A growing economy that outperforms in global rankings

While many major economies are at risk of recession in 2023, the IMF has forecast that the Australian economy will continue to grow.

Our positive outlook is built on strong recent performance. During 2021, Australia outperformed peer economies, growing by 5.2%. This solidified our position as the world’s 12th largest economy in 2021.

Australia continued to outperform other advanced economies during 2022, with a growth rate of 3.7%. This compares to an estimated of 2.7% for advanced economies. Our success will likely continue. The IMF forecasts that Australia’s economy will grow by 1.6% in 2023, compared to an average of 1.3% for advanced economies.  

Our economic strength is based on sound fundamentals. Australia’s legal and governance systems are transparent and trustworthy. We are a global leader in the protection of property rights, including intellectual property rights. Our low tax and adaptive regulatory environment make us a business-friendly nation.

For a small population, Australia is a rich consumer market. We have the highest median wealth in the world. We also have the sixth largest number of high-income households. Our US$7.3 trillion financial sector includes the world’s fifth largest pool of pension assets.

Why Australia? Thanks to our strong economy, talented workforce, renewable energy resources, and open trade and investment, Australia is well placed to lead and innovate in the Asia-Pacific region.

Businesswoman looking at a digital tablet on a meeting

The world’s 12th largest economy

Strong growth in 2021 solidified Australia’s position as the world’s 12th largest economy in 2021. Nominal GDP was around A$2.2 trillion (US$1.6 trillion) in 2021. Australia is home to just 0.3% of the world’s population, but accounts for 1.7% of the global economy.

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Notes: 1. Across 196 economies. 2. The GDP for the top 20 largest economies was US$78,346 billion or 81% of the world’s GDP in 2021. 3.The GDP for the rest of the world was US$18,731 billion in 2021 or 19% of global GDP.
Sources: International Monetary Fund, 2022, World Economic Outlook, October 2022 database; Reserve Bank of Australia, 2023, Foreign exchange rates; Austrade

Australia's strong relative growth

Australia’s outlook remains strong. The IMF forecasts the Australian economy will grow by 1.6% in 2023. This means Australia will again outperform other advanced economies, which are expected to grow by an average of just 1.3%. This follows Australia’s solid 5.2% growth in 2021 and an estimated growth of 3.7% in 2022. As an exporting nation, our outlook partly reflects the prosperity of our major trading partners. India, China and the ASEAN-52 economies all expect to register solid economic growth in 2023.

change-in-real-gdp-selected-economies_mobile-817 

Notes: 1. Gross domestic product (GDP) is national currency and constant prices. 2. Association of Southeast Asian Nations. The forecast includes Indonesia, Malaysia, Philippines, Singapore and Thailand. Singapore is classified as an advanced economy. 3. Latin America  and the Caribbean. 
Sources: International Monetary Fund (IMF), 2023, World Economic Outlook April 2023 database; Austrade

A nation of high-income households

Australia is a large consumer market and Australian households have a high disposable income. According to the Economist Intelligence Unit (EIU), almost 6 million households generate an income above US$75,000 per year. This places Australia sixth in global rankings. The EIU forecasts continued growth, with 7.6 million high-income households by 2030.

Household-disposable-income

Notes: 1. The number in brackets indicates the economy’s ranking in 2022 across 59 economies. 2. Association of Southeast Asian Nations. The forecast includes Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

Sources: Economist Intelligence Unit, 2022, Number of households with disposable income of more than US$75,000 per annum, accessed 1 December 2022; Austrade.

Australia is a low-tax country

Australia has one of the lowest overall tax rates of any high-income country in the world.1 Our tax revenue represents 29% of our GDP, compared to 34% across OECD countries. Australian social security taxes2 represent less than 1% of GDP. The average among the 38-strong OECD countries is 9%. Taxes on goods and services represented 7% of Australia’s GDP, compared to 11% across OECD countries.

 

tax-revenue-as-a-percentage-of-gross-domestic-product-by-country

Notes: 1. Measured as a percentage of GDP. Tax systems across countries vary significantly and this makes it often difficult to make direct comparisons on a like-for-like basis. A simple measure used by the OECD, and others, is to consider the total ‘tax take’ of an economy. The tax take (or tax burden) is the ratio of total tax revenues to GDP, at market prices. This ratio is a broad measure of a country’s taxation impost which cuts across the various bases, rates, thresholds and purposes, which distinguishes one system from another. 2. Social security contributions/taxes as “compulsory payments paid to general government that confer entitlement to receive a (contingent) future social benefit”. For example, unemployment insurance or family allowances. Social security contributions are often levied on employers and not only employees. 3. The number in brackets indicates the country’s ranking across OECD members.

Sources: Organisation for Economic Co-operation and Development, 2023, Tax revenue, accessed 6 January 2023; Austrade

Sophisticated financial markets and a large managed funds sector

The Australian dollar is the sixth most traded currency globally. Today, Australia is home to the world’s fifth largest pool of managed funds and 11th largest stock market. Australia’s US$2.2 trillion managed funds sector is underpinned by a mandated retirement savings scheme, called superannuation. This has created the world’s fifth largest pension pool. 

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global-significance-of-australias-financial-markets

Notes: 2. For international comparison, the Investment Company Institute excludes funds of funds. 4. Asia region defined as economies located in Asia and Oceania.

