major macro economic indicators
|GDP growth (%)||2.0||2.7||2.1||2.4|
|Inflation (yearly average) (%)||2.4||2.5||1.6||1.6|
|Budget balance (% GDP)||-2.9||-2.9||-2.7||-2.8|
|Current account balance (% GDP)||-3.4||-3.1||-4.6||-4.2|
|Public debt (% GDP)||30.9||34.1||36.8||39.2|
- Geographic proximity to emerging Asia
- Mining resources
- Moderate public debt
- Specific geographic features which favour tourism
- Commodities trade dependence (particularly iron ore and coal) and Chinese demand
- Substantial household debt (185 % of disposable income)
- Shortage of skilled labour
- Highly exposed to natural hazard
- Wide disparities between federated States
Transition of the economic model to deal with the end of the mining boom and the Chinese economic slowdown
In 2015, growth was held in check by China’s economic slowing and by the worsening terms of trade as a result of the decline in the prices of Australia’s leading export commodities. Growth would be a little stronger in 2016. The country started to adapt its economic model. The slowing in demand for iron ore and coal from China could be offset by the more intensive extraction of other commodities such as copper and liquefied natural gas (by 2020 Australia will be the world’s leading exporter of this gas), maintaining private investment. Service sector (especially education and tourism) is simultaneously strongly expanding. The more expansionary monetary policy by the Australian central bank (RBA) will help sustain domestic demand, in particular household consumption, despite the high households’ debt level (185% of gross disposable income, 90% of it comes from mortgage debt). Households will also benefit from rising property prices (around +7% yoy in July 2016, +9% in Sydney) to further increase consumption.
However, two downside risks could hamper growth: (i) the faster than expected economic slowdown in China (Australia’s leading trading partner, one third of exports) and (ii) failing house prices. Nonetheless Australia retains a certain amount of room for manoeuvre in boosting activity if necessary thanks to its low public debt and the capacity of the RBA to react with an interest rate currently at 1.5%.
The abandonment of the public deficit target leads to a rapid increase in public debt
The budget consolidation sought by the former Prime Minister is no longer a priority. Indeed Prime Minister Turnbull wants to adopt a pro-corporate policy by both lowering taxes and allocating $1.1 billion (0.1% of GDP) in innovation and entrepreneurship. Otherwise, security issues have been very present in the last general elections’ debate. Thus, the government plans to invest $30 billion over the ten next years in the defence sector. Public debt should therefore continue to rise, but should remain at a low level.
Australia is heavily dependent on demand in China, in particular for iron ore and coal, its two leading exports, despite the initiation of its model’s transition. This transition could benefit from Asian demand to diversify its exports (copper, liquefied natural gas and agricultural products). Nonetheless customer diversification remains weak (for instance, 80% of exported iron ore goes to China). Current account deficit should slightly narrow thanks to the increase in exports and to income balance improvement.
The Australian banking sector is highly developed and well capitalised, but also highly concentrated. The country’s four main banks, sharing very similar business models, hold most the assets (80%) and mortgage loans (90%), thereby creating a systemic risk for the entire sector if there were to be a property crisis.
Re-elected, Malcolm Turnbull will govern with the smallest majority
Following a motion of censure against former Prime Minister Tony Abbott, current PM Turnbull called for anticipated general elections in July 2016 in order to obtain a wider majority to govern. Despite his re-election, he gets a reduced majority as the government coalition (Liberal – National) lost 15 seats compared to the previous mandatory (76 seats obtained in the 150-seat House of Representatives). Political instability, prevailing since 2010 (five Prime ministers in six years), should continue. New anticipated elections before the end of Turnbull’s mandate in 2019 are not excluded if he’s willing to get a wider majority or if the most conservative wing of its Party (Abbott’s support) sees an opportunity to pass a motion of censure against Turnbull.
Internationally, Australian policy is focused on establishing closer economic ties with the Asia-Pacific region (in particular China) and diplomatic ties with the United States to counterbalance the rising power of China in the region. Australia has joined the Asian Infrastructure Investment Bank set up by China, to the displeasure of the United States. China has also won the contract for the management of the Darwin’s port (in northern Australia and giving access to Asia-Pacific) to the detriment of the United States.
