A resilient economy that outperforms in global rankings

Australia continued to feel the impact of the COVID-19 pandemic in 2021. An outbreak of the Delta variant in June 2021 forced major cities and regional and rural areas into lockdown, particularly in the heavily populated south-east. The Australian Government again provided economic support for businesses and workers. States and territories stepped up their vaccination programs. Restrictions eased in October 2021 as vaccination rates increased.

Economic activity is expected to contract by around 3% in the September quarter, according to Australia’s Treasury. Although the September quarter was tough, some parts of the economy remained resilient during this challenging time. Resources, energy and agriculture exports kept growing.

According to the International Monetary Fund, Australia’s GDP growth rate is expected to rebound to 3.5% in 2021, after declining to 2.4% in 2020. The IMF also forecasts our GDP to grow to 4.1% in 2022 as the economy and international borders reopen.

In financial terms, Australia remains solid. The Australian public sector debt ratio will be 43% of GDP by the end of 2022. On current forecasts, this is well below the 89% average forecast for advanced economies.

Businesswoman looking at a digital tablet on a meeting

The world’s 13th largest economy

The Australian economy is set to become the world’s 13th largest economy in 2022, according to the International Monetary Fund. Australia’s nominal GDP will be around A$2.1 trillion (US$1.7 trillion). Australia is home to just 0.3% of the world’s population, but accounts for 1.6% of the global economy.

19_australias_free_trade_agreements

Notes: 1. Rest of the world’s 196 economies: US$19,674 billion in 2022 or 19.2% of the global GDP. 2. Top 20 largest economies: US$82,730 billion or 80.8% of the world’s GDP in 2022.
Sources: International Monetary Fund, 2021, World Economic Outlook, October 2021; Austrade

Resilience in the face of adversity

An outbreak of the Delta variant of COVID-19 in June 2021 forced a number of states and territories into lockdown. By October 2021, vaccination rates were up, restrictions had eased, and businesses had resumed trading. Australia’s GDP growth rate is expected to rebound to 3.5% in 2021 from a decline of 2.4% in 2020. Australian GDP is projected to be 1.1% larger by the end of 2021 than in pre-pandemic 2019. This increase is larger than the average GDP increases for advanced economies. The IMF has upgraded its forecast for Australia’s GDP growth rate to 4.1% in 2022. The improved outlook reaffirms the Australian economy’s underlying strength and resilience.

2_real-GDP-change-selected-economies

Notes: 1. Gross domestic product (GDP) is national currency and constant prices.  
Sources: International Monetary Fund (IMF), 2021, World Economic Outlook October 2021; Austrade

A balanced response to COVID-19

All countries have tried to minimise economic disruption while slowing the spread of COVID-19. Few countries achieved both. Australian states and territories closed internal borders in response to local outbreaks. To support our economy, the Australian Government provided an economic package worth 20% of GDP.¹ The Australian public generally adhered to stringent, fast-changing lockdown measures. By October 2021, Australia combined a low fatality rate² with a low impact on GDP, relative to most other countries. 

covid-19-fatality-rates-and-change-in-gross-domestic-product

Notes: 1. The figure estimated in Australia’s Final Budget Outcome 2020-21 (released in September 2021) is about 15%. 2. Fatality rates as at 20 October 2021.
Sources: WorldoMeter, 2021, COVID-19 Coronavirus Pandemic, accessed 20 October 2021; International Monetary Fund, 2021, World Economic Outlook October 2021; Austrade

High levels of COVID-19 support

After Australia closed its borders, the Australian Government created an economic stimulus package worth 20% of GDP.3 In global terms, this placed Australia between the US and the EU. During the most recent lockdowns, the federal and state governments were estimated to provide around A$20 billion in direct economic assistance to businesses and households in the September quarter of 2021.4 It kept Australians employed and companies in business.

 
Fiscal-measures-in-response-to-covid19-min

Notes: 1. Includes Health and non-health sectors. 2. Liquidity support is defined as “Below-the-line” measures plus Contingent liabilities. “Below-the-line” measures involve the creation of assets or liabilities without affecting today’s fiscal balance, like an equity injection in a firm. Contingent liabilities are not explicitly recorded on government balance sheets and arise only in the event of a particular discrete situation, such as a crisis. For example, in the case of Australia, the Coronavirus SME Guarantee Scheme. 3. The figure estimated in Australia’s Final Budget Outcome 2020–21 is about 15%. 4. The Treasury, Opening statement to the Economics Legislation Committee, accessed 27 October 2021.

