Australia’s trade and investment linked to Asia’s powerhouse economies
Australia’s economic growth will remain solid over the next five years,
according to the latest International Monetary Fund’s (IMF)
World Economic Outlook. The strength of Australia’s economy reflects the country’s unique
position in the world’s fastest-growing economic region – Asia.
During the past 20 years, the size of the Chinese and Indian economies has
grown by a factor of seven as measured by GDP, adjusted for purchasing
power parity (PPP). As a result, these two countries’ share of the global
economy has grown two and half-fold, to 26%.
Over the same period, ASEAN–10 (Association of Southeast Asian Nations)
countries have also raised their share of the world economy. Having
quadrupled their nominal output value over two decades, ASEAN countries now
account for 6.3% of the world economy.
Over the next five years, the IMF expects the Asia-Pacific region to
continue to grow quickly, rising by around 7% per year. This means the
region will shortly account for over 45% of the world’s economic output.
Australia’s stellar economic performance
According to the
National Accounts for the December quarter 2018
released by the Australian Bureau of Statistics, Australia’s economy has
officially recorded 27 years of uninterrupted annual growth. The figures
demonstrate the resilience of the Australian economy and the strength of
our nation’s economic management.
This is an achievement unequalled by any other developed economy.
Australia’s average real GDP growth rate since 1992 is around 3.2% per
year, and the economic
are in place for this trend to continue.
According to the latest World Economic Outlook report, the IMF
forecasts Australia’s real GDP will grow by an average rate of 2.7% per
year between 2019 and 2023, up from an average growth rate of 2.6% between
2014 and 2018. This is the highest projected rate among major advanced
Trade is partly responsible. Australia has 11
free trade agreements
(FTAs) with individual countries and groups of countries. A number of other
agreements are currently under negotiation. The countries covered by these
FTAs account for almost 70% of Australia’s total trade.
With several FTAs under negotiation, the expanding network of agreements
will provide a wider range of trade and investment opportunities. They will
also enhance Australia’s ability to capitalise on regional growth.
Investment frameworks established by these agreements support a more
attractive investment environment and help drive further economic
integration in Asia.
The importance of being near Asia
In recent years, strong Asian demand for Australia’s natural resources and
agricultural products has been the main driver of Australia’s growth.
Meanwhile, increased Asian demand for Australia’s education, tourism and
other professional services has boosted Australia’s economy.
Australian businesses, exporters and communities have expanded their
footprint across the Asian region to capitalise on the demand for
Australian goods and services. In 2017–18, trade with Asia represented
about two-thirds (A$526 billion) of
Australia’s two-way trade in goods and services
(A$799 billion). Twelve economies out of Australia’s top 15 trading
partners are now in the region.
Meanwhile, Japan, China, Singapore and Hong Kong have emerged as
significant sources of foreign direct investment (FDI) into Australia.
These economies’ stock of FDI in Australia has grown (CAGR) by 11% per year
between 2011 and 2017, to A$186 billion. This compares with an FDI stock
value of A$190 billion for investment from the United States, which has
grown by 8.6% per year over the same period.
China, India and Southeast Asia
Sustained economic growth in China and India will be the twin pillars of
Asia’s contribution to world output growth. The IMF estimates the total
output of China and India grew by a CAGR of 10.5% between 1998 and 2018.
The combined GDP of these two Asian powerhouses will continue to grow by
8.5% per year to 2023 and reach US$54 trillion (adjusted for PPP
valuation). The total value of their combined estimated output in 2023
represents over 30% of the predicted world total, according to the IMF.
Southeast Asia is also growing strongly. The combined output of Indonesia,
Thailand, Malaysia and other Southeast Asian nations (except Singapore) is
expected to rise solidly with a CAGR of more than 7% to 2023. As a result,
these countries will make a strong contribution to regional growth.
With a population of over 600 million and a combined GDP of about US$8
trillion (adjusted for PPP valuation), ASEAN economies have initiated a new
to transform the bloc into a more competitive and resilient economic
region, and finally integrate itself into the global economy by 2025.
Additionally, newly industrialised economies (NIEs) in Asia – South Korea,
Taiwan, Hong Kong and Singapore – will likely expand at a CAGR of 4.5% to
2023. The combined share of ASEAN and NIEs’ production will represent about
9.6% of total world output.
For further economic commentary and analysis of the major trends and events
that shape Australia’s trade and investment performance, visit
Economics at Austrade.
Note that Australia’s real gross domestic product (GDP) grew by 0.2% in the December
quarter 2018, following a 0.3% rise in the September quarter. The
Australian economy grew 2.3% through the year (the December quarter 2017
compared with the December quarter 2018). Following an expansion of 2.4% in
2017, Australia’s real GDP grew by 2.8% in 2018.
IMF, Executive Board Concludes 2018 Article IV Consultation with Australia
(released 21 February 2019)