Australia has a prosperous Western-style capitalist economy with a high per capita GDP, estimated in purchasing power parity (PPP) terms by the US Central Intelligence Agency (CIA) at $24,000 for 2001. Since the late 1980s, the government has been engaged in a program to transform the economy's orientation from import substitution industrialization (ISI) to export-driven, high-tech globalization. This helped introduce an economic expansion from September 1991 that as of March 2002 had continued uninterrupted for 43 quarters, despite slowdowns occasioned by the 1997 Asian financial crisis and the 2001 global economic downturn.
Home processing industries that rely on Australian surpluses of raw material inputs of wool, food and minerals (particularly coal) beyond domestic needs still comprised about 55% of merchandise exports in 2000. Traditional exports accounted for about half of Australia's foreign exchange earnings, down from two-thirds in the mid-1990s, mainly due to the increased earnings from tourism and an increasing share of high tech exports. Australia's flexible exchange rate regime has helped the economy rapidly adjust to the vicissitudes of international commodity markets. It is the world's largest wool-producing country. Faced with competition from synthetics, the wool exports experienced a decade of decline until the recent recovery in 2000/01, as world prices jumped 21%. The country, also one of the great wheat exporters, experienced an estimated 3% loss in wheat production in 2000/01 due to the weather which was turned to gain as returns increased due to higher prices. Australia also exports large quantities dairy and meat products. Live cattle exports for the past four years have been outperforming more traditional cotton and sugar production. In minerals, Australia is also a major world supplier of iron ore, bauxite, lead, zinc, and copper; coal, beach sand minerals, and nickel have become major industries as well. Since the 1960s manufactured goods have provided an ever-increasing share of the country's exports, with elaborately transformed manufactures (ETMs), like automobiles, high-speed ferries, and telecommunications equipment, making up 23% of exports in 2001.
Heavy-industry expansion took place from 1960 to 1970, with steel output more than quadrupling during this period. By the 1980s, however, Australian steel was facing stiff competition from abroad, and production stagnated. In 2001, steel production fell and world steel prices dipped below 70% of their 1994 level, but Australian productivity rose, and due to a combination of the low value of the Australian dollar, and the United States offering around 85% of Australian steel imports exemptions from the steel tariffs and quotas it had imposed in March 2001, net returns on steel exports actually improved in 2001. The Asian financial crisis in 1997, however, had a more serious impact on export revenues from heavy industry, which declined in 1998 an average of -5%.
Australia's last economic recession was in 1990, from which it began to recover in mid-1991. Economic growth, supported by rising consumption and higher export demand, reached 4% in the fourth quarter of 1993. However, the unemployment rate of about 11% was near a postwar record. From this high point, however, unemployment has been on a steady decline in Australia—to 8.5% unemployment in 1995, 7.5% in 1999, and6.3% in 2000, albeit with an increase in 2001 to 6.7%. IMF figures predict a return to the downward trend in 2002 and 2003, with a projection of 6.3% and 6% unemployment, respectively. Real GDP growth fell to 3.7% in 1997, but recovered in 1998 and 1999 to an average of 5%, helped by reforms that included currency depreciation and a redirection of exports to non-Asian countries. By IMF estimates, real GDP growth fell to 3.1% in 2000 and 2.6% in 2001, but its projections are for real growth rates to recover to about 4% in 2002 and 2003, Australia's long-term average.
Australia's economy was not immune from the impact of the 2001 global slowdown and the aftershocks from the 11 September 2001 terrorist attacks on the United States, as real growth declined, growth in exports plummeted from 10.9% in 2000 to 0.8% in 2001, imports fell 4.7% in 2001, and several major businesses collapsed into bankruptcy. The Australian dollar continued its slide against the US dollar that took it from A $1.34/ US $1 in 1997 to A $1.94/ US $1 by January 2002. The benefit of the currency depreciation, however, was to make Australian exports increasingly competitive, and the decline in imports in 2001 helped maintain Australia's remarkably steady current account surplus, which has remained unchanged at 0.2% of GDP from 1997 through 2001. During the 1990s Australia recorded an average annual economic growth rate of nearly 4% a year, the second-fastest growth rate among developed countries, behind only Ireland.