A resilient economy that outperforms in global rankings

Australia faced several challenges at the start of 2020. A major drought was followed by bushfires. The COVID-19 pandemic then shut international borders and dislocated trade.

The Australian economy put in an exceptional performance in 2020, despite these challenges. Australia’s resources, energy and agriculture exports kept growing. The Australian Government provided an economic stimulus package worth 15.7% of GDP to support businesses and the livelihoods of Australian workers.

An effective public health response and adherence to stringent lockdown measures minimised the transmission of the virus in the community.

The result was that Australia was less hard hit economically than other countries. Our GDP was 2.4% lower in 2020 than in 2019. This decline was far smaller than the average rate of -4.7% across advanced economies.

In financial terms, Australia remains rock-solid. The Australian public sector debt ratio will be 54% of GDP by the end of 2022. On current forecasts, this is well below the 94% average forecast for advanced economies.

Businesswoman looking at a digital tablet on a meeting

The world’s 12th largest economy

The Australian economy is set to become the world’s 12th largest economy in 2021, up two places from 2019, according to the International Monetary Fund. Australia’s GDP will be around A$2 trillion (US$1.6 trillion). 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. Rest of the world’s 195 economies: US$17,870 billion in 2021 or 19% of the global GDP. 2. Top 20 largest economies: US$75,994 billion or 81% of the world’s GDP in 2021.
Sources: International Monetary Fund, 2021, World Economic Outlook Database, April 2021; Austrade

Resilience in the face of adversity

The start of 2020 brought huge challenges for Australia. The country was just recovering from devastating bushfires when the COVID-19 outbreak began. The Government acted quickly to close borders and contain the pandemic. The Australian health system coped with infections and the government supported businesses and the livelihoods of Australian workers. The result was that Australia was less hard hit economically than other countries. Australian GDP was 2.4% lower in 2020 than in 2019. This decline was far smaller than the average rate of –4.7% across advanced economies.

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Notes: 1. Gross domestic product constant prices. Argentina, Finland, Malaysia, Netherlands, Norway, Saudi Arabia, Singapore, Sweden, Switzerland, United Arab Emirates (UAE), and Vietnam are estimated by the IMF.
Sources: International Monetary Fund (IMF), 2021, World Economic Outlook April 2021; Austrade

A balanced response to COVID-19

In 2020, all countries tried to minimise economic disruption while slowing the spread of COVID-19. Few countries achieved both. Australia’s geographical isolation helped us prevent uncontrolled transmission, while the states and territories closed internal borders in response to local outbreaks. To support our economy, the government provided an economic package worth 18% of GDP1. The Australian public generally adhered to stringent, fast-changing lockdown measures. Bloomberg rated Australia as the third best country in the world in its COVID Resilience Ranking. By April 2021, Australia combined a low fatality rate with a low impact on GDP, relative to most other countries.

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Notes: 1. The figure estimated in Australia’s 2021–22 Budget is 15.7%. 2. Fatality rates as at 30 April 2021.
Sources: WorldoMeter, 2021, COVID-19 Coronavirus Pandemic, accessed 30 April 2021; International Monetary Fund, 2021, World Economic Outlook April 2021; Austrade

High levels of COVID-19 support

After Australia closed its borders, the Australian Government created an economic stimulus package worth 18% of GDP3. In global terms, this placed Australia between the US and the EU. Support was provided to workers, businesses and the broader community. It kept Australians employed and companies in business.

 
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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 2021–22 Budget is 15.7%.
Sources: International Monetary Fund, 2021, Fiscal Monitor April 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 and Australia’s debt burden will remain low by global standards. In its April 2021 ‘Fiscal Monitor’ report, the International Monetary Fund estimated that the Australian Government’s net debt would be 54% of GDP in 2022. This is well below the 94% average forecast for advanced economies.

 
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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, April 2021; Austrade

Proximity to Asia’s powerhouse economies

Asia’s share of global GDP has increased steadily from 20% in 1981 and will 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, and 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 2.4 billion middle-class consumers expected by 2030.4

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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. World Economic Forum, see source below.
F = Forecast
Sources: International Monetary Fund, 2021, World Economic Outlook April 2021; World Economic Forum, 2019, Asia will have the world's largest GDP; Austrade

A diversified, services-based economy

Australia’s resilience is underpinned by a diverse mix of competitive industries. In 2020, the country’s services and goods industries accounted for 81% and 19% of real gross value added (GVA) respectively. Australia’s mining sector generated 11.0% of GVA, followed by financial services (9.4%), ownership of dwellings (9.1%) and healthcare and social assistance (8.0%). Technology-driven sectors – including professional, scientific and technical services, education and IT – are worth over 15% of total economic production.

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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. 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 6; Austrade

Service industries power ahead

The Australian services sector grew by 3.2% per year in the three decades to December 2020, outpacing growth in the goods sector. The information, media and telecommunications sector grew fastest, at a compound annual growth rate of 5.1% over the last 30 years, followed by professional, scientific and technical services (4.7%), and healthcare and social assistance (4.4%).

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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 6; Austrade