AUSTRALIA’S
ECONOMY
Agron/Econ 496
Sergio Lence
February, 2008
Australian Economy
 Prosperous, Western-style market economy

World Bank classification:

Low-income economies
 53 countries (e.g., Haiti)

Lower-middle income economies
 55 countries (e.g., Guatemala)

Upper-middle income economies
 41 countries (e.g., Mexico)

High-income economies
 60 countries (e.g., Australia)
Composition of GDP (%)
 Agriculture
 Industry
 Services
Australia
3.7
25.6
70.7
U.S.
0.9
20.6
78.5
Composition of Exports (%)
Australia
 Minerals and Metals
60
 Rural Goods
17
 Manufactured Goods
18
U.S.
?
9
82
Australian Economy
 Major economic reforms starting in the 1980s
 First reform: Labor Party’s floating of AUD in 1983
 Free-trade agreements and reduction of trade barriers
 Financial sector deregulation, including 1992 access
for foreign bank branches
 Rationalization and reduction of trade unions
 Restructuring of centralized system of industrial
relations and labor bargaining
 Better integration of individual state economies into
federal system
 Improvement and standardization of national
infrastructure
 Privatization (e.g., Australian Wheat Board)
AUSTRALIA:
Annual Changes in GDP and CPI
CPI
GDP
Australian Economy
 Current concerns





