AUSTRALIA

Commonwealth of Australia

COUNTRY OVERVIEW

LOCATION AND SIZE.

Australia is a continent and a country in the Southern Hemisphere, lying to the south of Southeast Asia, and dividing the Indian and South Pa cific Oceans. The total area of Australia is 7,686,850 square kilometers (2,967,892 square miles), with land constituting 7,617,930 square kilometers (2,942,282 square miles) and water 68,920 square kilometers (26,610 square miles). Australia is about the same size as the United States, not including Alaska. The only country that occupies an entire continent, the Commonwealth of Australia does not share any land boundaries with other nations. The length of the country's coastline is 25,760 kilometers (16,007 miles). The capital, Canberra, is lo cated in the southeast corner of the nation and lies ap proximately halfway between the 2 largest cities, Sydney and Melbourne.

POPULATION.

The population of Australia was 19,169,083 as of July 2000, with a population density of about 2.4 people per square kilometer (6.19 people per square mile). Most of the population is concentrated along the southeast coast of the country, in an arc running from the city of Brisbane to the city of Adelaide. This arc is sometimes called the "boomerang coast" because of its shape. All of Australia's large cities (those with more than 1 million people)—Sydney, Melbourne, Brisbane, Perth, and Adelaide—are on the coast. The population living inland (more than 200 kilometers, or 124 miles, from the coast) is rather small, and a large part of this region, called the Outback, is extremely sparsely populated. Australia's population is mostly urbanized, with about 88 percent of its people living in an urban area. Sydney alone has over 20 percent of the country's people.

Australia's population has become increasingly multicultural. In 2000, 21.8 percent of Australia's people were born overseas. Australia is still a land of immigrants and each year attracts new residents from all over the world. Fewer than 3 percent of the population is identified as Aboriginal or Torres Strait Islander (the latter being a Melanesian group native to northern Queensland). The country's population has doubled since World War II. With the exception of rapid growth shortly after the war, Australia's population growth has been steady at around 1 to 1.5 percent annually. The population in 1985 was 15.75 million, and in 1990 it was 17.06 million. The country's population is expected to reach 21 million by 2010. The Australian government has not found the need to create explicit population controls, given this slow rate of increase. Australia has a slowly aging population, with 21 percent between the ages of 0-14, 67 percent between 15-64, and 12 percent over the age of 65.

OVERVIEW OF ECONOMY

The Australian economy developed rapidly in the twentieth century to become relatively stable and prosperous in world terms. Australia is characterized by an abundance of resources and a diverse yet predominantly primary sector-oriented economy. Grains, livestock, minerals, processed metals, and coal have been the mainstays of economic growth since European settlement in 1788 and continue to play the dominant role in export revenue. The gross domestic product (GDP) per capita continues to be high, with Australia ranked 17th out of 191 countries, with a GDP per capita of about US$17,575 in 1998. Australia's standard of living and lifestyle are similar to those of the United States and Europe.

Australia's economy depends on trade. Traditionally, Australia exported raw materials to its former colonial power, Great Britain, and to other European countries. When Great Britain joined what is now called the European Union (EU), trade between Great Britain and Australia declined. Australia has compensated by seeking new markets for its exports in Asia, especially in Japan and Southeast Asia. Japan, especially, has been a major purchaser of Australia's mineral and agricultural products. With the Asian financial crisis of the late 1990s, Australia sought to increase its exports to Europe and the United States while still maintaining a high level of trade with Asia.

Australia's geographic position and its topography have had an impact on its economy. The country is located relatively far from most world population centers and markets. Australia's immediate neighbors, with the exception of New Zealand, are developing countries. The Australian continent is generally dry and contains poor soils, limiting agricultural potential and requiring imports of water and fertilizers. Most of the continent's interior, the Outback, is unsuitable for agriculture except for limited cattle grazing. Australia is a generally flat continent with its few small mountain ranges being low in elevation; they primarily run north-south at the eastern edge of the country. Obstacles to road and railroad building are generally the great distances between population centers and between resources and population centers.

Australia's dependence on mineral and agricultural exports and the small size of the country's economy mean that it is exposed to fluctuations in world commodity prices. Fortunately, the diversity of minerals and agricultural products in Australia means that when some commodity prices are low, others are likely to be high, protecting the Australian economy from devastating shocks. Australia is self-sufficient in most resources including food and minerals; the major exception is oil, of which 20 percent of Australia's needs must be imported.

In the 1990s, the Australian government encouraged the privatization of government-owned companies. Large blocks of government-owned shares in the national telephone company, Telstra, and the national airline, Qantas, among other companies, were sold to the public. The Australian government has increasingly pursued a more free market approach to its economy, with fewer regulations and controls on business.

Australia's external debt is estimated at US$222 billion, and in 2000 the debt was estimated at approximately 3.3 percent of the GDP. The hosting of the Summer Olympic Games in 2000 contributed significantly to the rise in debt. However, Australia's debt has been declining as a percentage of both value of exports and GDP. Debt servicing continues but has little effect upon the performance of the economy as a whole, as it is large and strong enough to make interest payments without problems.

Australia is a contributor to global aid programs, but most aid is concentrated in the Asia-Pacific region. Australia contributes US$1.43 billion in overseas aid per year, and a significant proportion of this goes to Papua New Guinea, which is Australia's nearest neighbor and a former Australian colony. Australia is seen as a safe investment target for both domestic and overseas corporations. The mix of small, medium, and large companies is similar to that of the United States or Great Britain.

