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Australia is the 13th largest economy in the world in terms of nominal gross domestic product (GDP) in 2023 with about $1.6 tn. The country holds the record for the longest uninterrupted GDP growth of almost 30 years, which ended when it fell into recession in the second quarter of 2020 due to the Covid-19 pandemic.
As per the International Monetary Fund (IMF), unprecedented macro policy stimulus and relatively quick suppression of the virus in 2020 helped the Australian economy recover strongly from the recession induced by the pandemic.
Thus, Australia registered a GDP growth of 4.9% in 2021. The following year, it grew 3.7%. However, growth slowed to 2.1% in 2023. For 2024, the IMF predicts a growth rate of 1.5% and 2.0% for 2025.
Australia GDP Annual Growth Rate (in %)
Viewed historically, the Australian economy was known as heavily dependent on agriculture, particularly wheat, beef, lamb, dairy produce, and several irrigated crops. Following World War II, its manufacturing and services sectors began growing as mineral exploitation in the country developed. Australia started undergoing economic liberalization in the early 1980s.
Australia’s population is around 26.8 million, and 86% of its people can be found in many urban areas. Over 7.6 million migrants are living in the country. In the 12 months to March 2023, 81% of the growth in the country’s population was attributed to net overseas migration, contributing to an increase of 454,400 individuals.
The unemployment rate for 2022 fell to 3.7% from 5.1% in the previous year. Looking forward, Australia’s unemployment rate is expected to increase by 1.2 percentage points between 2023 and 2028, reaching 4.9% by the end of this period.
Australia Unemployment rate
Currency and Central Bank
The Australian dollar, or AUD, is the official currency of Australia and its external territories, namely Christmas Island, Cocos (Keeling) Islands, and Norfolk Island. People use the dollar sign ($) within the country but add an A or AU before distinguishing it from other dollar-denominated currencies.
The AUD is the fifth most traded currency globally, behind the US dollar, euro, Japanese yen, and UK pound sterling.
The Reserve Bank of Australia (RBA) has been the country’s central bank since 1960. Before the Reserve Bank Act 1959, the Commonwealth Bank of Australia had central banking functions.
Australia Inflation (in %)
Inflation in Australia is expected to come in at 3.5% this year, after 5.6% in 2023 and 6.6% in 2022.
Industry and Trade
Australia’s economy is dominated by its service sector, which contributed about 62.43% to the GDP in 2022. Furthermore, financial services, healthcare & education, mining, construction and manufacturing count among the leading growth sectors of Australia’s economy.
As of December 2023, the mining sector constitutes 14.3% of the GDP, with health and education contributing 12.8%, finance contributing 7.4%, and construction adding 7.1% to the overall economy.
Meanwhile, manufacturing accounts for 5.7% of Australia’s GDP. Food, machinery and equipment, metal processing and metal goods, chemical and petrochemical, and building materials production are among the top industries in Australia.
Australia’s agricultural and mining sectors are the most critical for exports, with iron and coal begin the country’s most important exports. In addition to this, Australia is also one of the leading exporters of meat and wheat in the world.
Australia ranks 22nd worldwide in total exports, and its main export products include mineral fuels, ores, slag and ash, gems and precious metals, cereals and meat. The country’s main export partners are China, Japan, South Korea, India, and the US.
Australia Economy: Balance of Trade
On the other hand, Australia is the 24th biggest importer globally, and its top import products include mineral fuels, machinery including computers, vehicles, electrical machinery and equipment, and pharmaceuticals. Its main import partners are China, the US, Singapore, Japan, and Germany.
Stock Exchanges and Capital Markets
Australia’s primary securities exchange is the Australian Securities Exchange or ASX, which is the 16th largest in the world in terms of market capitalization. The ASX was formed following the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006.
It offers diverse asset classes and services, including equities, debt securities, derivatives, and commodities.
Maintained by Standard & Poor’s, the market-capitalization weighted and float-adjusted S&P/ASX 200 index is considered the benchmark of the ASX. The largest companies that make up the index include the healthcare firm CSL Ltd., Commonwealth Bank of Australia, and BHP Group Ltd, a leading global resources company.
Bond Market
Australia’s financial markets are well-developed. The bond market is clustered in government, municipal and corporate bonds. Available are Australian Government Bonds (AGBs) and Exchange-traded Australian Government Bonds (eAGBs) which are represented by exchanged-traded Treasury Bonds (eTBs) and exchange-traded Treasury Indexed Bonds (eTIBs).
Australia’s Government also issues Treasury Notes with a maturity of usually lesser than 6 months. All government bonds are denominated in Australian dollars.
The corporate bond market is divided into Australian financial institutions, Australian corporate’s (non-financials), Long-dated asset-backed securities and “Kangaroo” bonds (issued by non-residents in the Australian domestic market, denominated in AUD).
Australia’s non-government bond market is significantly larger than its government bond market.
Real Estate Market
A key issue in the Australian real property market is affordability. House prices, which were four times the average household income in 1990, jumped to six times by 2011. This was due to high levels of immigration and the tendency of new immigrants to stay in capital cities.
Australia House Price Index (in %)
Moreover, the government’s decision to loosen rules for foreign investment in real property in 2008 contributed to the affordability problem. In Australia, foreigners are allowed to buy residential properties, subject to the approval of the Foreign Investment Review Board (FIRB).
However, in 2022, the housing market registered its first year-on-year decline since 2018. Housing prices were down 5.3%, according to CoreLogic, but still well above pre-Covid levels.
However, the Australian housing market has experienced substantial growth in 2023. Throughout the year, both house and unit prices exhibited consistent growth every month. Recent data from PropTrack reveals a national annual growth rate in house and unit prices of 5.42%, with capital cities experiencing a slightly higher rate at 6.54%.
Sources of Charts: tradingeconomics.com
