Australia
Culture:
https://www.griffith.edu.au/international/life-in-australia/australian-culture-and-customs
https://en.wikipedia.org/wiki/Culture_of_Australia#Religion
Political/Legal System:
https://www.cia.gov/library/publications/the-world-factbook/geos/as.html
Trade and Finance:
http://www.financialstabilityboard.org/2011/09/r_110926b/
http://www.doingbusiness.org/data/exploreeconomies/australia
https://en.wikipedia.org/wiki/List_of_countries_by_leading_trade_partners
https://en.wikipedia.org/wiki/China%E2%80%93Australia_Free_Trade_Agreement
http://dfat.gov.au/trade/agreements/jaepa/fact-sheets/Pages/japan-australian-economicpartnership-agreement-a-snapshot.aspx
http://ec.europa.eu/trade/policy/countries-and-regions/countries/australia/·
https://en.wikipedia.org/wiki/Australia%E2%80%93United_States_Free_Trade_Agreement#Out
comes
http://www.economywatch.com/world_economy/australia/export-import.html
https://en.wikipedia.org/wiki/Closer_Economic_Relations
Energy:
http://www.eoearth.org/view/article/152472/
http://www.eia.gov/beta/international/country.cfm?iso=AUS
http://www.eia.gov/todayinenergy/detail.cfm?id=22592
Defense and Security:
https://en.wikipedia.org/wiki/Australian_Defence_Force
http://www.defence.gov.au/History/
http://guides.naa.gov.au/allies-enemies-trading-partners/
http://dfat.gov.au/about-australia/australia-world/Pages/defence-and-security.aspx
Immigration:
http://news.xinhuanet.com/english/2015-11/16/c_134820592.htm
https://en.wikipedia.org/wiki/Immigration_to_Australia
https://en.wikipedia.org/wiki/Immigration_detention_in_Australia
Health:
http://www.who.int/countries
https://en.wikipedia.org/wiki/Health_care_in_Australia
Environment:
http://www.environment.gov.au/
http://www.environment.gov.au/marine/gbr
https://en.wikipedia.org/wiki/Environmental_issues_in_Australia
http://www.gbrmpa.gov.au/about-the-reef/facts-about-the-great-barrier-reef
Poverty:
http://www.acoss.org.au/poverty/
https://en.wikipedia.org/wiki/Poverty_in_Australia
US Relations:
https://en.wikipedia.org/wiki/ANZUS
https://en.wikipedia.org/wiki/Australia–United_States_relations
https://en.wikipedia.org/wiki/Australia–United_States_Free_Trade_Agreement
Australian Accounting:
http://www.ifrs.org/Use-around-the-world/Documents/Jurisdiction-profiles/Australia-IFRSProfile.pdf
http://www.differencebetween.net/business/accounting-business/difference-between-gaap-andaasb/