POLITICS, GOVERNMENT, AND TAXATION

The Commonwealth of Australia is a federal system with 6 states, 2 domestic territories, and a number of overseas territories, the latter consisting of small islands and a part of Antarctica. (However, the United States and many other countries do not recognize Australia's or any other country's territorial claims in Antarctica.) The 6 states are New South Wales, Victoria, Queensland, Tasmania, South Australia, and Western Australia. The 2 domestic territories are the Northern Territory and the Australian Capital Territory, the last of which, a small district containing the national capital, Canberra, is similar politically to the District of Columbia in the United States.

Australia is a constitutional monarchy with Queen Elizabeth II of England as the formal head of state. She is represented in Australia by a governor general. In practice, the political system is headed by the prime minister and the Australian parliament, which resembles that of Great Britain or Canada. Australia's parliament has 2 houses: the lower is the House of Representatives and the upper is the Senate. Australia is a member of the British Commonwealth. This organization of former British territories should not be confused with the formal name of the country, the Commonwealth of Australia. Australia's national government is usually called the Commonwealth government.

The major political parties in Australia are the Australian Labor Party, Australian Democratic Party, Liberal Party, National Party, and Green Party. The current Commonwealth government is a coalition of the conservative Liberal and National parties. The economic goals of these 2 parties are the promotion of free enterprise through reducing government regulation, privatization of government enterprises, and decentralization of government services, policies similar to those of the Republican Party in the United States. The leading opposition party, Labor, advocates policies similar to those of the Democratic Party in the United States.

Australia has a federal system, like that of the United States, which means that government income and expenditure is divided between the Commonwealth and state governments. Approximately half of the national government's revenues derive from a national income tax . Other leading sources of the national government's income include company taxes, sales taxes, excise duties , interest and dividends on investments, and various other taxes. The principal expenditures of the national government include social security programs, which account for about 37 percent of expenditures, followed by health care at about 15 percent, assistance to state governments at about 12 percent, defense at about 7.5 percent, general public services at about 7 percent, and education at about 7 percent, with other expenditures making up the remainder.

For state governments, most revenue (about 52 percent) is derived from various state taxes, followed by transfers and payments from the national government (40 percent), and income from public utilities (8 percent). The major state government expenditures are on health, education, general services, transportation, law and order, community services, and other matters including cultural and environmental issues.

The Commonwealth government has played a very active role in the development of the economy towards reduced regulation, lowering of taxation rates, and the privatization of government corporations such as Telstra, the largest telephone company. Foreign investment is generally unrestricted and the United States is the largest source of foreign direct investment . The government does not usually interfere with the takeovers of domestic enterprises by foreign investors, nor does it offer any tax incentives for foreign investment. The Federal Treasury, however, regulates foreign investment through the Foreign Investment Review Board (FIRB). This regulation is a screening process to ensure conformity with Australian law and policy. As with many government controls, the greater part of regulating, promoting, and developing investment has been handed down to the control of the Australian states. Recent tax reform has introduced a 10 percent Goods and Services Tax (GST) nationwide, which replaced former taxes such as payroll and wholesale taxes. Most goods and services are now taxed through the GST at the flat rate of 10 percent. Corporate income, capital gains, and branch tax rates are all 36 percent. Personal income taxes are progressive, meaning that the rates increase with the taxpayer's income.

The Australian Defense Force, comprising army, navy, and air force branches, has 54,000 personnel currently serving, and in 1997 recorded an expenditure of US$8.4 billion. The Australian Defense Force is apolitical and does not play any role in economic development. The government has recently sought to increase funding for the Defense Force because of political instability in neighboring countries such as Fiji and Indonesia.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Australia's transport and communications infrastructure has developed rapidly in close conjunction with the expansion of the country's main industries. The development of transport infrastructure in Australia has been almost entirely related to moving commodities for sale in cities or to gaining access to seaports.

ROADS.

In 1996, Australia had 913,000 kilometers (567,338 miles) of roads, of which 353,331 kilometers (219,559 miles) were paved. Freeways constitute 13,630 kilometers (8,469 miles) of total roads in Australia. Road infrastructure in Australia is generally very good. Both urban and inter-city roads are well developed across the country. However, congestion, especially that caused by competition between freight and passenger road users, is becoming a problem in the large cities. The main cities affected are Adelaide, Melbourne, Sydney, and Brisbane; Sydney has the worst congestion problems, followed by Melbourne, then Brisbane. Intra-urban movement constitutes about half the total tonnage of road freight in Australia.

RAIL.

In 1999 there was a total of 33,819 kilometers (21,015 miles) of rail lines in Australia. Rail infrastructure exists in both urban networks (mostly commuter rail) and regional networks (mostly freight rail). Rail infrastructure in Australia has never received much government support, despite the country's relatively flat topography and large distances. The consequence has been the development of a few high demand corridors being serviced by relatively poor infrastructure. While current rail infrastructure has sufficient capacity to deal with demand, major investments, totaling at least US$2 billion, have been identified as necessary to deal with the expected increase

in transport demand over the next 20 years. Additionally, conflicts between commuter and freight rail operators are becoming typical of the rail transport centers of Sydney, Melbourne, and Brisbane.

AIR.