Large current account deficit
Absence of export-oriented manufacturing
industry
Real estate bubble
High levels of net foreign debt owed by the
private sector
Pressure on environment
POPULATION, 2004
 Australia
 United States
 China
 India
 World
20 million
294 million
1,300 million
1,073 million
6,390 million
World Population Density
 Population (bottom) and Internet (top) densities
Australian Population Density
0-100
100-200
200-300
>300
Fe
de
r
C
ze H atio
ch un n
R ga
ep ry
Sl
ub
ov
ak Po lic
R lan
ep d
ub
lic
G Ita
er ly
m
a
Ja ny
Be p a
U
lg n
ni
i
te Fi um
d nl
Ki an
ng d
Sw dom
ed
Au en
D str
en ia
m
ar
EU k
Fr 15
an
G ce
re
P e
N or ce
et tu
he ga
rla l
n
N
Sw o d s
r
i w
O tze ay
EC rla
D nd
To
t
Ko al
re
Sp a
a
C in
hi
Ic na
el
a
Lu Ca nd
xe na
U m d
ni b a
te o
N d S urg
ew t
Ze ate
a s
Au lan
st d
ra
Ire lia
la
n
Br d
az
Tu il
rk
So M ey
e
ut xi
h co
Af
ric
a
In
di
a
an
us
si
R
Annual Population Growth,
1992-2005
 Australia
 U.S.
1.16% per year
1.12% per year
2
1.5
1
0.5
0
-0.5
Po
la
nd
T
va
k urk
R ey
ep
ub
Fi lic
nl
a
H nd
un
D gar
en y
m
a
C
ze F rk
ch ra
R nce
N epu
et
he blic
rla
nd
U
G
ni
te erm s
d
Ki any
ng
do
N m
or
w
Sw ay
ed
G en
O re
EC e
U D ce
ni
te Tot
d
a
Lu St l
a
xe te
m s
bo
u
N Au rg
ew s
Ze tria
Sw al
a
itz nd
er
l
Au and
st
r
Po alia
rtu
C gal
an
ad
a
Ita
Ire ly
la
nd
Sp
ai
n
Sl
o
Net Immigration Rate,
2000-2005
 Australia
 U.S.
0.58% of total population
0.40% of total population
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
a
la
n
Au d
st
ra
lia
er
an
ad
itz
Sw
C
ed
en
Sw
es
ria
St
at
Au
st
m
re
ec
e
nd
s
ce
Be
lg
iu
G
an
la
he
r
te
d
et
ni
U
N
nd
Nationals (citizens)
Fr
la
ay
ge
ra
Ire
av
e
w
or
n
ar
k
Sp
ai
ga
l
ic
ry
ub
l
en
m
N
D
D
ep
Po
rtu
R
an
d
un
ga
H
nl
Fi
Ita
ly
 U.S.
EC
ch
rk
ey
ep
ub
lic
R
Tu
 Australia
O
ze
C
ak
ov
Sl
Po
la
nd
Foreign-Born Population,
circa 2000
23%
11%
Non-nationals (non-citizens)
25
20
15
10
5
0
Lu
Sl xe ISL
ov m
ak bo
R ur
N ep g
ew u
b
Ze lic
al
an
Ire d
la
n
Fi d
nl
a
H nd
un
g
D ary
en
m
a
C
ze Po rk
r
ch tu
R ga
ep l
ub
N lic
Sw orw
itz ay
er
la
n
Au d
st
Sw ria
ed
e
G n
re
e
Be ce
lg
iu
Po m
la
nd
T
N ur
et
k
he ey
rla
Au nds
st
ra
lia
Ko
r
C ea
an
ad
M a
ex
ic
o
Sp
ai
n
I
t
al
U
ni
y
te Fra
d
n
c
K
in e
gd
G om
er
m
an
y
Ja
pa
n
U
ni EU
te
d 15
S
ta
te
s
Gross Domestic Product,
2005 (billion U.S. dollars, PPP)
 Australia
 U.S.
700
12,400
4 000
3 500
3 000
2 500
2 000
1 500
1 000
500
0
World Gross Domestic Product
(1999)
Earth’s Satellite Picture at Night
k
va
y
ico
ex
ke
Po
la
Re nd
pu
Hu blic
ng
Cz P ary
ec ort
u
h
R gal
ep
ub
li
Ne K c
o
w
r
Ze ea
al
an
d
Sp
ai
n
Ita
G ly
re
ec
Fr e
a
G nce
er
m
an
y
Ja
pa
Fi n
nl
a
Un
Sw nd
ite
d ede
Ki
ng n
do
Be m
lg
iu
Ca m
n
De ada
nm
Au ark
st
ra
l
Au ia
Ne
st
r
th
e ia
Sw rlan
itz ds
er
la
n
Ic d
el
an
Un Ire d
ite lan
d
St d
at
e
No s
Lu
r
xe wa
y
m
bo
ur
g
Sl
o
M
Tu
r
Per Capita GDP and GNP,
2005 (U.S. dollars, PPP)
 Australia
 U.S.
34,200 (GDP)
41,800 (GDP)
70 000
GDP
60 000
GNP
32,900 (GNP)
41,700 (GNP)
80 000
50 000
40 000
30 000
20 000
10 000
0
M
rk
ey
ex
ic
S
o
lo
va Po
l
a
k
R nd
ep
ub
H lic
un
ga
r
C
z e Po y
ch rtu
R gal
ep
ub
li c
N
ew Kor
Ze ea
al
an
d
S
pa
in
Ita
G ly
re
ec
e
Ja
G pan
er
m
an
Fr y
an
c
Fi e
nl
a
S nd
w
ed
A en
us
tra
B lia
el
gi
um
Ire
la
n
U
ni Ca d
te
n
d
a
K da
in
gd
om
A
us
D tria
en
m
ar
Ic k
N ela
et
he nd
r
S lan
w
ds
i
U tze
ni
rla
te
d nd
S
ta
te
N s
o
Lu
r
xe wa
m y
bo
ur
g
Tu
Per Capita GNI and NNI,
2005 (U.S. dollars, PPP)
 Australia
 U.S.
32,900 (GNI) 27,700 (NNI)
41,700 (GNI) 36,400 (NNI)
60000
Gross national income
Net national income
50000
40000
30000
20000
10000
0
Nominal GDP vs. PPP GNP
Australian Dollar (AUD, A$, AU$)
 Currency of the Commonwealth of Australia
 Includes Australia, Christmas Island, Cocos (Keeling)
Islands, and Norfolk Island, as well as the independent
Pacific Island states of Kiribati, Nauru and Tuvalu.
 Introduced in 1966
 Not only replacing the Australian pound (distinct from the
pound sterling since 1929) but also introducing a decimal
system.
 Sixth-most-traded currency in world foreign exchange
markets (behind U.S. dollar, euro, yen, pound sterling,
and swiss franc)

