Located in the southern hemisphere, Australia has the world's fourteenth largest economy. It is rich in natural resources and is the world's largest producer of iron ore, gold, and uranium. Australia is also one of the world's leading exporters of wool, meat, wheat, and cotton. The service industry occupies a dominant position in the Australian economy. The fastest-growing ones are business and financial services. Travel and tourism-related to secondary and higher education are also important industries in Australia.
Australia's economic structure
Australia's GDP in 2018 was approximately US$1.42 trillion. Looking at the composition of Australia’s gross domestic product from the expenditure side, private consumption is about 55%; fixed capital formation is 28.4%; imports are 21.4%, exports are 21.8%; government spending is 18%. Private consumption is the main driving force for economic growth, while Australia’s total amount of foreign trade accounts for more than 40% of its GDP, indicating that Australia's economy is highly dependent on foreign countries and is a country that relies heavily on foreign trade.
In 2018, Australia's total import and export trade of goods and services reached US$552.621 billion, of which exports were US$283.493 billion, an increase of 13.2% over the previous year; and imports were US$269.128 billion, an increase of 10.2% over the previous year, creating a trade surplus of US$14.378 billion. In terms of regions, Australia’s main export region is East Asia, and East Asia alone accounts for 73.3% of overall exports. The top five exporting countries are China, Japan, South Korea, India, and the United States order; the top five importing countries are China, the United States, South Korea, Japan, and Thailand in order. Since the 1980s, Australia’s foreign trade policy has shifted its focus to Asia. In addition, in recent years, the vast consumer market formed by the rise of emerging Asian developing countries such as China, India, and the ten ASEAN countries has greatly increased the proportion of Australia’s economic and trade exchanges with Asia's enthusiastic round-trip transactions.
According to statistics from the Australian Department of Foreign Affairs and Trade, Australia’s trade structure in 2018 was as follows: primary products such as agricultural products and energy mineral products (60.3%), precision processed products (7.7%), simple processed products (3.7%), and other products (mainly Gold and undisclosed trade items) (6.2%), service exports (21.9%). The top five export products are all energy mineral products: coal, iron ore, petroleum, gold, and artificial corundum. The total value of the first five export products amounted to US$151.396 billion, accounting for about 53% of the total export value.
Although Australia is a major mining country, the service industry is also an important source of Australia’s export earnings and economic growth. In 2018, service exports amounted to 56.998 billion U.S. dollars, accounting for 22.7% of exports and 4.8%. of total GDP. Important industries include tourism, education-related tourism, telecommunications, computer and information services, and financial services.
Because trade is vital to Australia’s economy, Australia is very active on international activities. In addition to being a member of important economic and trade organizations, such as the World Trade Organization (WTO) and the Asia Pacific Economic Cooperation (APEC), it is also actively developing relations with other countries in the Asia-Pacific region. Bilateral relations and the establishment of multilateral cooperation with ASEAN enhance Australia's international influence.
Australian economic and political factors
Nearly 60% of Australia's exports are agricultural and mineral raw materials and primary processed products, and about 70% of imports are industrial products. Countries in the Asia-Pacific region are Australia's main trading partners
Australia is currently the 20th largest trading country in the world, and its foreign trade was dominated by the European market in the early days. However, with the rapid growth of the Asian economy, Australia has begun to attach importance to economic and trade relations with its Asian neighbors. Asia has now leaped into Australia's foreign trade. In the first place, it occupies about 60% of the Australian export market, and East Asian countries (including Japan, China, South Korea, and Taiwan) also account for a considerable proportion of the Australian import market. Because of the underdeveloped manufacturing industry in Australia, most of its consumer and industrial products are imported. There are no special restrictions and quota restrictions on imports of general products. It is a completely open market, except for automobiles, textiles, footwear, tobacco, and alcohol. Rather than levying high tariffs, tariffs have generally fallen below 5%. Its main imported products include industrial products such as vans, computers, communication equipment, aircraft, and auto parts, which account for 70% of the total import value. Although Australia's manufacturing industry is underdeveloped, its natural resources are quite abundant. The most important exports are coal, gold, iron, aluminum, crude oil, wool, beef, etc., which account for 60% of the total export value. The main products imported from Taiwan to Australia include computers and peripheral equipment, computer parts and accessories, steel screws, corded phones, knitwear, auto parts, plastic products, sports equipment, lamps, furniture, bicycles, air conditioners, motors, sewing machines, power tools, etc. The main products exported to Taiwan from Australia are coal, aluminum, crude oil, iron ore, copper, wool, lobster, beef, etc.