Australia currently has 408 airports, 15 of which serve as major intersections and destinations. The national air carrier is Qantas Airways. The country's second largest air carrier, Ansett Airlines, also has an extensive domestic network. The primary commercial airports are Sydney, Melbourne, Brisbane, Adelaide, and Perth. There are an additional 254 regional airports with paved runways across the country. Almost all of Australia's air movements constitute passenger travel. While Australia's air infrastructure is well developed, it has become increasingly overused and overworked and faces increasing maintenance and development costs. Between 2000 and 2020, an estimated US$1.4 billion in new investment will be required to adequately service air travel demand. Of this amount, roughly 67 percent will be directed at terminal expansion for the primary international airports. Currently, Australia's largest and most congested airport, the Kingsford Smith Airport in Sydney, remains efficient by world standards. Australia's main regional airports (Canberra, Coolangatta, Cairns, Darwin, and Hobart) are operating within capacity.

SEA.

Australia has 14 major seaports, including Fremantle (Perth), Darwin, Brisbane, Newcastle, Sydney, Port Kembla, Adelaide, Melbourne, Davenport, and Hobart. In addition, export-dedicated seaports are located at Gladstone, Weipa, Hay Point, Dampier, and Port Hedland. Australian seaports are currently under-utilized, and most ports have the infrastructure to meet demand for the next 2 decades. The Bureau of Transport and Communication Economics found in 1996 that spending on infrastructure development will not likely exceed US$500 million over the next 20 years.

POWER.

Australia does not import or export electricity. The country produces its own electricity supply, which is generated from coal (89.85 percent), hydro-electricity (8.35 percent), and other sources, mainly renewable energy (1.8 percent). Australia does not generate or consume electricity from atomic power. Total electricity production in Australia was 186.39 billion kilowatt hours (kWh) in 1998, with total consumption being 173.34 billion kWh for the same year.

COMMUNICATIONS.

In 1997, there were 9.5 million phone lines in use in Australia, representing a 15 percent increase since 1993. For the same period (1993-97), subscriptions to cellular phone networks increased 667.3 percent, with a total of 3.8 million users in 1997. Thus, Australia has one of the world's highest rates of cellular phone use. Recent upgrades to the digital phone system have achieved almost total coverage across the country. In 1999 Australia had 709 Internet service providers.

ECONOMIC SECTORS

The export of agricultural and mineral resources has been the mainstay of Australia's economy for many years and continues to be a significant contributor to the GDP. Commodities produced in these sectors generate 57 percent of the value of total exports. The services sector (driven partly by the continuing development of the tourism industry) makes up an increasingly dominant proportion of GDP. The dependence on the export value of commodities puts Australia somewhat at the mercy of fluctuations in world commodity prices. Australia's attempts to increase manufactures have met with competition from the global market. Therefore, Australia has focused on developing its service sector.

During the 1990s, many Australian government-owned or partially government-owned companies were privatized or partially privatized. Notable examples of this process include the partial privatization of the Commonwealth Bank, the national airline Qantas, and the telephone company Telstra. Currently, public enterprises account for about 10 percent of total economic output in the country.

Australian companies are regulated by a number of government agencies. Chief among these is the Trade Practices Commission, which has the responsibility of encouraging competition and preventing monopolization in any industry. The Trade Practices Commission is concerned with price discrimination, resale price maintenance, misuse of market power, types of exclusive dealing, and anticompetitive agreements. Another government body, the Prices Surveillance Authority, identifies prices that are deemed excessive and establishes inquiries to determine if high prices result from anti-competitive or collusive company behavior. A third government body, the Industry Commission, is concerned with the allocation of resources in the economy as a whole. The Industry Commission advises the government on the setting of tariffs and other protective barriers needed to support Australian industry or to make it more competitive globally.

AGRICULTURE

Historically, agriculture has been as important in the development of Australia, as it was in the United States. Australia's traditional dominance in wheat and sheep continues into the 21st century. Recently Australian agriculture has become increasingly diversified. The considerable expanses of arable land have helped Australia to become a leading world exporter of grains, meats, and wool. Both grains (predominantly wheat and barley) and wool markets around the world are dominated by Australian exports. The market for cattle is more regional but is becoming increasingly important globally, given health concerns about European-produced beef. While only about 6 percent of Australia is suitable for crops and pasture, a considerable amount (60 percent) of the land area is suitable for cattle grazing.

Agriculture contributes roughly 3 percent of the GDP and employs about 4 percent of the total workforce directly. While the sector's contribution to the GDP is small, raw and unprocessed agricultural commodities contribute about a quarter of Australia's total export earnings each year. Australia exports a great deal more agricultural produce than it imports. In 1998 agricultural exports from Australia were estimated at US$15.14 billion, in comparison to the US$3.11 billion worth of agricultural imports for the same year. The main agricultural crops grown in Australia are wheat, coarse grains (barley, oats, sorghum, maize, and triticale), rice, oilseeds (canola, sunflowers, soybeans, and peanuts), grain legumes (lupins and chick peas), sugarcane, cotton, fruits, grapes, tobacco, and vegetables. The main livestock production is in sheep (wool and lamb), beef, pork, poultry, and dairy products. Exports account for over 90 percent of wool and cotton production, nearly 80 percent of wheat, over 50 percent of barley and rice, over 40 percent of beef and grain legumes, over 30 percent of dairy products, and nearly 20 percent of fruit production.