Finally, Australian legislation is positive for business in that the time and cost involved in creating a business are significantly less than in other OECD countries and obtaining credit is easy.
Last update: July 2016
As a former colony of the British crown,Australia’s legal system and legal precepts are broadly inspired by British “common law” and the British court system.
There are 9 separate court systems in Australia, one for each of six States, one for each of two Territories and one Federal system.
Bills of exchange and promissory notes are not widely used inAustralia.
Cheques, defined as “bills of exchange drawn on a bank and payable on presentation”, are used for domestic and even international transactions, but are being overtaken by electronic funds transfers and credit card payments.
SWIFT bank transfers are the most commonly used payment method for international transactions. The majority of Australian banks are connected to the SWIFT electronic network, offering a rapid, reliable and cost-effective means of payment.
The Australian dollar, along with the main foreign currencies, is now also part of the Continuous Linked Settlement System / CLS, a highly automated interbank transfer system for processing international trade settlements.
The collection process starts with an initial phone call and a letter sent reminding the client of his obligation to pay the amount due plus any contractually agreed interest penalties or, lacking such a penalty clause, interest at the legal rate applicable in each State/Territory.
If the debt remains unpaid and the creditor’s claim is due for payment, uncontested, and over 2,000 AU$ (or after a ruling has been made), the creditor may issue a summons demanding payment within 21 days. Unless the debtor settles the claim within the required timeframe, the creditor may lodge a petition for winding-up of the debtor’s company, considered insolvent (statutory demand under section 459E of the Corporations Act 2001).
Under ordinary proceedings, once a statement of claim (summons) has been filed and where debtors have no grounds on which to dispute claims, creditors may solicit a fast-track procedure enabling them to obtain an enforcement order by issuing the debtor with an “application for summary judgement”.
This petition must be accompanied by an affidavit (a sworn statement by the plaintiff attesting to the claim’s validity) along with supporting documents authenticating the unpaid claim.
For more complex or disputed claims, creditors must instigate standard civil proceedings, an arduous, often lengthy process lasting up to two years, given the fact that court systems vary from one State/Territory to the next.
During the preliminary phase, the court examines the case documents attesting to the parties’ respective claims. During the subsequent “discovery phase”, the parties’ lawyers may request their adversaries to submit any proof or witness testimony that is relevant to the matter and duly examine the case documents thus submitted. Before handing down its judgement, the court examines the case and holds an adversarial hearing of the witnesses who may be cross-examined by the parties’ lawyers.
Local Courts or Magistrates Courts (depending on the State/Territory) hear minor disputes involving amounts ranging a up to a maximum of 150,000 AU$ in the State of Queensland.
Beyond these various thresholds, disputes involving financial claims up to 750,000 AU$ in New South Wales, Western Australia, or Queensland, for example, are heard either by the County Court or District Court, depending on the State/Territory.
Claims equal to those threshold amounts or greater are heard by the Supreme Court of each State.
As a general rule, appeals lodged against Supreme Court decisions, are heard by a Court of Appeal in that State/Territory. Any further appeal is heard by the High Court of Australia, located inCanberra, which will decide, with “leave” of the court itself, to only re-examine cases of clear legal merit.
Though the Australian legal system does not have commercial courts per se, in certain States, such asNew South Wales, commercial sections of the District or Supreme Courts offer fast-track proceedings for commercial disputes.
Since 1st February 1977, Federal courts have been created alongside the State/Territory courts and established in each State capital. The federal courts have wide powers to hear civil and commercial cases (like company law, winding up proceedings) as well as fiscal or maritime matters, intellectual property, consumer law, and so on.
In certain cases, the jurisdictional boundaries between State and Federal Courts may be indistinct and this may lead to conflicts depending on the merits of each case.
Arbitration and Alternative Dispute Resolution (ADR) procedures may also be used to resolve disputes more rapidly and obtain out-of-court settlements, often at a lower cost than through the ordinary adversarial procedure.