Australia has long been seen by the rest of the world as a wealthy underpopulated country that is prone to natural disasters. The economy in Australia is a highly developed mixed economy, which blends elements of a market economy with a planned economy and private enterprises with public enterprises. As of 2021, Australia is the 12th biggest national economy by nominal gross domestic product (GDP).
Up until World War II, the country’s economy relied heavily on foreign investment and agriculture. This changed quickly after the second world war due to the exponential growth in manufacturing developments and mineral exploitation that soon followed.
The country has seen much growth since then and even took the record for the longest streak of uninterrupted GDP growth in March 2017. That marked the year as the 26th year since Australia had faced a recession (two consecutive quarters of negative growth). The country’s GDP as of June 2021, was roughly calculated to be at a whopping $1.98 trillion!
But after nearly 30 years of economic prosperity, in the year 2020, the country plunged into its first recession since 1991 due to the economic fallout from the Covid 19 pandemic.
It seems that even “The Lucky Country” of Australia, which famously avoided the global financial crisis of 2008, could not escape the ravages of the coronavirus pandemic.
GDP shrank 7 percent in the April to June quarter in comparison to the last 3 months – a steeper fall than the previous quarter and the worst performance since the country began keeping records since 1959.
Economy in Australia
The current state of Australia’s economy is steadily improving post-recession and is growing faster than expected in previous quarters as households have started tapping into their savings and are increasing spending.
As was expected, the June quarter GDP data shows record annual growth as the current state of Australia’s economy looks much better than it did a year ago. However, despite the figures being fine, they will probably be the best we expect to see until next year as Australia remains in the middle of the Covid pandemic.
The Australian economy in the June quarter this year was 9.6 percent larger than last time around in 2020. This figure beat the previous long-standing record of 9 percent growth in March 1967.
Australia’s economy from past to present
The economic growth of Australia during 1901-2000 was highly volatile, especially in the first five decades following the Federation. Years of strong growth and declines of roughly 5 to 10 percent are interspersed during this time.
This volatility is most likely due to the volatility of agricultural production as well as the two world wars and the Great Depression in the first half of the century. Since the 1950s though, growth has been substantially more stable, with the 90s being the most stable decade of all despite the recession of the 1990s.
A simple look at the historic decade average GDP growth rates data shows that the 1990s had an average increase of 3.2 percent which is much higher than the century average GDP rate of 1.7 percent.
The Australian economy came into the 2000s in a healthy and stable state. The new economic reforms brought in did wonders for the country and the introduction of inflation targeting during the early 90s meant that inflation was much more stable and lower.
The housing sector boom in the early 2000s was another major development during the decade. From 2000-2004 dwelling prices increased by approximately 70 percent while housing credit increased roughly 90 percent.
From 2004 onwards, the house price growth became less intense and showed fewer changes in prices relative to income in the last 6 years of the decade, while credit growth slowed steadily.
The labour market performance was also very positive in this decade. The unemployment rate averaged to roughly 5.5 percent and even fell to as low as 4 percent, which was something that the country hadn’t experienced since the 1970s.
This last decade marks the slowest growth of GDP and gross national income (GNI) per capita since the last 60 years. This is the case, even if data from the latest years with covid ravaging the economy is not included.
The GNI per capita grew healthily between 2000-2011 but has since fallen drastically till 2015, before growing at a slower rate until 2018.
On the 2nd of September in 2020, the country officially went into recession as a result of the coronavirus pandemic. With the GDP falling 7 percent in June the 2020 quarter, the biggest drop on record. GDP fell 0.3% in the March quarter.
Australia’s economy seems to be in a much better place now compared to previous years and it seems likely that the country’s economy has successfully faced and survived the brunt of the covid economic storm. It is now showing positive trends and forecasts for the future.
The GDP is expected to grow by 4 percent in 2021 and a further 3.3 percent in 2022 due to increased domestic demand. Confidence is higher and labour demand is increasing. Greater income and decreased saving rates will support consumption.
The unemployment rate is also expected to fall to lower levels. However, restrictions continue to strain some parts of the economy and until extensive vaccination is achieved, outbreaks may impose restrictions.
What appeals to different buyer personas?
Thinking of starting a business in Australia and want to know what appeals to different buyer personas? Here are a few reasons why Australia is such a great place for different buyer personas.
Australia is one of the few countries that managed to stay afloat during the global financial crisis of 2008 and has a good track record of stability. Buyers can put their fears to rest and have peace of mind when investing in the country.
Good living standards
The country provides good standards of living to all its residents. Australia measures excellent on education, income, health standards, life satisfaction and much more. The high standards of living and good average income make Australia a great place to move to for people in search of a good life.
Australia offers a good taxing system for investors especially for buyers looking for investing in property and real estate.
For property investors, Australia offers a tax break known as negative gearing which basically calculates your tax based on your property’s income, expenses, and depreciation. This means that, for tax purposes, you can end up having less income.
Meaning, you don’t have to pay as many taxes at the end of the year, which makes Australia an appealing location to investors.
Why Australia’s economy is ideal for someone who wants to live there?
Starting a business in Australia
Are you considering starting your own business in Australia? We have good news for you! According to the World Bank, Australia is one of the easiest places in the world to do business in and ranked 14th in the world for the ease of doing business in 2020.
The open market setting with minimal restrictions on services and goods imports makes Australia an investor’s dream. The abundant resources and availability of a highly educated workforce also help attract foreign investment.
The strong legal framework present in the country also helps protect property rights and minimizes corruption. The stable political environment also provides a healthy judicial system that functions impartially. Contracts are therefore always enforced, and outcomes are always predictable.
Cost of living in Australia
The mean cost of living in Australia is generally a bit high for expats. While many Australian cities are comparatively cheaper than places like New York, London, or Paris, its remoteness and location make it a relatively expensive place to live if you don’t do the necessary planning.
The biggest monthly expense is usually housing. Especially if you’re residing in or around the capital of Sydney. Other daily expenses such as eating out and groceries do depend more on the individual though and can vary greatly depending on your lifestyle.
The average cost for a single expat living in Sydney (the most expensive city in Australia) comes around to be roughly $1,000 USD, without including rent.
To put this into perspective, Australia has the 14th most expensive average cost of living in the world. But a lot of cities are dropping in the rankings fast.
With cities like Melbourne coming at 99th place in a list of most expensive cities, compared to Hong Kong and Tokyo which regularly sit in the top ten, Australia doesn’t seem so bad after all.
To summarize, Australia is a liberal democracy using a Westminster form of government and utilizes a highly developed mixed economy.
The history of Australia’s economy is not a smooth one, and despite all odds, the country and its economy have always survived despite facing some tough circumstances. The recent covid pandemic might have finally driven Australia into recession in 2020 after roughly 30 years of smooth sailing, but the worst seems to be past the “lucky country” and the signs of the economy recovering to post-pandemic levels are evident and clear.
At the end of the day, the good quality of life provided by the country and the ever-declining cost of living is starting to make Australia a much more appealing option for expats. The political stability, strong legal framework, an abundance of natural resources, and the presence of a highly skilled workforce also make starting your own business in Australia worth considering as your next business venture!