The distribution of agricultural production in Australia is largely determined by the physical environment and climate. The traditional large farm system of wheat and sheep production is spread fairly uniformly between parts of New South Wales, Victoria, South Australia, and Western Australia. Queensland, New South Wales, and Victoria produce the majority of beef, and New South Wales has the largest and most numerous poultry farms. Sugarcane and large-scale vegetable production occurs almost entirely in the tropical state of Queensland, while cotton is produced in both New South Wales and Queensland. Tropical fruits, such as mangoes and bananas, are grown in parts of New South Wales, Queensland, Western Australia, and the Northern Territory.

A notable characteristic of Australian farming and agricultural production is the extent to which net farm income varies from year to year. Australia's weather is subject to extreme fluctuations, which has an impact on annual production and ultimately on farm income.

Farm sizes range from relatively small part-time farms to operations of more than 5000 hectares. In general, Australian farming is characterized by large scale, highly mechanized and efficient operations, one of the key reasons why only a small percentage of the workforce is employed in this sector. Environmental factors have long been ignored in the production of agricultural commodities due to their importance to the economy. At the beginning of the 21st century, however, Australia is forced to pay more attention to the growing evidence of environmental stress and degradation caused by farming. In the past, the agricultural sector carried considerable political weight, being represented by the Labor and National political parties. Currently, there is increasing political pressure from urban residents to remove most subsidies and other forms of protection given to farmers. Australian farmers already do not receive many of the subsidies given to farmers in the United States and Europe.

INDUSTRY

MINING.

Australia's mining sector is important to both Australia and the world. The mineral sector is the largest primary sector in the economy, accounting for 6.5 percent of the GDP but for more than 60 percent of export earnings. World-wide, Australia is the third largest producer of minerals and metals (not including coal and petroleum). About 80 percent of total mineral production is exported.

Australia is the world's leading producer of alumina and bauxite (both used in the production of aluminum), diamonds (mainly industrial, not gems), opals, and sapphires. The country is the world's second largest producer of lead and zinc; the third largest producer of gold and iron ore; the fourth largest producer of cobalt and uranium; the fifth largest producer of aluminum, coal, copper, nickel, and silver; and the sixth largest producer of salt. Australia is virtually self-sufficient in most minerals and metals. The main exception is oil, but Australia does produce 80 percent of its own needs, mainly from offshore wells. However, Australia does have large deposits of coal, natural gas, liquified petroleum gas, and uranium, all of which are exported.

Many minerals are widespread throughout the country, but others are concentrated in particular areas. Most mining takes place in remote or rural Australia. Bauxite, diamond, and iron ore production is concentrated in the tropical north. Coal, lead, and zinc are mined primarily in New South Wales and Queensland. Uranium production is limited to a few mines in the Northern Territory and South Australia. Every Australian state and the Northern Territory have substantial mining activity. Most of Australia's oil is found offshore. The northwestern coast of the continent and Bass Strait, between Tasmania and the mainland, are the principal locations for petroleum extraction.

Of Australia's total mineral and energy production, 40 percent consists of metals, 30 percent of petroleum group products, 25 percent of coal, and 5 percent of industrial minerals (such as construction materials, clay, and salt).

Minerals of particular interest include coal, which is the largest foreign exchange earner in the sector, accounting for 25 percent of the minerals sector and 15 percent of the country's total export earnings. Australia is the sixth largest producer of coal in the world, but the world's largest exporter, most of which is sold to Japan and other Asian countries.

Australia's uranium mining has been controversial, as much of it has been conducted in environmentally sensitive World Heritage areas (sites recognized by the United Nations Educational, Scientific and Cultural Organization [UNESCO] as having global cultural significance). Some groups have protested against Australia's mining of uranium because of its role in energy production. Australia itself does not use atomic power and operates only one experimental reactor. Australia does not sell uranium for use in weapons and maintains strict controls on exports. Foreign investment in Australia's uranium industry was allowed in 1996. Australia has the world's largest reserves of uranium, about 25 percent of world total.

With respect to the ownership of minerals and mineral rights, each Australian state owns resources in its own area, while the Commonwealth government owns resources in the territories and offshore. However, the Commonwealth government has given control over nonuranium minerals within the boundaries of the Northern Territory to the territorial government.

Mining in Australia has frequently led to conflict with Aboriginal groups over ownership of land and resources. Much of Australia's mining takes place in remote areas, including the Outback, where Aboriginal people form a high percentage of the population. Aboriginal people have protested against mining activity which disturbs or destroys sacred sites, causes environmental damage, and negatively affects the customs of Aboriginal communities. The proposed expansion of the Ranger uranium mine, at Jabiru in the Northern Territory, has been criticized by Aboriginal people living in the area. Australian legislation in the 1990s belatedly recognized Aboriginal concerns. In 1996, the Wik ruling of the High Court of Australia determined that mineral leases in Australia are subject to Aboriginal claims. The effect that this ruling will have on mining is still uncertain, but it will probably have little financial impact on the mining sector as a whole.

Foreign companies control a majority of mining, smelting, and refining in Australia. Many mineral companies are vertically integrated, in that they mine, refine, and distribute their products globally. Australia's largest mining company, Broken Hill Proprietary (BHP), is one of the world's largest mining companies. It operates in Australia as well as overseas. BHP's recent merger with the South African mining company, Billiton, made it one of the three largest mining companies in the world. The new company is known as BHPBilliton. Two other large mining companies, Anglo American (South Africa) and Rio Tinto (Great Britain), also have substantial investments in Australia.

MANUFACTURING.