Sources: International Monetary Fund, 2021, Fiscal Monitor, October 2021; Austrade

Low government debt by global standards

The COVID-19 pandemic has triggered a rapid increase in public debt in almost all economies. Australia entered 2020 with very low public debt (less than 30% of GDP) and Australia’s debt burden will remain low by global standards. In its October 2021 ‘Fiscal Monitor’ report, the International Monetary Fund estimated that the Australian Government’s net debt would be 43% of GDP in 2022. This is well below the 89% average forecast for advanced economies and 102% average forecast for G7 economies.

Austrade-BM-general-government-net-debt

Notes: 1. For cross-economy comparability, net debt levels reported by national statistical agencies for economies that have adopted the 2008 System of National Accounts (Australia, Canada, US) are adjusted to exclude unfunded pension liabilities of government employees’ defined-benefit pension plans. 2. Belgium’s net debt series has been revised to ensure consistency between liabilities and assets. Net debt is defined as gross debt (Maastricht definition) minus assets in the form of currency and deposits, loans, and debt securities. 3. “Net debt” for Ireland is defined as gross general debt minus debt instrument assets, namely, currency and deposits, debt securities, and loans. It was previously defined as general government debt less currency and deposits. 4. ppt = percentage point. 5. Totals may not always add up exactly due to rounding.
Sources: International Monetary Fund, 2021, Fiscal Monitor, October 2021; Austrade

Proximity to Asia’s powerhouse economies

Asia’s share of global GDP has increased steadily from 20% in 1981 and is projected to reach almost 45% in 2026. Australian trade stands to benefit. Most of Australia’s principal export partners are located in Northeast Asia and Southeast Asia. A network of 15 free trade agreements gives Australian companies preferential access to these fast-growing markets. Australia is well positioned to grow its resources, energy, agriculture, and education and tourism services exports to Asia’s rising 2.2 billion middle-class consumers expected by 2032.4

Austrade-BM-asian-economic-growth

Notes: 1. The bar represents the value of the regional gross domestic product at current prices based on purchasing power parity. 2. To avoid double counting with newly industrialised economies (NIEs) and ASEAN, Singapore was excluded. 3. NIEs: Singapore, Hong Kong SAR, Korea and Taiwan. 4. Brookings, see source below.
F = Forecast
Sources: International Monetary Fund, 2021, World Economic Outlook October 2021; Brookings, Which will be the top 30 consumer markets of this decade? 5 Asian markets below the radar, Table 1, August 2021; Austrade

A diversified, services-based economy

Australia’s resilience is underpinned by a diverse mix of competitive industries. In 2020-21 (financial year ending June), the country’s services and goods industries accounted for about 81% and 19% of real gross value added (GVA) respectively. Australia’s mining sector generated 10.6% of GVA, followed by financial services (9.3%), ownership of dwellings (8.9%) and healthcare and social assistance (8.2%). Technology-driven sectors – including professional, scientific and technical services, education and IT – are worth 15% of total economic production.

Australias-real-gross-value-added-by-industry

Notes: 1. Goods comprise agriculture, forestry and fishing, manufacturing and mining. 2. Ownership of dwellings is not classified as a good or service. 3. GVA is around 95% of total GDP in 2020-21. To obtain the GDP, we would need to add taxes, the statistical discrepancy less subsidies to the GVA.
Sources: Australian Bureau of Statistics, 2021, Australian National Accounts: National Income, Expenditure and Product, Table 37. Industry Gross Value Added, Chain volume measures, Annual; Austrade

Service industries power ahead

The Australian services sector grew by 3.3% per year in the three decades to June 2021, outpacing growth in the goods sector. The information, media and telecommunications sector grew fastest, at a compound annual growth rate of 5.0% over the last 30 years, followed by professional, scientific and technical services (4.8%), and healthcare and social assistance (4.5%).

Growth-by-industry-in-australias-real-gross-value-added

Notes: 1. Goods comprise agriculture, forestry and fishing, manufacturing and mining. 2. Ownership of dwellings is not classified as a good or service.
Sources: Australian Bureau of Statistics, 2021, Australian National Accounts: National Income, Expenditure and Product, Table 37. Industry Gross Value Added, Chain volume measures, Annual; Austrade