A competitive economy
Australia has one of the strongest economies in the world—competitive, open and vibrant. The nation’s high economic performance stems from effective economic management and ongoing structural reform. Australia has a competitive and dynamic private sector and a skilled, flexible workforce.
In 2003–04, the Australian Government recorded a budget surplus of $8 billion—one per cent of gross domestic product (GDP). The Australian Government’s net debt fell by $6.2 billion in 2003–04 to $23.4 billion. At 2.9 per cent of GDP, this is the lowest in 26 years.
Strong growth with low inflation

Melbourne: Princes Bridge and city skyline
Adam Buzzone/Tourism Australia
Australia’s annual real GDP has been growing by an average of 3.4 per cent since 1998. Australia has had one of the strongest economies in the world in recent years, growing at an average annual rate of 4 per cent since 1990. GDP in 2004 was projected to reach $835 billion.
Australia’s economic growth is coupled with low inflation. Australia’s inflation rate has been stable over the past decade, and inflation in 2003–04 was just 2.4 per cent.
An important factor contributing to Australia’s ability to maintain low inflation with high growth has been the economy’s productivity performance. Since 1990, Australia’s productivity has been growing at an average annual rate of over 2.3 per cent. This has been one of the fastest-growing productivity rates in the OECD—above the average of 1.8 per cent.
Australia’s small business sector is vital to the economy, accounting for 58 per cent of employment growth over the past six years and generating about 30 per cent of Australia’s economic production.
There are more than 1.2 million small businesses in Australia employing almost 3.3 million people. Over the past decade, the number of small businesses has grown by an average 3.5 per cent every year.
A healthy economic structure
Australia has a comprehensive economic policy framework in place. The economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to businesses.
There is a strong prudential regulation system along with business-oriented corporate regulation and insolvency regimes. Competition is substantial in key areas such as transport, telecommunications, electricity and gas.
Australia has an open economy with a business-friendly tax system and low barriers to trade and investment. The labour market is flexible and highly skilled, with strong economic growth and moderate wage and price pressures supporting sustained employment growth.
The goods and services tax (GST), Australia’s broad-based value-added tax, is levied at 10 per cent and applies to almost all goods and services. There is no stamp duty on share transactions, and business taxes include company tax rates of 30 per cent.
In 2003–04, thanks to low interest rates, strengthened company profits and optimistic business sentiment, new business investment grew by 8.3 per cent in 2003–04.
Australia and foreign trade
Australia’s export base is strong and diverse. Australian businesses are internationally competitive and there are many international business opportunities thanks to low tariffs and minimal barriers to entry. See Trade and investment (page 57).
The current account deficit (CAD) has traditionally been a benchmark for foreign investors. Australia has averaged a CAD of around 5.5 per cent of GDP over the past decade. In 2003–04 the CAD reached 5.8 per cent of GDP. With the Australian Government’s budget in surplus, the current account deficit is now largely the result of private sector trade and income flows.
Valued at US$547 billion, Australia’s pool of investment funds under management is the fourth-largest in the world. Almost 350 000 people are employed in Australia’s finance sector.
Knowledge-based industries
Driven by the pace of technological and social change, innovation is leading to higher productivity and a more rapid development of information and knowledge in all industries.
Australia is one of many modern economies that has a strong knowledge-based economy—an economy driven by the production, distribution and use of knowledge and information. Knowledge-based industries now contribute almost half of Australia’s GDP.
Australia’s international trade competitiveness relies increasingly on skills, knowledge, innovation and enterprise as well as domestic and international information networks.
Australia’s open economy is an excellent climate for enterprise and innovation. Information and communication technology (ICT) is one of the key industries driving economic growth, and Australia’s ICT spending as a proportion of GDP is the tenth-highest in the world.
Australian businesses are also heavy users of information technology. Australia’s telecommunications and IT market is the third-largest in the Asia Pacific and tenth-largest in the world.
Australia is home to citizens from some 200 countries, making it the most multilingual workforce in the Asia Pacific region. More than 4.1 million Australians speak a second language, including 3 million who speak a language other than English at home.
Australians are outstanding innovators with new ideas and inventions generated by individuals, small businesses and research institutes. The Australian Government’s Commercialising Emerging Technologies (COMET) program helps to get these innovations to market.
COMET provides innovators with advice and financial assistance on commercialisation, attracting capital and establishing strategic partnerships. In the first four years of the program, COMET supported 900 companies. Of these, 850 have so far reported commercialisation outcomes. This includes 250 companies raising around $240 million in capital and 400 companies securing business alliances, licences and agreements.
Between 2004 and 2011 the Australian Government will spend a further $100 million on the COMET program. The second phase will assist some 200 companies every year; expand the network of private sector business advisers with commercialisation expertise by 30 per cent; and assist well over 1000 firms that in turn could raise more than $500 million in capital.

Uluru, formerly named Ayers Rock, is a massive monolithic sandstone rock in central Australia, covering an area of 3.3 square kilometres
Tourism
Tourism is one of Australia’s most important industries. It accounts for 5.7 per cent of total employment, contributes $73 billion to consumption per annum and is worth more than 11 per cent of total exports.
More than 90 per cent of tourism-related businesses employ about 20 staff, including substantial numbers of young people and people from non–English speaking backgrounds. With 48 cents in every tourism dollar spent outside of the capital cities, tourism is also a key economic sector for regional Australia.
There were 5.2 million visitor arrivals to Australia during 2004, an increase of 10 per cent on the previous year’s figure.
In the year ended September 2004, international visitors spent a total of 131 million nights in Australia. During their stay they spent $12 billion (excluding prepaid international fares and inclusive package tours). The biggest spenders were visitors from the United Kingdom ($2 billion), followed by visitors from New Zealand ($1.2 billion), Japan and the United States ($1.1 billion), and China ($908 million).
- Australia is one of the world’s largest exporters of beef. The value of Australia’s beef and veal exports totalled $3.8 billion in 2003–04.
- Australia is the world’s third-largest exporter of dairy products. In 2003–04 Australia’s exports of dairy products were valued at $2.2 billion.
- Australia is the world’s largest wool producer and exporter. In 2003–04 Australia’s shorn wool production was 475 000 tonnes and wool exports were valued at nearly $2.8 billion.
- The major grains and oilseeds produced in Australia include wheat, barley, canola, oats and sorghum. Australia is the world’s second-largest wheat exporter and exported 15.2 million tonnes of wheat in 2003–04.
- Australia’s key cotton export markets include China, Japan, the Republic of Korea and Thailand. Australia’s raw cotton exports in 2003–04 were valued at just under $1 billion.
- Sugar is one of Australia’s major exported crops with exports of around 4 million tonnes in 2003–04, worth around $1 billion.
- In 2003–04 the gross value of horticulture production was around $6 billion. Major horticultural products include fruits and nuts, vegetables, table grapes, dried vine fruits and nursery products.
- Australian fisheries operate in one of the world’s cleanest environments. Seafood production in 2003–04 was around 267 000 tonnes, valued at about $2.1 billion.
- In 2000–01 the value of turnover of Australia’s forest products was about $15 billion. Australia’s native forest area is around 163 million hectares and around 13 per cent of this is classified as conservation reserve.
- The Australian food industry had an annual turnover of over $65 billion in 2002–03 and accounted for 46 per cent of total retailing turnover in that year.
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Last update May 2005