The manufacturing sector has grown substantially since the 1950s, and while it remains a key sector in terms of its contribution to the GDP and employment, it also faces fierce competition from competing regional economies, especially those in Asia.

The relatively small population of Australia, and hence its small domestic market, has traditionally limited the development of certain types of manufacturing, such as sophisticated industrial equipment and electrical goods. Otherwise Australia is well equipped locally to produce most manufactured goods competitively. Key manufacturing industries in Australia are industrial machinery, chemical production, transport equipment, food processing, and steel production. Australia has the ability to manufacture most of its needs and can obtain most raw materials domestically. About one-fifth of Australia's workforce is employed in manufacturing industries, and the growth of the sector since World War II has been fairly uniform. Australia has its own automobile industry, although foreign companies have overall control and ownership. Large investors include General Motors, Ford, Toyota, and Mitsubishi. General Motors owns the Australian automobile company, Holden, that produces its own line of Australian cars.

The manufacturing sector in Australia has been stable and sound, with a broad spectrum of industries that have had little need for tariff protection or government subsidies. However, the rapid development of similar industrial manufacturing industries in Asia has created many cheaper import substitutes . High levels of industry regulation (such as union-driven working conditions) and smaller margins of trade have also put the manufacturing sector under stress. Many value-added goods, refined fossil fuels, and metal products are now produced more cheaply in Asia, reducing the competitiveness of Australia.

The manufacturing sector in Australia is located almost completely in the urbanized regions of eastern Australia, with the exception of considerable steel and primary industry production in the state of Western Australia. Working conditions are generally very good, with "award wages" (nationally legislated working conditions and minimum wages) and Occupational Health and Safety measures addressing workers' interests. In 1998, 54 percent of employees did not take any time off work because of a work-related injury or illness. The manufacturing industry is one of the most unionized employment sectors in Australia and has taken a leading role in promoting an improvement in working conditions.

SERVICES

The service sector contributes approximately 69.2 percent of the GDP and employs an estimated 73 percent of the labor force . The recent growth in tourism, retail , and financial services contributes to a steady increase in these numbers.

TOURISM.

By the end of the 20th century, tourism had become Australia's largest "resource," surpassing coal in value. In 2000 approximately 4.6 million international tourists arrived in Australia, bringing an estimated US$9.02 billion into the country, a 73 percent increase from tourist revenues in 1993. International tourist arrivals for 2001 are estimated to increase substantially to 5.2 million. International tourists come mostly from New Zealand, accounting for 17 percent, and Japan, accounting for 15 percent. Tourists come from other regions as well: the Americas, 12 percent; Asia (except Japan), 26 percent; Europe, 24 percent; and others, 6 percent. Some 99 percent of international tourists in Australia arrive by air.

The Australian Tourist Commission (ATC) is responsible for promoting Australian tourism internationally. According to their recent policy statements, the ATC "positions" Australia differently in tourism markets, meaning that they present different aspects of Australia in different countries. For example, in Japan, Australia is promoted as "close, affordable, safe," and with "inspirational experiences of nature and culture." In other overseas markets, Australia is typically positioned as "the most naturally free-spirited and liberating country in the world" and as a destination for a regular vacation rather than as the "trip of a lifetime."

Australia's scenery, variety of landscapes, distinctive animals, beach culture, modern cities, and relaxed lifestyle are all promoted as reasons to visit the country. The relatively weak Australian dollar, which has steadily declined in value against the U.S. dollar, makes Australia an affordable destination, as foreign travelers increasingly receive more Australian dollars per unit of their own currency. The 2000 Summer Olympics held in Sydney was a major factor driving an increase in international tourism to Australia. Televised events revealed many aspects of the country to potential visitors. The success of Australian films, particularly the Crocodile Dundee series, and television programs such as Survivor II and The Crocodile Hunter have also sparked an interest in visiting Australia. International tourists are forecast to increase by an average of 7.8 percent per year until 2010.

RETAIL.

Australia has a diverse range of retail enterprises, similar in complexity to that of the United States or Great Britain. Australian-owned national retailers are numerous but are considerably outnumbered by smaller retailers. Small businesses (those employing fewer than 20 people) accounted for 95 percent of total retail businesses but only 38 percent of total retail income in the period 1998-99. For the same period, large businesses (those employing more than 200 people) made up less than 1 percent of total retail businesses but generated 41 percent of total retail income. The remaining 4 percent of retail businesses and 21 percent of income was attributable to medium-size businesses (21-200 employees).

The larger retail businesses in Australia are mainly comprised of department stores and supermarkets, which contribute 99.6 percent of total income. At the end of June 1999, there were 98,289 retail businesses in the country, generating about US$90 billion in revenue. Since 1991-92, the number of retail businesses has increased by 18 percent, and employment in this sector has increased by 33 percent, with an annual sector-wide revenue growth rate of 5 percent. In the same period (since 1991-92) the operating profits of Australian retailers doubled.

Small businesses are most numerous and tend to dominate the total income for domestic repair and service industries, such as household equipment repair and motor vehicle services and maintenance. Small businesses also comprise the greater part of the total income for recreational goods, specialty foods, furniture, house-wares, and appliances. Small enterprises and the large national retailers alike are subject to "award conditions" which specify minimum wages and employment conditions. The retail industry, while having a very high union membership rate, is not controlled by unions, and the Commonwealth government and business alike support moves towards direct employer-employee workplace agreements.

FINANCIAL SERVICES.

