06 Dec 2021
We’ve just published our December 2021 update to the Benchmark Report. This quarterly update tracks the Australian economy’s performance against our global peers and trade partners – and it’s full of fascinating insights.
Globally, the pandemic still dominates. But Australia is set to bounce back relatively quickly. We still have a low level of public debt compared to most countries. This means our Government can afford a high level of support. And this gives investors confidence.
Our exports of resources and energy have hit new highs, and we remain a top agri-exporter to fast-growing markets in Asia. We also detect a recent surge in solar power and renewables. So, please take the opportunity to update yourself on Australia’s comparative economic performance. It’s a good story – and I think we can be confident for 2022.
1. The world’s 13th largest economy
Australia is set to become the world’s 13th largest economy in 2022, according to the International Monetary Fund (IMF). Australia’s GDP will be around A$2.1 trillion (US$1.7 trillion) next year. We are home to just 0.3% of the world’s population, but we now account for 1.6% of the global economy.
2. Resilience in the face of adversity
The Australian economy is still recovering from June’s Delta outbreak. However, an ultra-fast take-up of vaccines has seen restrictions eased, so we think the economy will bounce back quickly. The 2.4% decline in GDP in 2020 will be countered by a 3.5% increase in 2021. So, by the end of 2021, our GDP will be 1.1% higher than it was pre-pandemic. This means we will have outpaced the average 0.4% increase (on pre-pandemic GDP) that advanced economies will have posted by the end of 2021. The IMF believes our economy will grow by a brisk 4.1% in 2022.
3. A balanced response to COVID-19
So far, the pandemic has inflicted a relatively minor toll on Australia’s population. The Australian public generally adhered to stringent, fast-changing lockdown measures. By October 2021, Australia combined a low fatality rate with a low impact on GDP – relative to most other countries.
4. High levels of COVID-19 support
After Australia closed its borders, the Australian Government created an economic stimulus package worth 20% of GDP, according to IMF estimates. Our Government puts the number slightly lower in its ‘Final Budget Outcome’, at 15% for 2020–21.
In terms of generosity – or the level of state support – this places 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.
5. Australia has low government debt by global standards
Australia’s public sector debt remains small despite pandemic-related support measures. In its October 2021 ‘Fiscal Monitor’ report, the IMF estimated the Australian Government’s net debt would be 43% of GDP in 2022. This is well below the 89% average forecast for advanced economies.
6. Proximity to Asia to benefit Australian trade
Australia’s economy benefits from strong trade ties with Asia. Most of our major export partners are in the Asian region. We have 15 bilateral and multilateral free trade agreements with markets in Asia and Oceania. Asia’s share of global GDP is projected to reach almost 45% in 2026, which means Australia is well placed to reap the benefits.
7. A diversified, services-based economy
Australia’s resilience is underpinned by a diverse mix of competitive industries. In 2020–21, our services and goods industries accounted for about 81% and 19% of real gross value added (GVA) respectively. The per-sector contributions to GVA were:
- mining: 10.6%
- financial services: 9.3%
- ownership of dwellings: 8.9%
- healthcare and social assistance: 8.2%.
Technology-driven sectors – including professional, scientific and technical services, education and IT – are worth 15% of total economic output.
8. Service industries power ahead
The Australian services sector grew by 3.3% per year in the three decades to June 2021. This means growth in the services sector continues to outpace growth in the goods sector. The information, media and telecommunications sector grew fastest, at a compound annual growth rate (CAGR) of 5.0% over the last 30 years. Professional, scientific and technical services grew by a CAGR of 4.8%, and healthcare and social assistance by a CAGR of 4.5%.
9. Exports of resources and energy hit new highs
Asia is a major buyer of Australia’s resources and energy products. Following a moderate growth rate of 3.3% in 2019–20, exports of these two commodities increased by 6.5% to around A$310 billion in the year to June 2021. Australia’s resources and energy exports are projected to hit a new record of A$349 billion in 2021–22. This is an impressive result amid global economic uncertainties. It’s powering the recent surpluses in our balance of trade.
10. Australia’s surge in solar and wind renewables
Renewable energy delivered around one-quarter of total electricity generation in 2020. I have researched data from an official US agency – the Energy Information Administration – and it seems that Australia’s performance is comparable to other major economies: the US (on 21%), France (24%), Japan (26%) and China (29%). Growth in renewables is rapid. In Australia, output has risen by approximately 9% per year since 2010. As a result, it has tripled its share of power generation over the same period. In 2019–20, wind power produced approximately 8% of Australian power, solar another 8%, and hydro 6%.
11. A top agri-exporter to Asian markets
Food and fibre exports reached A$49 billion in 2020–21. Of Australia’s 15 top food markets, 11 are in the Asia region. These 11 countries account for two-thirds of the nation’s agrifoods exports. Australian produce commands premium prices because of our reputation for high standards in agriculture and food production. Meanwhile, Australia’s network of regional free trade agreements gives our growers preferential access to Asian markets.
12. A clean, green source of food and natural fibres
High-value, branded, premium Australian produce is selling well in global markets. Beef is our biggest export earner, generating A$8.4 billion of overseas earnings in 2020–21. Australia is also a major exporter of wheat, wool, wine, lamb, barley, canola, sugar, fruit, live cattle, mutton, tree nuts, cheese, raw cotton and chickpeas. Together, these top 15 products contributed almost 70% to the total value of Australia’s A$53 billion of agricultural exports in 2020–21.
Access the Benchmark Report 2021 to see detailed charts and analysis, and to download the Report.