Australia is a test market for information products and a base for expanding sales in the South Pacific
Australia is in the South Pacific and is quite far away from major global markets. The population of the country is only 20.29 million. The market size is small and medium. However, because the computer penetration rate in the Australian market is second in the world, more than 40% of families own personal computers and speak English as their mother tongue. Therefore, the world's major computer factories have chosen Australia as their test market for their products and as a base for expanding sales to neighboring countries.
Signing bilateral trade free agreements with the United States and Thailand, some industries will benefit
Since the Australian Liberal Party came to power, it has tried its best to win ties with the United States. Australia hopes that the US government will cancel subsidies to American farmers so that Australian agricultural products can be sold to the United States more competitively. However, although the US government signed a free trade agreement with Australia, it continues to subsidize American farmers, and Australian agricultural products have not benefited from bilateral trade agreements. However, the auto industry is expected to increase exports to the United States because Australia's labor cost is lower than that of the United States. Similarly, Australia's export of large trucks to Thailand will also benefit from the Australia-Thailand bilateral free trade agreement, and Thailand's auto import tariffs will be reduced from 75% to 0%.
Australian industrial structure
According to data from the Australian Bureau of Statistics, the important industries that contributed significantly to GDP in 2018 include finance and insurance, energy and mining, and construction. Although agriculture and animal husbandry does not contribute much to GDP, it is still a traditionally important industry in Australia.
Australia Energy and Mining:
Australia's energy and mining industry account for about 12% of GDP and have advantages in natural resources. The export of minerals and fuel commodities occupies an important position in the world, especially the energy supply and demand in the Asia-Pacific region.
Australian Agriculture and Animal Husbandry:
- Mining: Australia has discovered a total of more than 70 kinds of mineral resources with rich reserves, 23 of which have been mass-produced. It is now the world's No. 1 exporter of iron ore, coal, aluminum ore, unhardened lead, and gold. It is the second largest country in the production of lead and industrial diamonds, and the third-largest country in the production of uranium and zinc. In addition, Australia is rich in mineral deposits of nickel, silver, and copper, earning considerable foreign exchange for Australia. Australia is also a leading global development and manufacturing country in the field of mining equipment, technology, and services. The industry is quite competitive in the complete supply chain stage, including exploration, engineering, mineral processing, environmental management, mining safety, research and development, and training.
- Coal: Australia is the world's third-largest coal-producing country. Among Australia's coal exports, metallurgical coal accounted for a relatively large proportion. In 2018, metallurgical coal accounted for 46.93% of coal exported, and steam coal accounted for 53.07%. In the thermal coal market, Australia faces more competitors, especially Indonesia. In the Asian thermal coal market, Australia is the second-largest exporter, second only to Indonesia.
- Liquefied natural gas: Australia has had rapid growth of LNG production in recent years. In 2015-16, new production capacity increased by 60%. In 2019, Australia's LNG exports totaled 77.5 million tons, an increase of 11% over 2018, making it the world's largest exporter of LNG, with export revenue of 33.5 billion U.S. dollars.
The output value of Australian agriculture accounts for about 3% of its GDP, and agricultural products account for 8-9% of total exports. Due to geographical location and other reasons, Australia has become the largest exporter of agricultural products and food to Asia. Australia has a diverse climate, different rainfall patterns, and soil types, so it can operate a variety of different agricultural enterprises. The agricultural land area accounts for about 60% of the total area of Australia, including tropical and temperate horticulture; inland and coastal aquaculture; production of cereals, rape, and fiber; grazing and raising livestock; forestry and production of wood products.
Australia exports 2/3 of its agricultural products each year, including wheat, oats, barley, sorghum, corn, and cotton. Over the past 20 years, the production and export of beef, wine, and dairy products have grown substantially in response to overseas market demand.
Australian Construction Industry:
The output value of the Australian construction industry accounts for about 8% of its GDP. Because Australia’s population is concentrated in the eastern coastal area with a better climate, and Australia contains a large number of immigrants, the demand for infrastructure construction in Australia and China has greatly increased, and the Australian government has increased funding for large-scale public construction projects. Vigorous development of the resource industry has caused extremely frequent activities in the private engineering and construction industries. In addition, the Reserve Bank of Australia hopes to revive non-resource-based investment to help cool the economic drag of the mining sector. When the industry develops well, it will promote the development of other industries in Australia. For the above reasons, it will increase the prosperity of the construction industry in Australia.