Financial services is a growing sector in the Australian economy. With respect to commercial banking, the sector is dominated by 4 large private banks: the National Australia Bank, Commonwealth Bank (partially government owned), Westpac, and ANZ Bank. Together these 4 account for about 70 percent of market share and provide both retail and wholesale banking services (services to individuals and to companies). In an increasingly globalized economy, Australia's banks face international competition but have generally thrived. Australia's banking system has been consistently modernized by technological developments. For example, checks and checking accounts are no longer widely used, and Automated Teller Machines (ATMs) and electronic banking have replaced both the use of checks and in-person banking transactions.

Australia's financial services sector also includes many non-bank financial institutions. These include financial intermediaries such as building societies, credit unions, money market dealers, and finance companies. Building societies, similar to Savings and Loan companies in the United States, have generally been declining as they are no longer competitive and have been bought out by banks. Funds managers and trusts are other non-bank financial institutions. These institutions manage insurance funds, superannuation (retirement) funds, and real estate assets, among other matters.

Australia's central bank is the Reserve Bank of Australia, similar in concept to the Federal Reserve system in the United States. The Reserve Bank's functions include managing and issuing the currency, controlling the money supply, supervising the private banks, assisting the government in formulating economic policy, providing banking services to the government, managing the foreign exchange rate , and managing the Australian government's overseas financial holdings. The overall objectives of the Reserve Bank are to maintain the stability of Australia's currency, maintain full employment in the country, and ensure the economic prosperity of Australia.

INTERNATIONAL TRADE

Historically, Australia's largest trading partners were Great Britain and the rest of Europe. This historical trading relationship reflected Australia's colonization by Great Britain and the British need for new markets for manufactured goods as well as sources of raw materials. The cultural affiliation between Australia and its "mother country" also contributed to this historic trading pattern. Since the 1970s, however, Australia's international trade has shifted towards Asia and Pacific countries. When Great Britain joined what is now known as the European Union in the 1970s, Australia lost many trading advantages with that country and sought new markets closer to home. Japan, Singapore, other Southeast Asian countries, and the United States have all become important Australian trading partners. The composition of Australia's exports has largely remained the same, but new markets (including more recently South America and the Middle East) have been sought. The marked failure of some key Southeast Asian economies, particularly Indonesia, Thailand, and Hong Kong in the late 1990s, has had only a limited effect on the Australian economy. As of 2001, political events outside Australia, such as disturbances in the neighboring countries of Indonesia and Fiji, have had almost no impact on Australia's trade.

Australia's principal exports are meat, wheat, cotton, machinery and transport equipment, coal, iron ore, aluminum, gold, and other minerals. The largest destination for exports is Japan, which purchased almost US$9 billion worth of Australian products in 1999. The United States was the second-largest purchaser, at about US$4 billion, followed by South Korea, New Zealand, Taiwan, Hong Kong, China, Singapore, Great Britain, Indonesia, Malaysia, and Italy. Eight of the top twelve importers of Australian products are in Asia.

Australia's main imports are machinery and transportation equipment (mostly motor vehicles), computers and office machines, telecommunications equipment, oil and petroleum products, medical and pharmaceutical products, aircraft and related equipment, and clothing. Australia's largest source of imports is the United States. Australia imported nearly US$10 billion worth of goods from the United States in 1999. Other leading sources of imports to Australia are Japan, Great Britain, China, Germany, South Korea, New Zealand, Indonesia, Taiwan, Singapore, Italy, and Malaysia. With the exceptions of Hong Kong and Germany, Australia's top twelve trading partners are the same for both exports and imports.

The recent (2000) sharp drop in the value of the Australian dollar, especially against the U.S. dollar, could have an impact on Australia's current trade deficit . A devalued currency means that Australia's exports become relatively cheaper, while imports become more expensive. Thus, a weak Australian dollar may give the country a competitive edge over Canada, the United States, and other countries in selling raw materials to Japan, to take one example. However, the flip side is that imported products become more expensive, as Australians require more dollars to purchase the same product. For example, a product selling for US$100 would be the equivalent of A$153 in 1999, assuming all other factors to be equal. But with the drop in the value of the Australian dollar, the same US$100 product would be the equivalent of A$192 in 2001. Therefore, many Australian consumers might find imported products too expensive and stop buying them. If this situation continues, Australia's exports could increase and its imports decrease, leading to a decline in the amount of the trade deficit.

MONEY

Australia's economic performance depends on the world prices of mineral and agricultural commodities. The value of Australia's currency can considerably affect the value of export earnings. Australia has also managed to steer clear of recession and sharp fluctuations in the rate of inflation during the past 2 decades. Government policies of the 1990s, including allowing the value

of the currency to fall, deregulating industry, and encouraging foreign investment, allowed Australia to weather the Asian economic crisis of that decade. In this period, inflation was low, averaging between 1 to 3 percent per year. Inflation is a controversial topic among economists and is still not clearly understood. However, within the past 2 years price increases in Australia have been attributed to the introduction of the Goods and Services Tax (GST) of 10 percent on most products and services; the fall in the value of the Australian dollar, which makes imports more expensive; and the increase in world oil prices, which are passed on to Australian consumers. Nevertheless, steady economic growth of around 4 percent per year has characterized the greater part of economic performance.

Australia has an established stock exchange. The Australian Stock Exchange (ASX) opened in 1987 through the merger of smaller, very well established (100 years or so of trading) exchanges. In 1998, there were 1,162 companies listed on the exchange.