AUD accounts for 4–5% of worldwide foreign exchange
transactions.
Monetary Conversion Rates
 AUD per U.S. dollar
2.5
Exchange Rate
PPP
2
1.5
1
0.5
04
20
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
19
70
0
1/2/08
10/2/07
7/2/07
4/2/07
1/2/07
10/2/06
7/2/06
4/2/06
1/2/06
10/2/05
7/2/05
4/2/05
1/2/05
10/2/04
7/2/04
4/2/04
1/2/04
10/2/03
7/2/03
4/2/03
1/2/03
Exchange Rate
 AUD per U.S. dollar
AUD per US$
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Sw Ja
itz pan
e
G rlan
er d
m
an
y
Ita
Fr ly
a
Be nce
lg
Po ium
rtu
g
Au al
D str
N enm ia
et
he ar
rla k
C
ze S nds
ch we
R de
O ep n
EC ub
D lic
To
U
ni
ta
te
d Br l
Ki az
ng il
do
So Me m
ut xic
h
Af o
ric
Sp a
N ain
or
w
U G ay
ni re
te e
d ce
St
a
Fi tes
nl
a
C nd
an
a
N Hu da
ew ng
Ze ary
a
Au lan
R
us
st d
r
si
an Ic alia
Fe ela
de nd
ra
tio
L T n
Sl ux urk
ov em ey
ak b
R our
ep g
ub
Po lic
la
n
Ko d
re
a
In
di
Ire a
la
n
C d
hi
na
Real Annual GDP Growth,
1992-2005
 Australia
 U.S.
3.8%
3.2%
10
8
6
4
2
0
Sw Jap
itz an
er
G lan
er d
m
a
Au n y
st
r
Fr ia
an
Sw ce
ed
Fi en
nl
a
Be nd
O
EC lgiu
D m
To
Ca tal
n
D ad
Ne en a
w ma
Un Ze rk
ite ala
d nd
S
Eu tate
ro s
ar
e
Ne E a
U
th
er 15
l
Un A and
s
u
ite
d stra
K
li
Lu ing a
d
xe o
m m
bo
ur
g
Ita
Ic ly
el
an
d
Sp
ai
Ko n
r
No e a
rw
a
Ire y
l
Po and
rtu
Cz
g
ec Gr al
Sl h R eec
ov
e
ak epu
Re blic
pu
b
P o lic
l
Hu and
ng
a
M ry
ex
ic
Tu o
rk
ey
Annual Inflation (GDP Deflator),
1992-2005
 Australia
 U.S.
15
2.4%
2.1%
53.5
12
9
6
3
0
-3
Long-Term Interest Rates,
1994-2005
 Australia
6.6%
5.5%
 U.S.
Australia
United
States
Japan
United
Kingdom
20
04
20
02
20
00
19
98
Euro
area
19
96
19
94
10
9
8
7
6
5
4
3
2
1
0
Unemployment Rates, 1994-2005
 Australia
 U.S.
6.9%
5.1%
20
15
10
5
0
l
l
y
y
y
c
d ea ay ds ria an es
k
d
c
e
g
d
d
e
ga om an ota alia bli den ar ada ium an U15 Ital nc ec lan pain land ubli
t
t
ar an
ur an
r
n
p
w
a
e in
o
r
r
E
bo zerl Ko or erla Aus Ja Sta nm eal ortu ingd Irel D T ustr epu we ung an elg erm
S
p
F
P
G
F
N th
m t
C
S
B G
d
P
H
R
A
Re
K
C
De w Z
xe Swi
te
E
e
k
h
i
d
u
e
c
a
N
O
L
e
ite
N
Un
ov
Cz
Un
Sl
Ja
pa
G n
re
ec
C
H
ze u e
ch ng
R ar
U ep y
ni
te ubl
i
d
St c
at
Po es
rt u
ga
l
Ita
Po ly
l
G and
er
m
an
Fr y
O
a
U EC nce
ni
D
te
T
Sl d K ota
ov in
l
ak gd
o
R
ep m
u
Eu bli
c
r
N oa
et
he rea
rla
nd
Au s
Sw s
itz tria
Lu erl
xe an
m d
bo
u
Be rg
lg
iu
m
Sp
a
C in
an
ad
Ire a
la
n
Ic d
el
a
Sw nd
ed
Au en
st
ra
lia
Ko
D rea
en
m
ar
k
F
N
i
ew nla
Ze nd
al
an
N d
or
w
ay
Government Net BorrowingLending as % of GDP, 2003-2005
 Australia
 U.S.
1.6%
-4.4%
12
9
6
3
0
-3
-6
-9
ra
lia
1995
ly
re
ec
e
Ja
pa
n
 U.S.
G
 Australia
Ita
Ko
re
a
I
c
N
ew ela
n
Ze d
al
an
D
Sl