Australia's financial services industry:
The output value of the financial and insurance industry accounts for about 10% of its GDP, and the mature financial services industry is the industry that makes the greatest contribution to the Australian economy. The industry has more than 5.1 trillion U.S. dollars in assets, the fourth largest pension fund asset pool, the world's sixth-largest investment fund asset pool, and the third-largest stock market in Asia.
Because of its superior geographical location, Australia acts as the central hub of the financial and insurance industry in the Asia-Pacific region. The government-mandatory pension savings plan, coupled with skilled and multilingual human resources, advanced commercial public construction, and other advantages, is the foundation for the development of the financial service industry. The expansion of finance and insurance also drives the growth of related industries, such as communications, real estate, and business services.
Australia's international education industry:
The rapidly developing international education industry has leaped to the top of Australia's export service industry and has become Australia's third-largest export industry in recent years, creating $13.7 billion in revenue for Australia a year. Australian higher education institutions have become the world's third most popular study abroad destination due to factors such as high quality of teaching, safe campus environment, and wide recognition of academic qualifications.
Australia's tourism industry and related investments:
Tourism makes an important contribution to the Australian economy. Australia has always been one of the most attractive tourist destinations in the world. It has become the eighth largest tourism market in the world and one of the countries with the highest per capita consumption expenditure of tourists in the world. According to the 2017 Tourism Outlook Report issued by the Australian Trade and Investment Commission, Australia received 8.6 million foreign tourists from 2016 to 2017, and the consumption of foreign tourists in Australia was US$27.2 billion, of which Chinese tourists contributed nearly 6.8 billion US dollars. Australia’s tourism industry is also supported by the government, attracting many young overseas groups for work and holiday, and driving crowds to Australia.
Australia's Market Advantage:
Rapid population growth
Benefiting from a good social living environment, the steady growth of the number of immigrants each year is the main reason for the rapid population growth in Australia. In the past 10 years, compared with the average population growth of less than 1% in most developed countries, Australia’s population growth rate is as high as 1.5%. This growth rate has brought huge housing demand and consumption momentum to Australia, driving the overall economy to maintain steady growth. At present, construction of real estate accounts for 8.8% of Australia's GDP, while consumption accounts for 55%. Both have had a great impact on Australia's long-term economy.
The reason why Australia has such a high number of immigrants is mainly based on government policy encouragement. In fact, at the beginning of the twentieth century, the government did not open immigration in all aspects but promulgated the White Australia policy to restrict the immigration of non-white people into Australia. It was not until the 1970s that the White Australia policy was officially abolished in 1972, with the sound of reforms and more and more Asian students studying in Australia. At this time, Australia officially encouraged refugees and families to move in. In the 1980s, for the development of the industrial economy, the Australian government even launched a skilled labor immigration program. As long as you have a certain area of expertise or business operations, you will have permanent residency rights in Australia after passing the application. It has become the main source of the total number of immigrants in Australia.
With this influx of population, in addition to predicting that Australia’s population will continue to show growth in the future, compared to the United States, Japan, Canada, and other advanced countries, Australia’s elderly population (proportion over 65) is greater than the younger proportion of the population (proportion under 15). Australia’s healthy and young demographics and social structure, along with its reliance on consumption to support economic growth, are major reasons why its economy is so strong.
Abundant mineral resources
In addition to the continuous population growth, Australia has experienced five mining booms since the nineteenth century. Each mining boom has allowed Australia to develop many mineral resources and improve its mining technology development. Therefore, with its technology and abundance of resources, the production cost of Australian minerals is very low, so that in the future, even if the price of raw materials falls sharply, they can still profit from the advantage of low cost. Take the largest iron ore in Australia’s export commodities as an example. 2-3 of the world’s four largest iron ore giants are all large Australian mining companies.
Industry development direction
Based on the analysis of the current state of Australia’s industry, energy and mining are an important source of Australia’s economy, but over-reliance on mining exports has caused labor shortages and has the adverse effect of crowding out the development of other economic sectors. Australia is also overly dependent on the Chinese mainland market due to coal, iron, and other mineral exports. The economy is easily constrained by China’s economic prosperity. As China’s economic growth slowed from 2011 to 2012, which had an immediate impact on Australia’s economy and exports, Australia has realized this trend and has gradually adjusted its economy. The resource-led growth model has been transformed into a more diversified development-oriented growth model, such as employment growth brought about by the boom in the service industry.