Sources: 1. Reserve Bank of Australia (RBA), 2023, Assets of financial institutions; Australian Bureau of Statistics (ABS), 2023, Managed funds; Australian Prudential Regulation Authority, 2023, Quarterly general insurance performance statistics; ABS, 2023, Assets and Liabilities of Australian Securitises; ABS, 2023, Australian national accounts: national income, expenditure and product; RBA, 2023, Foreign exchange rates, accessed via Macrobond in January 2023. 3. Investment Company Institute, 2023, Worldwide market data. 5. World Federation of Exchanges, 2023, Equity statistics; Saudi Stock Exchange, 2023, Exchange market statistics; London Stock Exchange, 2023, LSE market cap by sector; Center for Research in Security Prices, 2023, CRSP indices; Euronext, 2023, Euronext indices; Indonesia Stock Exchange, 2023, Jakarta stock exchange indices; Hong Kong Exchanges & Clearing Limited, 2023, HKEX market cap by sector; accessed via Macrobond on 10 January 2023. 6. Thinking Ahead Institute, 2022, Global pension assets study. 7. Bank for International Settlements, 2022, Triennial central bank survey of foreign exchange and OTC derivatives markets in 2022. 8. Bank for International Settlements, 2022, Debt securities statistics; Austrade.

Good governance, strong institutions and the rule of law

Australia’s success is built on strong institutions. Our legal system is highly rated. Corruption is low. Our public service is agile, with the ability to formulate and implement sound policies. We are a global leader in the protection of property rights, including intellectual property (IP) rights. Australia’s good governance gives investors confidence. We provide a secure base for multinationals that want to expand or set up new operations in the Asia-Pacific region.

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global-rankings-of-australias-governance-mobile

Sources: 1. Economic Intelligence Unit, 2022, Viewpoint database. 2. Fund for Peace, 2022, Fragile States Index. 3. The World Bank, 2022, The worldwide governance indicators. 4. Austrade.

Transparent regulation, open markets and efficient businesses

Australia’s pro-business environment attracts foreign investment and encourages new enterprise. According to the Institute for Management Development (IMD), Australia ranks highly in terms of competition legislation, number of days to start a business, judicial effectiveness and access to credit. Australia has been a leader in the Heritage Foundation Economic Freedom Index since its inception in 1995. Globally, we rank first for financial freedom and second for trade freedom. This reflects our strong banking system and commitment to open trade.

Business efficiency and environment, 2022

  Australia China India Japan Korea Norway Singapore UK US
The Heritage Foundation, 2022 Index of Economic Freedom in:                
Financial freedom1 1   160 106 37 37 37 3 3 3
Trade freedom2 2 84 93 68 86 8 1 10 70
IMD World Competitiveness Yearbook 2022 Ranking in:                
Country credit rating 1 26 51 28 17 1 1  20  11
Environmental agreements3 1 33 50 11 55 10 35  1 60
Investment in telecommunications4 4 34 1 32 15 33 55 50 14
Financial card transactions5 5 17 61 30 14 15 18  12 4
Number of days to start a business 5 31 51 37 26 9 2  15 9
Judicial effectiveness 6 30 29 14 42 7 7  22  26
Stock markets6 6 38 14 24 36 7 9  25 12
Competition legislation 7 31 22 8 34 14 4  24  27
Central Bank Policy 9 27 13 50 28 10 3 48 32
EIU Business environment rankings 2022 in:                
Private enterprise 6 47 41 20 22 11 9 8 1
Market opportunities 9 3 17 29 17 22 41  16  4
Overall business environment rating 10 42 46 21 23 10 1  18  2

 

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Notes: 1. Financial freedom is an indicator of banking efficiency as well as a measure of independence from government control and interference in the financial sector. 2. Trade freedom is a measure of the extent of tariff and non-tariff barriers that affect imports and exports of goods and services. 3. Number of international multilateral environmental agreements that have been met. 4. As a percentage of GDP. 5. Financial card transactions US dollars per capita. 6. Stock markets provide adequate financing to companies. 

Sources: The Heritage Foundation, 2022, Index of Economic Freedom; Institute for Management Development, 2022, World Competitiveness Yearbook 2022; Economist Intelligence Unit, 2023, EIU overall business environment rating; Austrade.

Australia’s lifestyle cities are global drawcards

Fresh talent keeps arriving. Australia’s vibrant cities offer a laid-back, outdoor lifestyle and the opportunity to expand horizons. Additionally, our cities are secure, pristine and well-managed. This attracts families. Our high quality of life is a key drawcard. Australia’s state capitals have a competitive cost of living compared to most major cities in the Asia region, according to Mercer’s 2022 Cost of Living Index. The index is used by companies to measure the cost of relocating employees globally.

cost-of-living-city-rankings-in-asia-and-rest-of-world-mobile

Notes: 1. The Mercer Cost of Living Index measures the cost of sending an employee overseas. The index covers more than 200 goods and services, in addition to currency fluctuations, cost inflation and accommodation instability. If a country lacks infrastructure or public services, the index reflects the costs of additional compensation a company may need to provide to their employees. This includes the cost of providing security. Australian cities are cost-effective for expatriates owing to high-quality infrastructure and public services. 2. A higher ranking means a lower cost of living. For example, Hong Kong has the highest cost of living across the 225 cities.

Sources: Mercer, 2022, Cost of living index; Austrade.