A resilient economy that outperforms in global rankings

Australia’s economy has shown resilience to multiple shocks throughout the COVID-19 pandemic. Closed borders and targeted lockdowns contained the virus throughout most of 2020 and 2021. International trade remained strong in most sectors, partly thanks to high commodity prices. Australia’s international arrivals began to resume in November 2021 and the international border fully reopened in February 2022.

The Australian Government’s cautious approach has benefited the economy. Australia’s household consumption is expected to improve as restrictions ease. Meanwhile major tax incentives are projected to trigger the strongest boost in business investment since the mining boom. Australia’s growth rate is remaining strong at 4.2% in 2022, according to the International Monetary Fund (IMF).

Australian GDP is projected to be 6.7% larger by the end of 2022 than in pre-pandemic 2019. This increase over the pre-COVID-19 level in 2019 is higher than the average for advanced economies (3.7%).

Two other factors underpin our resilience: location and diversity. Fast-growing Asia is set to deliver 44% of global GDP by 2026. Australian trade is already oriented towards Asia’s economies – especially in minerals, energy, services and agriculture. Also, our diverse and highly productive economy is resilient against economic shocks, including the ongoing pandemic.

Businesswoman looking at a digital tablet on a meeting

The world’s 12th largest economy

Australia is set to become the world’s 12th largest economy in 2023, according to the IMF. Nominal GDP will be around A$2.5 trillion (US$1.8 trillion). Australia is home to just 0.3% of the world’s population, but accounts for 1.7% of the global economy.

19_australias_free_trade_agreements

Notes: 1. Rest of the world’s 196 economies: US$20,926 billion in 2023 or 19% of the global GDP. 2. Top 20 largest economies: US$89,826 billion or 81% of the world’s GDP in 2023.
Sources: International Monetary Fund, 2022, World Economic Outlook, April 2022; Austrade

Resilience in the face of adversity

Australia’s growth rate is expected to remain strong at 4.2% in 2022, according to the IMF. This follows a solid rebound of 4.7% in 2021. Australia’s rapid recovery compares well internationally. GDP is projected to be 6.7% larger by the end of 2022 than in pre-pandemic 2019. This increase over the pre-COVID-19 level in 2019 is higher than the average for advanced economies (3.7%). Tax incentives will encourage a forecast boom in business investment.

Expected-change-in-real-GDP-selected-economies

Notes: 1. Gross domestic product (GDP) is national currency and constant prices. 2. Latin America  and the Caribbean. 
Sources: International Monetary Fund (IMF), 2022, World Economic Outlook Update April 2022; 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. Federal and state governments provided around A$20 billion in direct economic assistance to businesses and households in the September quarter of 2021.4 This 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

A low-tax country by global standards

Australia has one of the lowest overall tax rates among OECD countries, measured as a percentage of GDP.¹ Australian social security taxes² represent less than 1% of GDP, whereas the OECD average is 9%. Taxes on goods and services represented 7% of Australia’s GDP, compared to 11% across OECD countries.

 

2022-tax-revenue-as-a-percentage-of-gross-domestic-product-by-country

Notes: 1. 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, excluding Costa Rica.

Sources: Organisation for Economic Co-operation and Development, 2022, Tax revenue, accessed 23 June 2022; 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.

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

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 16 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 in the Asia region. This is because Asia's middle class is growing strongly, and is expected to include 2.2 billion consumers 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 Institution, see source below.
F = Forecast
Sources: International Monetary Fund, 2022, World Economic Outlook April 2022; Brookings Institution, 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