POVERTY AND WEALTH

Australia has sometimes been called a "classless society," though this is not strictly true. Class in Australia is generally defined on the basis of income or self identification. The terms "working class," "middle class," and "upper class" are all in use, but are difficult to define statistically. Social mobility in Australia is high and there are no formal or cultural obstacles to movement between social or economic classes. Australia's high level of multiculturalism, with many recent immigrants, also contributes to class mobility. Immigrants are often concerned to get the best possible education for their children so that they will move upwards economically. There are some differences in standards of living between rural and urban residents, as the cost of providing basic services to rural areas is generally higher. Rural regions often have more limited services and higher prices for consumer goods .

In Australia the general living standards are very high, but differences remain between the country's richest and poorest. Moreover, the gap between rich and poor

is growing. The poorest 20 percent of households earned 1 percent of private income, while the richest 20 percent earned 50 percent. For a small minority of the population (nearly all Aboriginal), levels of education and health are very low, and these people are often at or below the poverty line. Australia has been internationally criticized for this situation. The richest minority in Australia are very wealthy and play key roles in international finance. On the whole, the majority of Australia's population would probably be defined as middle class.

Poorer families in Australia are generally characterized by financial struggle and limited opportunities. The national government has an obligation to provide basic services to such families. Australia, like many developed western economies, is partly a welfare state . The poorest citizens, and those on low wages or dependant upon care, receive social security and are granted access to free or reduced price health services, education, transportation, and housing. A poorer family in Australia will most likely live in a cheaply constructed, and often highly subsidized public housing area. Many of the basic family services provided by the Commonwealth government, such as rent assistance, childcare assistance, health care, and legal aid, are often busy and run on stretched resources. This situation is more extreme in the country's rural areas. General health levels among such families are low, primarily from inferior housing, poor diet, and increased susceptibility to the abuse of alcohol and drugs. While free education has been the hallmark of the Australian school system, budget cuts have increased the actual cost of sending children to school, with poor families having to pay for many extracurricular activities. The lifestyle of a poor family in Australia is characterized by the need to work to live and support a family in the short term. Rarely, even if members of a family are employed full time, is there the financial ability to take time off work for vacations. Access to higher education, the Internet and even basic computer knowledge, and inclusion in political decision-making are all limited.

The typical family in the higher income brackets of Australian society enjoys many more opportunities, choices, and luxuries than do poorer families. Many richer families have the choice of living outside busy urban centers in rural areas within commuting distance of the cities. Those who choose to live in the major metropolitan areas enjoy spacious, well built, modern or traditional heritage housing. Education has traditionally been a priority for the richer families, and children will often be sent to private schools where the educational standards are usually far better and more inclusive of physical and personal development programs. It is not uncommon for such children to attend boarding schools in another state or region. Almost universally, higher-income families take advantage of a well-developed private health care system, with education being a key factor in better levels of health among such families. While domestic violence, drug abuse, and support services are commonly associated with poorer families in Australia, such abuses transcend socio-economic boundaries and can also occur among the richer families. Richer families have ease of access to private vehicles, typically 1 per person in the family, and the ability to take time off work for domestic and international vacations. In contrast to poorer families, substantial and self-funded retirement plans are

universal among richer families. Such families easily access personal or home information and entertainment technology. Personal computers, reliable and private access to the Internet, cellular telephones, and entertainment technologies are common and form the basis of better connections to news, information, and public opinion. Richer families have a considerable political voice through their ability to make contributions to political parties, to be informed about current affairs, and to participate in debate.

WORKING CONDITIONS

In world terms, Australian working conditions are of a high standard. Australian industrial relations are characterized by fairly high union membership and a federally driven, but state determined, compulsory arbitration and conciliation system. Industrial relations practices are specified in the Conciliation and Arbitration Act (1904), which encouraged employer associations to recognize unions and empowered these unions to make working condition claims on behalf of employees. In Australia there are 7 distinct systems of industrial regulation and relations: the national system is supplemented by those of the 6 states, each having its own distinct industrial relations legislation and arbitration processes. As a result, there has long been a high degree of state intervention in the labor market. There is now only 1 main central union confederation, the Australian Council of Trade Unions (ACTU). "Awards" are the legal decisions made by independent industrial organizations, and they specify minimum standards of pay and working conditions that an employer must meet or otherwise face legal penalties. Working conditions are regulated by legislation and industrial awards.

While Australia carries no social restrictions on employment opportunities for women, the percentage of women in the formal workforce has traditionally been smaller than that of men. Female participation in the workforce has been increasing steadily since the early 1960s, when women comprised 25 percent of the work-force. In 1993, women's participation in the workforce was still increasing at 42 percent. The national Affirmative Action (Equal Employment Opportunity for Women) Act (1986) obliges employers to take steps specifically designed to remove discrimination towards women and promote equality in employment. Despite this act and award conditions for equal pay for equal work being well established, women's earnings on average remain slightly less their male counterparts. This inequity is partially due to the fact that women remain concentrated in industries where pay and working conditions remain relatively less favorable than other occupations and professions. More recent trends in equal opportunity employment address factors such as childcare, maternity and paternity leave, affirmative action, and sexual harassment, and sees them as significant industrial relations issues rather than exclusively women's issues.

Unemployment in Australia has been between 6 and 8 percent since the early 1980s and continues to remain in this range. Many Australian employers have readily employed immigrant workers, especially in times of labor shortages.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1770. Captain James Cook claims Australia for Great Britain.