d
ov en
ak ma
r
R
U
e k
ni
te p u
b
d
Ki lic
ng
do
m
Fi
nl
an
d
Sp
ai
n
Po
la
n
N d
or
Sw w
itz ay
er
la
n
Sw d
e
N
et de
he n
U
r
ni lan
te
d ds
St
at
H es
un
ga
r
Au y
st
r
C ia
an
a
G da
er
m
a
Po ny
rtu
ga
Fr l
a
O
EC nc
D e
T
Eu ota
ro l
ar
e
Be a
lg
iu
m
Au
st
Government Debt as % of GDP
1.6%
-4.4%
180
2005
160
140
120
100
80
60
40
20
0
lo
va Me
k
x
R ico
ep
ub
l
P ic
ol
an
d
K
or
e
Tu a
rk
e
G y
re
e
P ce
or
tu
ga
Ja l
p
H an
N ung
et
he ary
rla
C G nd
ze e s
ch r m
R any
ep
ub
lic
S
pa
U Fr in
ni a
te nc
d
S e
ta
te
Ire s
la
n
O
E A d
C us
D
t
a ria
Lu ve
xe rag
m e
S bo
w u
itz rg
er
la
U
nd
ni
te
d
I
K taly
in
gd
om
E
U
C 15
an
ad
Ic a
el
an
Fi d
nl
a
B nd
el
g
A ium
us
tra
S lia
w
ed
e
N No n
ew rw
Ze ay
al
D an
en d
m
ar
k
S
Taxes on Income and Profits as %
of GDP, 2004
 Australia
 U.S.
18.2%
11.1%
30
25
20
15
10
5
0
te
d
ta
t
S
S
e
Ja s
w pa
itz n
er
la
C nd
an
A ada
us
tra
li
K a
or
ea
S
G pai
er n
m
a
M ny
ex
ic
o
Ita
Fr ly
an
B ce
el
gi
um
O
E
I
r
C e
D la
a n
Lu ve d
U xe rag
ni m e
te b
d ou
K
in rg
gd
C
ze A o m
ch us
R tr i
N epu a
et
h b
N er lic
ew l a
S
lo Z nds
va ea
k la
R nd
ep
ub
lic
E
U
1
P 5
ol
a
G nd
re
e
S ce
w
ed
N en
or
w
P ay
or
tu
g
Fi al
nl
an
Tu d
r
H key
un
ga
Ic ry
e
D lan
en d
m
ar
k
ni
U
Taxes on Goods and Services as
% of GDP, 2004
 Australia
 U.S.
8.9%
4.7%
30
25
20
15
10
5
0
M
ex
ic
o
Ir e
la
nd
Lu Ko
xe re
m a
bo
u
H rg
un
ga
P ry
or
tu
ga
l
Ita
l
P y
ol
an
S
l o Be d
va lg
iu
k
m
R
ep
N
u
b
et
he lic
r
S lan
w
itz ds
er
la
n
G d
re
ec
D
en e
m
ar
Fr k
an
G ce
er
m
an
Fi y
nl
an
d
S
w
ed
e
C n
an
ad
a
S
pa
in
C
ze No
ch rw
R ay
ep
ub
lic
U
J
ni ap
te
an
d
S
ta
te
Ic s
el
an
d
A
us
t
A ria
N ust
ew ra
li
U
ni Ze a
al
te
a
d
K nd
in
gd
om
Household Expenditures in Recreation
and Culture as % of GDP, 2004
 Australia
 U.S.
7.1%
6.4%
10
9
8
7
6
5
4
3
2
1
0
el
an
d
Ja
pa
S
w n
ed
e
N n
or
w
a
Fi y
nl
an
C
d
ze
ch Sp
R ain
ep
ub
lic
F
Lu ra
xe nc
m e
bo
u
P rg
or
tu
G ga
er l
m
an
G y
re
ec
e
N
et Ita
he ly
S rlan
w
itz ds
er
la
B nd
el
g
D i um
en
m
ar
A k
us
A tria
us
tra
U
lia
ni
te Ire
la
d
K nd
in
gd
o
C m
an
ad
O
a
E
K
C
D ore
a
N ve a
ew ra
Ze ge
al
a
H nd
un
ga
S
ry
lo
P
va o
l
k
a
R n
U ep d
ni
te ubl
i
d
S c
ta
te
M s
ex
ic
Tu o
rk
ey
Ic
Infant Mortality, 2004
 Australia
 U.S.
4.7 deaths per 1000 live births
6.8 deaths per 1000 live births
15
10
5
0
Tu
rk
lo Hu ey
va n
k ga
R
ep ry
ub
l
P ic
ol
an
C
ze M d
ch ex
R ico
ep
ub
lic
K
or
e
U Por a
n i tu
te g
d al
S
ta
D tes
en
Lu m
O xem ark
E
C bo
D
u
av rg
er
ag
U
ni
e
te Ire
d la
K nd
in
gd
G om
er
m
a
B ny
el
gi
u
Fi m
nl
an
G d
N re
et e
h c
N erl e
ew an
Ze d s
al
an
A d
us
tri
a
Ita
C ly
an
ad
N a
or
w
a
