Due to the coronavirus pandemic, Australia is facing an “unprecedented” economic contraction, the country’s central bank recently said. According to the predictions of the International Monetary Fund (IMF), Australia’s economy will shrink by 6.7% this year. This is considerably worse than other major Asian economies like Japan, South Korea, Taiwan, Singapore and Hong Kong.

Australia Economy Overview

Australia is a highly developed economy, often described as Western despite its geographical location. It is a vast nation in terms of surface area, being the sixth-largest country on the planet, with a highly dispersed population of 26 million people. Australia’s capital is Canberra, and its largest city is Sydney. The country’s other major metropolitan areas are Melbourne, Brisbane, Perth, and Adelaide.

The Australian economy is a majorly developed market system, which has not suffered a technical recession since the early 1990s. In its recent history, Australia has been the nation with the largest median wealth per adult, but finished second in this ranking behind Switzerland last year. Australia has the 13th biggest national economy by nominal GDP, although this declines to 20th via PPP-adjusted GDP.

Australia economy: GDP constant prices



Australia is hugely popular with tourism, meaning that its economy is dominated by the service sector. This is responsible for around 65% of the GDP of the country, employing a staggering 79% of the labour force as recently as 2017. GDP growth has been steady in recent years, and has barely exceeded 2.5%. In 2019, real GDP was 2.3 percent. But with a global recession in sight, also the Australian economy is expected to shrink (-6.7% this year, IMF).

Unemployment in Australia has been falling steadily since 2015, and hasn’t been as high as 7% in the past decade. This is expected to change due to the effects of the coronavirus pandemic. The IMF estimates Australia’s jobless rate to grow to 7.6% this year and even 8.9% in 2021.

Australia economy: Unemployment

Australia – unique geographical composition

As mentioned previously, Australia has one of the most sparsely concentrated populations in the world, due to its vast geographical area. Australia has quite a unique geographical composition, with several thoroughly modern urbanised areas, and vast swathes of arid land and bushland. It is a rugged country with an unforgiving climate, and one of the issues that its society must always tackle is the fact that its soil is less fertile than the vast majority of countries, due to climatic conditions.

Australia has a population of 25.6 million, which makes it the 52nd most populous country in the world. Virtually all of its population is concentrated in urban areas, and steady population growth is expected over the next few years.

Australia Economy - Population

Currency and Central Bank

The Australian dollar is a highly regarded currency, and is also used by three independent Pacific Island states – Kiribati, Nauru, and Tuvalu. The Australian dollar was introduced in 1966 to replace the pre-decimal Australian pound. It is frequently traded in the world markets, being regarded the fifth-most traded currency, behind the US dollar, the euro, the Japanese yen, and the British pound.

Inflation has been very carefully controlled in Australia over the last decade. In 2019, with 1.9%, underlying inflation dipped below the central bank’s (Reserve Bank of Australia, RBA) target range of 2-3 percent. With the caveat of the coronavirus and its vast potential economic impact the developments have to be seen.

Australia economy: Inflation

The Reserve Bank of Australia is responsible for monetary policy in the country. Historically, Australia is a country of savers, with high interest rates, but this hasn’t applied in recent years. Indeed, the RBA recently slashed the cash rate by 25bps to a new record low of 0.25% as an emergency move – an attempt to mitigate the economic impact of the aforementioned coronavirus.

This represents a shift in monetary policy in Australia, and it remains to be seen whether this will be temporary, or whether the low-interest rate environment will endure. In an official statement, the RBA has commented that “in determining monetary policy, the Bank has a duty to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people”.

Industries and Trade

The service industry in Australia is huge, and completely dominates the economy. This is strongly tied to the tourist industry, with Australia being considered a “tourist trap” due to its favourable climate and rugged natural beauty.

Aside from the two industries with which Australia is most readily associated, healthcare, media and entertainment, finance, and mining all play an important role in the national economy. Australia is perhaps particularly associated with mining, as the industrial practice has been a driving force in the exploration of remote Australian territory. Extraction of coal, mineral sand, gold, copper, uranium, bauxite, iron ore, nickel, lead, zinc, diamonds, and natural gas is common, and Australia earns hundreds of billions of dollars from the exportation of many valuable minerals.

Australia – one of the most credible and esteemed trading partners worldwide

Australia is involved in a variety of international trade, with the country being considered one of the most credible and esteemed trading partners worldwide. According to data obtained in the 2019 calendar year, China was the largest trading partner of Australia, followed by the United States and Japan.

China is particularly important due to its geographical proximity to Australia, but the country has also forged favourable relationships with South Korea, Japan, and India, each of which is also located relatively close to the nation. Australia typically trades heavily with English-speaking countries and those nations located in far east Asia, with Britain, New Zealand, Thailand, and Malaysia all being important trading partners as well.

Surveys and Rankings

Australia was ranked 16th in the most recent Global Competitiveness Report, which represented a two-placed slide from its ranking in 2018. Australia’s strengths include macroeconomic stability and its skills-base.

Australia has always faired well in the World Bank’s Ease of Doing Business Report, and it improved four places in 2020, to reach 14th position.

And the Australia economy is also a place notable for its economic freedom, with the Heritage Foundation ranking the country 4th freest in its 2020 list. Labour freedom, government integrity, fiscal health, and trade freedom all count in favour of the country in this study.

Stock Exchanges and Capital Markets

The Australian Securities Exchange (often abbreviated to ASX) is Australia’s primary securities exchange. It is owned by the Australian Securities Exchange Ltd. It is listed well within the top 20 exchange groups on the planet, with a market capitalisation of A$1.9 trillion.

Australia was ranked fifth out of 57 of the world’s leading financial systems and capital markets by the World Economic Forum, indicating the maturity and effectiveness of its financial markets and system. The country also boast the eighth largest equity market in the world, and is arguably one of the most prominent exchange system in the Asia-Pacific region.

The S&P/ASX 200 is Australia’s leading share market index and contains the top 200 ASX listed companies by way of float-adjusted market capitalisation. Due to the maturity and favourable trading conditions in Australia, the country attracts a huge amount of foreign capital in its investment and equities markets.

Australia houses many highly regarded companies, seven are listed within the fortune Global 500. Four of these are within the banking industry, but none of the top three corporations in Australia are actually involved with finance. Wesfarmers is a conglomerate, Woolworths Group is a retailer, and BHP is a mining company.

Bond Market

Australia has a low level of public debt, which means that its non-governmental bond market is far larger than its government equivalent. This is particularly unusual for developed economies, but means that the Australian system is again favoured by foreign capital.

Almost all Australian corporate bonds have an investment grade credit rating by one of the major ratings agencies (Moody’s, Standard & Poor’s or Fitch), and most of these have retained their rating, even following the global financial crisis of 2008-2010.

However, the Australian government bond has a low 0.86% yield, despite the AAA credit rating of the country. Sharp falls in the rates offered by Australian government bonds is expected to result in foreign investors turning their attention to alternative markets in the years to come.

Real Estate Market

Australian property was once known for being affordable, but this image has steadily been chipped away due to vast increases in house prices over the last couple of decades. The current low-interest rate environment is also favourable for borrowers, which means that the predicted crash in prices is yet to materialise. Nonetheless, on the affordability scale, prices are still approximately 50% lower than in the United Kingdom.

Foreigners can buy property in Australia, but must get approval from the Foreign Investment Review Board before they do so.