Economy of Australia

Australia has a prosperous Western-style capitalist economy, with a per capita GDP at the level of the dominant West European economies. Its developed market economy is dominated by its services sector (65% of GDP). It also has developed agricultural and mining sectors (7% of GDP combined). Australia is rich in natural resources and is a major exporter of agricultural products, minerals, metals, and fossil fuels. Commodities account for 57% of the value of total exports, so that a downturn in world commodity prices can have a big impact on the economy. The Government is trying to increase exports of manufactured goods, but competition in international markets continues to be severe. Australia's comparative advantage in primary products is a reflection of the natural wealth of the Australian Continent and its small domestic market – 19 million people occupy a continent the size of the United States. The relative size of the manufacturing sector has been declining for several decades, and now accounts for just under 12 percent of GDP.

Australia started a basic reorientation of its economy more than 20 years ago and has transformed itself from an inward looking» import-substitution country to an internationally competitive, export-oriented one. Key reforms include reduction of high tariffs and other protective barriers. They float the Australian dollar exchange rate; deregulate the financial services sector, reduce the number of trade unions; better integrate the State economies into a national federal system; improve and standardize the national infrastructure; and privatize many government services and public utilities.

The ultimate goal for Australia is to become a competitive producer and exporter, not just of traditional farm and mineral commodities, but of a diversified mix of manufactured products, services, and technologies. While progress has been made on this economic reform agenda, much must be done, particularly in the domestic arena.

Australia has continued to prosper during the years of 2001—2004. It has done so by continuing to privatize industries and by relying on increasing domestic consumption and Chinese demand for resources. The state of Western Australia in particular has benefited from the resources boom caused by China, with its economy growing at an annualized rate of 7. 5 % during 2004. The national economy has been growing, however, at an average rate of just above 3 % a year. New economic problems come from a trade deficit that was caused by great amounts of cheap Chinese imports and overspending of Australian consumers.