Fr y
an
ce
S
p
A ain
us
tra
S lia
w
ed
e
Ic n
S ela
w
itz nd
er
la
nd
Ja
pa
n
S
Life Expectancy at Birth, 2004
 Australia
 U.S.
80.6 years
77.5 years
90
85
80
75
70
65
60
Ic
el
a
J a nd
N pan
or
w
Fi ay
n
D lan
en d
m
S a
Sw w rk
e
itz de
er n
l
G and
re
e
Ire ce
Be lan
lg d
i
Fr u m
a
G n
er ce
m
a
Au ny
st
ria
It
Tu aly
C rke
a y
Au nad
st a
r
Lu K alia
xe o
N mb rea
et o
he u
rla rg
O
EC Po nd
D rtu s
av ga
U
er l
ni
ag
te
d Sp e
Ki a
ng in
Sl
ov H do
ak un m
N Re gar
C ew pu y
ze Z b
ch ea lic
R lan
ep d
u
M blic
e
U P xic
ni o o
te la
d n
St d
at
es
Prison Population Rate, 2004
 Australia
 U.S.
250
120 per 100,000 people
725 per 100,000 people
725
200
150
100
50
0
GINI Index (higher income inequality,
higher index)
 Australia
 U.S.
35
45
Sl
ov
D eni
Lu enm a
C xe ar
ze m k
c b
Sl h R ou
ov e rg
a p
U k R ubl
ni
te ep ic
d ub
Ki lic
ng
do
Po m
la
Sw nd
ed
en
I
Sw rel
itz and
er
G lan
er d
m
a
Fi n y
nl
an
Au d
s
H tria
un
ga
r
Ko y
re
a
N Fra
et n
he ce
rla
n
Ic d s
el
an
Tu d
rk
Be ey
lg
iu
m
Ja
pa
n
Ita
M ly
ex
N ico
or
w
G ay
re
Po ece
O rtu
EC g
D al
to
ta
Sp l
A a
N us in
e w tr
a
Ze lia
al
a
U Ca nd
ni
te nad
d
St a
at
es
Annual Water Consumption per
Capita, 2004
 Australia
 U.S.
930 m3
1,739 m3
1800
1600
1400
1200
1000
800
600
400
200
0
St
at
e
Ja s
p
Au an
st
ra
G lia
re
ec
e
Ita
Fr ly
an
U
ce
ni
te
d Spa
K
N ing in
ew d
Ze om
al
an
M d
ex
ic
Tu o
rk
Po ey
rtu
C gal
an
a
N da
or
w
Po a y
G lan
er d
m
a
Ic ny
el
a
Fi nd
nl
an
d
Sw Ko
itz rea
er
la
O
n
EC Sw d
e
D
d
av en
er
a
EU De ge
n
15 m
av ark
er
ag
e
A
N
et ust
he ria
rla
nd
C
H
ze
s
u
n
ch
ga
R
ep ry
ub
Sl
lic
ov
I
ak rel
R and
ep
u
Be blic
lg
Sl ium
ov
en
ia
te
d
ni
U
Trade-to-GDP Ratio, 2005
 Australia
 U.S.
21%
13%
140%
120%
100%
80%
60%
40%
20%
0%
1,
99
0
1,
99
1
1,
99
2
1,
99
3
1,
99
4
1,
99
5
1,
99
6
1,
99
7
1,
99
8
1,
99
9
2,
00
0
2,
00
1
2,
00
2
2,
00
3
2,
00
4
2,
00
5
2,
00
6
2,
00
7
Billion AUD
AUSTRALIA
Trade in Goods and Services
250
200
150
100
50
0
-50
Imports
Exports
Trade Balance
AUSTRALIA: Exports
 STM: Simply-transformed manufactures
 ETM: Elaborately-transformed manufactures
AUSTRALIA: Exports
AUSTRALIA: Imports
 STM: Simply-transformed manufactures
 ETM: Elaborately-transformed manufactures
AUSTRALIA: Imports
Destinations of Exports (%)
AUSTRALIA
Japan (20%)
China (12%)
South Korea (8%)
U.S. (6%)
India (6%)
New Zealand (6%)
U.S.
Canada (22%)
Mexico (13%)
Japan (6%)
China (5%)
U.K. (4%)
Germany (4%)
Origins of Imports (%)
AUSTRALIA
China (14%)
U.S. (14%)
Japan (10%)
Singapore (6%)
Germany (5%)
U.S.
Canada (16%)
China (16%)
Mexico (10%)
Japan (8%)
Germany (5%)
Australia: Free Trade Agreements
 Free Trade Agreements:



U.S. (AUSFTA, started in 2005)
Singapore (SAFTA, started in 2003)
Thailand (TAFTA, started bin 2005)
 Free Trade Agreements under
Negotiation/Consideration









Japan
China
ASEAN (Association of South-East Asian Nations)-New
Zealand
Chile
Gulf Cooperation Council
India
South Korea
Malaysia
Indonesia
AUSTRALIA
Balance of Trade and Current Account
1%
0%
-1%
90 991 992 993 994 995 996 997 998 999 000 001 002 003 004 005 006 007
19
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
% of GDP
-2%
Trade
Balance
-3%
-4%
-5%
-6%
-7%
Current
Account
AUSTRALIA
Major Ag Policy Developments
 Reduction of trade-distorting support schemes for






producers
Major reduction in support to dairy producers
Implementation of drought-support measures
Emphasis in policies encouraging droughtpreparedness amongst farmers
More economic-oriented policies for water usage
Expansion and strengthening of natural resource and
environmental policies, mainly aimed at preventing
soil degradation
Streamlining of sanitary measures for imports
Producer Support Estimates
as % of Gross Farm Receipts
Australia
Japan
United States
EU25
OECD Total
70
60
50
40
30
20
10
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
AUSTRALIA
Farm Support Schemes
 Tax arrangements and risk-management tools to





manage income fluctuations
Excise tax rebates on diesel used by farmers
Accelerated depreciation for land and waterconservation investments
Publicly funded research and development
Assistance for exceptional situations (e.g., droughts
and floods)
Import tariffs on certain types of cheese,
unprocessed tobacco, and processed fruits and
vegetables
Australia Wheat Board
 Near-monopoly for Australian wheat exports

AWB currently exports 96% of Australian wheat
 Created in 1939

Served as model for Canadian Wheat Board
 Government-controlled until 1999
 Privatized in 1999 (owned by active wheat
growers)
 Publicly traded in Australian Stock Exchange
since 2001
THE END