Australia - Overview of economy

The Australian economy developed rapidly in the twentieth century to become relatively stable and

prosperous in world terms. Australia is characterized by an abundance of resources and a diverse yet predominantly primary sector-oriented economy. Grains, livestock, minerals, processed metals, and coal have been the mainstays of economic growth since European settlement in 1788 and continue to play the dominant role in export revenue. The gross domestic product (GDP) per capita continues to be high, with Australia ranked 17th out of 191 countries, with a GDP per capita of about US$17,575 in 1998. Australia's standard of living and lifestyle are similar to those of the United States and Europe.

Australia's economy depends on trade. Traditionally, Australia exported raw materials to its former colonial power, Great Britain, and to other European countries. When Great Britain joined what is now called the European Union (EU), trade between Great Britain and Australia declined. Australia has compensated by seeking new markets for its exports in Asia, especially in Japan and Southeast Asia. Japan, especially, has been a major purchaser of Australia's mineral and agricultural products. With the Asian financial crisis of the late 1990s, Australia sought to increase its exports to Europe and the United States while still maintaining a high level of trade with Asia.

Australia's geographic position and its topography have had an impact on its economy. The country is located relatively far from most world population centers and markets. Australia's immediate neighbors, with the exception of New Zealand, are developing countries. The Australian continent is generally dry and contains poor soils, limiting agricultural potential and requiring imports of water and fertilizers. Most of the continent's interior, the Outback, is unsuitable for agriculture except for limited cattle grazing. Australia is a generally flat continent with its few small mountain ranges being low in elevation; they primarily run north-south at the eastern edge of the country. Obstacles to road and railroad building are generally the great distances between population centers and between resources and population centers.

Australia's dependence on mineral and agricultural exports and the small size of the country's economy mean that it is exposed to fluctuations in world commodity prices. Fortunately, the diversity of minerals and agricultural products in Australia means that when some commodity prices are low, others are likely to be high, protecting the Australian economy from devastating shocks. Australia is self-sufficient in most resources including food and minerals; the major exception is oil, of which 20 percent of Australia's needs must be imported.

In the 1990s, the Australian government encouraged the privatization of government-owned companies. Large blocks of government-owned shares in the national telephone company, Telstra, and the national airline, Qantas, among other companies, were sold to the public. The Australian government has increasingly pursued a more free market approach to its economy, with fewer regulations and controls on business.

Australia's external debt is estimated at US$222 billion, and in 2000 the debt was estimated at approximately 3.3 percent of the GDP. The hosting of the Summer Olympic Games in 2000 contributed significantly to the rise in debt. However, Australia's debt has been declining as a percentage of both value of exports and GDP. Debt servicing continues but has little effect upon the performance of the economy as a whole, as it is large and strong enough to make interest payments without problems.

Australia is a contributor to global aid programs, but most aid is concentrated in the Asia-Pacific region. Australia contributes US$1.43 billion in overseas aid per year, and a significant proportion of this goes to Papua New Guinea, which is Australia's nearest neighbor and a former Australian colony. Australia is seen as a safe investment target for both domestic and overseas corporations. The mix of small, medium, and large companies is similar to that of the United States or Great Britain.

User Contributions:

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Bhageshwar Singh

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