Economy

Australia has a prosperous, Western-style market economy, with a per capita GDP slightly lower than those of the UK, France and Germany in nominal terms, but slightly higher in terms of Purchasing Power Parity. The Australian economy is dominated by its services sector (68% of GDP), yet it is the agricultural and mining sectors (8% of GDP combined) that account for 65% of its exports. Rich in natural resources, Australia is a major exporter of agricultural products, particularly grains and wool, and minerals, including various metals, coal, and natural gas. A downturn in world commodity prices can thus have a large impact on the economy. Australia's emphasis on reforms is a key factor behind the continuing strength of the economy. In the 1980s, the Australian Labor Party, led by Prime Minister Bob Hawke and Treasurer Paul Keating, commenced the modernization of the Australian economy by floating the Australian dollar in 1983, leading to full financial deregulation Current areas of concern to some economists include Australia's chronically high current account deficit and also the high levels of net foreign debt owed by the private sector. Other key reforms include unilaterally reducing high tariffs and other protective barriers; floating the Australian dollar exchange rate; deregulating the financial services sector-including a decision in late 1992 to allow liberal access for foreign bank branches; rationalizing and reducing the number of trade unions; efforts to restructure the highly centralized system of industrial relations and labour bargaining; better integrating the State economies into a national federal system; improving and standardizing the national infrastructure; and privatizing many government-owned services and public utilities.

Since 1996, the Coalition government, led by Prime Minister John Howard, continued to implement microeconomic reform policies. The microeconomic reforms of the Howard government have focused on the labour market, and have attempted to reduce union power and involvement in the workplace. The Coalition government deregulated numerous other industries, including the telecommunications sector, and privatized many of the pre-existing monopolies. Since the recession of the early 1990s, the Australian economy has not suffered a recession in over 14 years. As of September 2005, unemployment had fallen to a level of 5.0 per cent, the lowest level since the late 1970s. The price of shares listed on the Australian Stock Exchange has also grown significantly since the early 1990s. While the near-term outlook is for continued economic expansion, Australia's longer term prospects depend heavily on continued fundamental economic reform. There is a general consensus among the major political parties, management, and labour on the necessary features of this reform but significant divergence of views on the methods, pace, and degree of change required. The influence of China's economic growth has also fuelled Australia's export growth in mineral and energy resources, with the recent Western Australian Liquefied Natural Gas contract worth potentially $25 billion over the life of the project. China's industrialization has resulted in an export boom for resource corporations, and thus contributed to increasing the Australian Federal Government's revenue stream from increased Company Tax takings. Australia's trade with China is currently the fastest growing in the past decade, to become the third largest trading partner overall. Recent changes by the Coalition Government on industrial reform, with particular regards to new laws for liberalizing workplace contracts for small businesses under 100 employees, has resulted in some discontent among union groups and employee advocates. Critics argue that the laws will result in reduced worker entitlements in return for nominal financial compensation, which will thus impact on the social needs of individuals. Furthermore, it is argued that there is no economic evidence to support the government's claims that the changes will stimulate productivity and raise wages. Nevertheless, businesses welcome attempts to improve productivity, and believe such reforms will benefit the Australian economic output as a whole. The privatization of Telstra will also be a major agenda for the government, potentially worth AUD$30 billion, as it seeks to retire public debt and build upon successive federal surpluses for a future capital reserve. Telstra's privatization is undergoing numerous consultations with various lobby groups, particularly rural areas which expect funds to be allocated for improving rural telecommunications infrastructure. Various proposals for privatization to improve competition of Telstra's natural monopoly over fixed lines, including the separation of Telstra's wholesale communications and its retail division, have been seen as unsatisfactory by the current Telstra board for maximizing the final share price.

As a Federation, the political power between Commonwealth and State Governments is evenly spread out. This is why both the Commonwealth and the States have their own taxes. Obviously, taxes vary from State to State due to their different needs, populations, economics and budgetary position. However the majority of income for State Governments remains the Federal Government, for which the largest sources of revenue is income tax and business tax. Local Governments, or as they are known in Australia, councils, have their own taxes so that they can provide garbage collection, park maintenance services, libraries and museums, etc. Weak foreign demand and strong import demand pushed Australia's trade deficit up from US$8 billion in 2002, to US$18 billion in 2003, US$13 billion in 2004, and US$16 billion in 2005. The government is pushing for increased exports of manufactured goods, but competition in international markets continues to be severe. Australia is ranked 52nd in terms of population, with 20.11 million people residing there in mid 2004. According to data obtained from Australian Bureau of Statistics, the national growth rate during the 12 months ended June 2004 was 1.2%. This was similar to the growth rate of the world's population (1.1%) but higher than high-income countries' growth of 0.6 %. The growth of Australia's population has two components; natural increase (the number of births minus the number of deaths) and net overseas migration (net permanent and long-term movement plus the migration adjustment). For the year ended June 2004, natural increase was 121,000 persons, an increase of 5,900 persons (5.1%) on the number recorded in the year ended June 2003 (115,200). The number of births registered in the year ended June 2004 (254,600) increased by 2.9% when compared with the previous 12 months (247,400). The number of deaths increased by 1.1% over the same period from 132,200 in 2003 to 133,600 in 2004.Net overseas migration was 117,600 persons in the year ended June 2004; an increase of 1.0% from the number recorded in the year ended June 2003 (116,500) Australia has the lowest population density of 2 persons per sq km (5.2 persons per square mile). Australia's largest city, Sydney with a population of approximately 4.4 million has one of the lowest population densities of any major world city. Almost 92% of the people live in urban areas and enjoy high life expectancy at birth of 79 years, according to (1997-2003) World Bank figures. The UNDP 2004 report shows that 14.3% of Australian population lives below income poverty line (50% of median household income). All the people in Australia enjoy access to an improved water source. Gross primary enrollment, which denotes the percent of school-age population, is 102%, with both male and female enrolled equitably. Literacy rate is 99%. Maintaining a decent standard of living, health and education for its people, Australia is ranked 3rd in 177 countries of the world in terms of human development index.