Australia has a housing bubble in 2015

Australia's economy pit stops in the growth race

The global Covid-19 pandemic did not stop at Australia's economy. The economy recorded a decline for the first time in 2020 - and that in a country that weathered the global financial crisis from 2007 to 2008 well.

Australia economy overview

Australia's economy has grown steadily over the past 26 years. However, due to the impact of the global Covid-19 pandemic, the 13th largest economy in the world in terms of nominal GDP recorded its first decline in 2020, from 2.2% in 2019 to -4.2% in the year 2020.

Nevertheless, in its latest global economic outlook from January 2021, the IMF predicts GDP growth of 3.5% in 2021 and 2.9% in 2022 for Australia. At the same time, GDP per capita is expected to reach USD 52,000 per year Will increase to $ 62,000 in 2021 and $ 65,000 in 2022 in 2020.

The country is the 25th largest exporter in the world and the 20th largest importer of goods. Australia's economy is driven by corporate and government spending, as well as its strong financial sector and large exports of agricultural products.

The population of Australia is about 25.7 million. 89% of the population live in many urban areas. Over 7.5 million migrants live in the country, and more than a third of the annual population growth is due to net migration from abroad.

Before the pandemic began, the unemployment rate was 5.2%, but rose to 6.9% in 2020. The IMF expects the Australian unemployment rate to rise to 7.7% in 2021 before falling to 6.7% in 2022. An aging population and the effects of climate change are some of the other challenges facing the Australian economy.

Currency and central bank

The Australian dollar or AUD for short is the official currency of Australia and its suburbs, namely Christmas Island, the Cocos Islands and the Norfolk Island. The dollar sign ($) is used within the country, but an A or AU is added to distinguish it from other dollar currencies.

The AUD is the fifth most traded currency in the world, behind the US dollar, the euro, the Japanese yen and the British 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 acted as the central bank.

The central bank is currently holding the base rate at an all-time low of 0.10%. The lender left the target for three-year government bond yields at about the same value. The inflation rate was 0.9% in 2020. The IMF expects an increase to 1.7% in 2021 and 1.6% in 2022.

Industry and Commerce

Australia's economy is dominated by the service sector, which contributes 66.1% of GDP and employs 77.7% of the workforce. The most significant growth in the industry was in business and financial services in Australia. This makes Australia the sixth largest pool of fund assets under management in the world.

Health care, social assistance and travel services are other high-growth sectors of the Australian economy.

Australia has traditionally been an importer of manufactured goods. Although the country is relatively small, its industrial sector is characterized by high productivity. About 75% of the existing industries in the country have a productivity above the world average.

The sector accounts for 25.2% of GDP and employs 19.8% of the workforce. Food, machinery and equipment, metalworking and hardware, chemicals and petrochemicals and the production of building materials are among the leading industrial sectors in Australia.

The Australian agricultural sector only accounts for 2.1% of GDP and provides employment for 2.5% of the workforce.

The main export sectors of Australia are agriculture and mining. Iron exports account for 24% of the country's total annual exports. In addition, Australia is also one of the world's leading exporters of wool, meat, wheat and cotton.

China, Japan, South Korea, Great Britain and the USA are Australia's main trading partners, while the main suppliers are China, USA, Japan, Thailand and Germany. Overall, China is Australia's largest trading partner in terms of exports and imports.

Studies and rankings

Australia's economy rose one place from four in 2020 to three in 2021 on the Heritage Foundation's Economic Freedom Index, but the overall score fell 0.2 points from 82.6 to 82.4. The country has been in the Free category for the past 15 years.

In the World Bank's “Ease of Doing Business 2020” index, the country rose four places from 18th to 14th. Australia increased its overall score from 80.7 to 81.2 and is now 9th among the countries in the OECD region high income.

Stock exchanges and capital markets

The main stock exchange in Australia is the Australian Securities Exchange, or ASX, which is one of the ten largest stock exchange groups in the world in terms of market capitalization. The ASX was formed after the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006.

It offers a variety of asset classes and services including stocks, debt, derivatives and commodities.

The S & P / ASX 200 index, managed by Standard & Poor’s, weighted by market capitalization and weighted by circulation, is the benchmark for the ASX. The largest companies that make up the index include healthcare company CSL Ltd., Commonwealth Bank of Australia, and BHP Group Ltd, a world leader in natural resources.

Bond market

The Reserve Bank of Australia (RBA) extended its overnight rate target of 0.10% to the yield on three-year Australian government bonds. This was aimed at reducing the cost of finance for the Australian economy. This was previously set at 0.25% in March 2020.

In addition, the Central Bank of Australia announced a bond purchase program to purchase additional US $ 100 billion worth of Australian government, state and territorial bonds. It will mainly focus on 5 year and 10 year bonds. The previous US $ 100 billion purchase program expires in April this year.

Real estate market

A major problem in the Australian real estate market is affordability. House prices, which were four times the average household income in 1990, increased six times by 2011. This was due to the high level of immigration and the tendency of new immigrants to stay in the capital cities.

In addition, the government's decision to relax the rules on foreign investment in real estate in 2008 added to the affordability issue. In Australia, foreigners are allowed to buy residential property provided the Foreign Investment Review Board (FIRB) approves it.

News, backgrounds and analyzes. The business editor for Asia Investments.