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 (%)

Australia U.S. Agriculture 3.7 0.9 Industry 25.6 20.6 Services 70.7 78.5

Composition of Exports (%)

Australia U.S. Minerals and Metals 60 ? Rural Goods 17 9 Manufactured Goods 18 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

GDP

CPI

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 20 million United States 294 million China 1,300 million India 1,073 million World 6,390 million

World Population Density

Population (bottom) and Internet (top) densities

Australian Population Density

0-100 100-200 200-300 >300

Annual Population Growth,1992-2005 Australia 1.16% per year U.S. 1.12% per year

-0.5

0

0.5

1

1.5

2

Net Immigration Rate,2000-2005 Australia 0.58% of total population U.S. 0.40% of total population

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Foreign-Born Population,circa 2000 Australia 23% U.S. 11%

0

5

10

15

20

25

Nationals (citizens) Non-nationals (non-citizens)

Gross Domestic Product,2005 (billion U.S. dollars, PPP)

Australia 700 U.S. 12,400

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

World Gross Domestic Product (1999)

Earth’s Satellite Picture at Night

Per Capita GDP and GNP,2005 (U.S. dollars, PPP)

Australia 34,200 (GDP) 32,900 (GNP) U.S. 41,800 (GDP) 41,700 (GNP)

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

GDP

GNP

Per Capita GNI and NNI,2005 (U.S. dollars, PPP)

Australia 32,900 (GNI) 27,700 (NNI) U.S. 41,700 (GNI) 36,400 (NNI)

0

10000

20000

30000

40000

50000

60000

Gross national income Net national income

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

0

0.5

1

1.5

2

2.5

Exchange Rate

PPP

Exchange Rate

AUD per U.S. dollar

AUD per US$

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

1/2

/03

4/2

/03

7/2

/03

10

/2/0

3

1/2

/04

4/2

/04

7/2

/04

10

/2/0

4

1/2

/05

4/2

/05

7/2

/05

10

/2/0

5

1/2

/06

4/2

/06

7/2

/06

10

/2/0

6

1/2

/07

4/2

/07

7/2

/07

10

/2/0

7

1/2

/08

Real Annual GDP Growth,1992-2005 Australia 3.8% U.S. 3.2%

0

2

4

6

8

10

Annual Inflation (GDP Deflator),1992-2005 Australia 2.4% U.S. 2.1%

-3

0

3

6

9

12

1553.5

Long-Term Interest Rates,1994-2005

Australia 6.6% U.S. 5.5%

0123456789

10Australia

UnitedStates

Japan

UnitedKingdom

Euroarea

Unemployment Rates, 1994-2005

Australia 6.9% U.S. 5.1%

0

5

10

15

20

Government Net Borrowing-Lending as % of GDP, 2003-2005

Australia 1.6% U.S. -4.4%

-9

-6

-3

0

3

6

9

12

Government Debt as % of GDP

Australia 1.6% U.S. -4.4%

0

20

40

60

80

100

120

140

160

180

1995 2005

Taxes on Income and Profits as % of GDP, 2004 Australia 18.2% U.S. 11.1%

0

5

10

15

20

25

30

Taxes on Goods and Services as % of GDP, 2004

Australia 8.9% U.S. 4.7%

0

5

10

15

20

25

30

Household Expenditures in Recreation and Culture as % of GDP, 2004

Australia 7.1% U.S. 6.4%

0

1

2

3

4

5

6

7

8

9

10

Infant Mortality, 2004

Australia 4.7 deaths per 1000 live births U.S. 6.8 deaths per 1000 live births

0

5

10

15

Life Expectancy at Birth, 2004

Australia 80.6 years U.S. 77.5 years

60

65

70

75

80

85

90

Prison Population Rate, 2004

Australia 120 per 100,000 people U.S. 725 per 100,000 people

0

50

100

150

200

250 725

GINI Index (higher income inequality, higher index)

Australia 35 U.S. 45

Annual Water Consumption per Capita, 2004

Australia 930 m3

U.S. 1,739 m3

0

200

400

600

800

1000

1200

1400

1600

1800

Trade-to-GDP Ratio, 2005

Australia 21% U.S. 13%

0%

20%

40%

60%

80%

100%

120%

140%

AUSTRALIATrade in Goods and Services

-50

0

50

100

150

200

250

1,99

01,

991

1,99

21,

993

1,99

41,

995

1,99

61,

997

1,99

81,

999

2,00

02,

001

2,00

22,

003

2,00

42,

005

2,00

62,

007

Bill

ion

AU

D

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

AUSTRALIABalance of Trade and Current Account

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

% o

f G

DP

TradeBalance

CurrentAccount

AUSTRALIAMajor 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 drought-

preparedness 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 Estimatesas % of Gross Farm Receipts

0

10

20

30

40

50

60

70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Australia Japan United States EU25 OECD Total

AUSTRALIAFarm 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 water-

conservation 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