Economic Growth

International Comparisons

During the last 10 years the Australian economy has grown at a consistent rate, and the results have been favourable when compared to those of our major trading partners. As a result, the goal for growth in Australia was increased during the period, as it was recognised that we have been able to achieve strong levels of growth without the negative side effects which had previously been a concern.

The most significant international economy to Australia is the USA. The US economy contributes significantly to world growth. With the introduction of a free trade agreement between our two countries in 2005 this link may grow even stronger. For the early part of the decade, our growth figures were very similar to those of the United States. However, in 2002 the US economy struggled to return to strong growth after the terrorist attacks caused a significant decrease in confidence. The Australian economy at this time increased to 3.9% - although our confidence levels were affected by the attacks we benefited from a stronger AUD and the successful implementation of the new tax system the previous year. After 2002 the US economy once again returned to positive growth; the rates of growth for the two countries have been similar since that time. However, weakness in the US economy due to the sub-prime mortgage lending that has been offered in that country provided some uncertainty for the Australian economy in 2007 and early 2008. In fact, as the economic situation in the USA deteriorates there will be consequences for every country on Earth.

Japan is another significant trading partner for Australia. The Japanese economy has struggled to achieve positive growth since the Asian currency crisis late in 1997. Since that time the Japanese economy has moved through an extended period of negative growth, with a resulting increase in unemployment as well. During 2002 the economy in Japan experienced a strong recessionary phase – contracting by 1.9%. This is significant for Australia, as while the Japanese economy is suffering they will not buy as many of our exports. Since 2004 the performance of the Japanese economy has been encouraging, and the outlook is also significantly improved. This may result in an improved trading performance for Australia, as Japan has always remained one of our most important export destinations.

Australia has experienced more stable growth than South Korea (which peaked at 12.1% in 2000, but fell by 1.1% during the crisis in 1997/8) and stronger figures than our trading partners in the European Union. Our rate of growth is often compared to the OECD G7 (the largest seven economies in the world), and it can be stated that during the last 10 years our rate of growth in comparison to this group has been very favourable. The credit crisis that gained momentum in the second half of 2008 pushed many economies in the European region into recession, while at the same time the Australian economy was able to maintain positive economic growth.

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