1788. Australia is settled as a British penal colony.

1793. The first free settlers arrive.

1817. Australia's first bank, the Bank of New South Wales, is established.

1851. Gold is discovered in New South Wales and Victoria.

1883. Silver is discovered at Broken Hill, New South Wales.

1901. The Commonwealth of Australia, a federation of the colonies, is proclaimed. Australia adopts a federal system similar to the United States.

1914-18. Australia sends troops to fight for Great Britain in World War I.

1917. Transcontinental railroad opens.

1920. Qantas, the national airline, is founded.

1927. The national capital is moved from Melbourne to Canberra.

1940-45. Australian troops serve in World War II.

1942. Japanese planes bomb the Northern Territory capital of Darwin. Japanese midget submarines penetrate Sydney harbor.

1952. Uranium is discovered in the Northern Territory.

1960. Aboriginal people are granted Australian citizenship. The Reserve Bank of Australia is established.

1961. Iron ore deposits are discovered in Western Australia.

1966. Australia changes its currency from the British pound to the Australian dollar.

1992. The Mabo decision in the High Court allows Aboriginal people to claim title to their traditional lands.

1997. The Asian financial crisis weakens Australia's economy.

1999. A referendum to change Australia from a constitutional monarchy to an independent republic is defeated.

2000. The Summer Olympics in Sydney lead to a boom in tourism.

FUTURE TRENDS

Australia's well rounded economy is likely to see continued growth in both the near and distant future. The country's importance as a leading supplier of minerals and agricultural products, its increasing presence in financial services and specialized technology industries, and its growing appeal as a tourism destination all hold great promise. The diversity of the Australian economy, its many trading partners, and its peaceful democratic political system all help stabilize economic conditions and encourage new investment. The Asian financial crisis of the late 1990s slowed Australia's exports, particularly of minerals, but is unlikely to have any long-term effects on the overall economy. Australia's economy is a careful balance of free market policies with close regulation of key economic sectors, combined with extensive social services programs. Australia's standard of living is assured of remaining one of the world's highest.

The Australian economy will have to increasingly address environmental and Aboriginal issues. Environmental damage caused by mining and agriculture, especially, have come under frequent media attack. Current issues include soil erosion caused by overgrazing, urbanization, and poor farming practices; increases in soil salinity largely due to farming practices; depletion of fresh water supplies, again largely due to farming and urbanization; and coastal damage, especially around the Great Barrier Reef on the Queensland coast, caused by shipping and extensive tourism. Mining impacts on the environment, such as the release of toxic substances, tend to be more localized. Mining and agricultural enterprises are becoming more responsive to environmental issues, but there is still room for improvement. Australia only recognized the potential land claims of its Aboriginal population in the 1990s, placing it far behind the political history of indigenous-settler relations in other countries such as New Zealand, Canada, and the United States. The Mabo and Wik High Court decisions of the 1990s recognized that Aboriginal title to land may still exist and that it can overlap with pastoral and mining leases. The implications of these decisions have not yet been worked out. They will probably have no major impact on the Australian economy as a whole but will give Aboriginal people a greater voice in managing natural resources on their traditional lands.

DEPENDENCIES

Australia has no territories or colonies.

BIBLIOGRAPHY

Australian Tourist Commission. ATC Online: Tourism Industry Essentials. <http://www.atc.net.au>. Accessed April 2001.

Economist Intelligence Unit. Country Profile: Australia. London: Economist Intelligence Unit, 2001.

Gruen, Peter, and Sona Shrestha, editors. The Australian Economy in the 1990s. Canberra: Economic Group, Reserve Bank of Australia, 2000.

Kriesler, Peter, editor. The Australian Economy: The Essential Guide. Sydney: Allen and Unwin, 1995.

Kriesler, Peter, editor. The Australian Economy. 2nd Edition. Sydney: Allen and Unwin, 1997.

Lewis, John, et al. A Guide to the Australian Economy: Structure, Performance, Policy. Melbourne: Longman Cheshire, 1994.

Nicholson, Margaret. The Little Aussie Fact Book. Melbourne: Penguin, 2000.

U.S. Central Intelligence Agency. World Factbook 2001. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed September 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Australia. <http://www.state.gov/www/about_state/business/com_guides/2001/eap/index.html>. Accessed October 2001.

U.S. Geological Survey. "The Mineral Industry of Australia." Minerals Information, International: Asia and the Pacific. <http://minerals.usgs.gov/minerals/pubs/country/asia.html#af>. Accessed October 2001.

—Michael Pretes

Rory Eames

CAPITAL:

Canberra.

MONETARY UNIT:

Australian Dollar (A$). One dollar equals 100 cents. There are coins of 5, 10, 20, and 50 cents, and 1 and 2 dollars. There are notes of 5, 10, 20, 50, and 100 dollars. An interesting feature of Australia's banknotes is that they are made out of thin plastic rather than paper.

CHIEF EXPORTS:

Coal, wheat, gold, meat, wool, aluminum, iron ore, machinery, and transport equipment.

CHIEF IMPORTS:

Machinery and transport equipment, computers and office machines, telecommunication equipment and parts, crude oil, and petroleum products.

GROSS DOMESTIC PRODUCT:

US$445.8 billion (purchasing power parity, 2000 est.).

BALANCE OF TRADE:

Exports: US$69 billion (f.o.b., 2000 est.). Imports: US$77 billion (f.o.b., 2000 est.).