Australian Economy



The Australian economy is among the biggest 15 economies in the world, as judged by GDP (according to the IMF).

How open is the economy of Australia?

What are its major industries?

Is it sinking in debt?

Let’s find out.

Profile of the Australian Economy

All right, as of 2016, according to data of the IMF, Australia had a big-ass GDP of 1.26 trillion USD. Which placed it solidly in the 13th position in the world.

While such GDP is measly in comparison to the US (18.6 trillion) or the EU (16.4 trillion), we have to put things in context.

Beyond the biggest 15 countries, GDP doesn’t reach a single trillion. Economy size falls quickly into the half trillion, third of a trillion, then High-Middle income countries (as defined by World Bank) with double digit billions.

So big, it’s hard to imagine difference in scale.

In that sense, Australia’s economy is more than ten times the size of countries in the middle of the distribution.

Cool. How about GDP per capita?

According to the CIA World Factbook, Australia’s GDP per capita is $48,800 (2016).

This puts the Australian Economy in a solid 29th place, ahead of luminaries such as Germany, Canada, and the United Kingdom (cooler no?)

Australia’s population is just 24.1 million (about 33% less than Canada’s, which explains the better GDP per capita: Canada’s GDP is only 25% higher).

Awesome.

Which are the cooler industries in Australia?

I’m not sure about cool, but as to the largest, we have mining, manufacturing, health services, and financial services, and tourism among many others.

Australia’s economy is well-diversified, with no single industry taking an exorbitant amount of GDP.

And like other developed economies, the Australian economy has evolved into a service-oriented machine (more than 70% of GDP comes from services).

Sydney, one of the most famous cities in Australia is the financial center of the country.

That’s neat.

What about international trade?

Total trade (exports + imports of both goods and services) as percent of Gross Domestic Product in Australia, hovered around 41% in recent years.

This means the Australian economy is very open.

To put this in context, the US’s is slightly lower than 30%, while Canada’s is around 60%.

As to the breakdown, about 18.2% is exports, while imports hover around 22% of GDP.

The most important exports for Australia come from the mining industry, especially iron ore.

However, many other natural resources (commodities) fill-in for the rest of Australia’s exports: gold, wheat, oil and gas, wool, you name it, they have it.

This makes the Australian Economy sensitive to price swing and demand/supply shocks in international commodity markets (double it for iron ore).

Debt Profile of Australia

The net government debt of Australia was estimated at 18.9% (percent of GDP) for 2016.

That’s much lower than other developed countries such as the United States (90%+), and Japan (130%+).

And still lower than other conservative nations like New Zealand (roughly 25%).

Maybe they could expand with more debt…

But you won’t find me making such recommendations.

What about household debt?

The same old thing: “Australia’s household debt crisis is worse than ever…” says a 2017 article at the top of google search results.

Does that have any credit?

It does.

According to trading economicsAustralia’s household debt reached 125% of GDP in 2016.

Wow.

Now, other countries have similar over-100% ratios (like Switzerland, Canada, and Netherlands).

In Australia, we ain’t broke no, no. Wait, did you take a loan for that Rolex?

But that doesn’t mean it isn’t high.

The US’s is below 80% of GDP, and countries such as Mexico have it as low as 16.4%.

What would be a more reasonable number? My gut says 50-80%.

This includes the United States (pushing it), Germany, France, the Euro Area, and Japan, since I’m trying to make a fairer comparison by only including G20.

And even then, 80% just seems high. But that’s me (a pretty conservative dude).

This wraps up our tour of the Australian Economy. Hope you enjoyed it.

And with that, I’m up.

See you later,

Emil Christopher,

The Forex Economist

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