Australia Economic Outlook
Quality of life:
Australia boasts a prosperous, Western-style capitalist economy, with a per capita GDP among the highest in the world. The services sector accounts for the largest share of GDP, although agriculture and mining significantly contribute to exports. The country has a high standard of living and regularly ranks close to the top in global comparisons of national performance on metrics such as quality of life, health, education, economic freedom, and the protection of civil liberties and political rights.
Consistent growth:Barring the pandemic-induced contraction in 2020, Australia's economy has experienced non-stop growth for decades, supported by pro-market economic policies, large inward migration flows and improving trade ties with a booming Asian economy.
Mining giant:Australia is a major producer of minerals, including iron ore, coal, lithium and gold, which account for over two-thirds of total exports and 10% of GDP. That said, the services sector is still by far the largest contributor to Australia's economy, accounting for about 75% of GDP and employing the vast majority of the workforce. Major services sector include retail, finance, tourism, and professional services.
Healthy fiscal metrics:The public debt-to-GDP ratio is well below the OECD average, and the fiscal balance was in surplus in fiscal year 2023, a rarity among advanced nations. Healthy demographics, robust economic growth and mining revenue have supported the budget balance in recent years.
Challenges:Australia's large reliance on trade with China is a risk at a time when China is turning inwards economically, and tensions with the West are on the rise. Moreover, Australia is at risk from extreme weather, with wildfires and flooding becoming more widespread and damaging in recent years. In addition, Australia is not currently maximizing the value of some of its commodities—such as lithium—due to a lack of domestic refining capacity, something the government wishes to change.
Australia's economic outlook:Australia's economic outlook is favorable, buoyed by a large and growing consumer market, abundant natural resources, and a stable economic environment, and annual GDP growth should exceed 2% in the coming years.
Australia's Macroeconomic Analysis:
Nominal GDP of USD 1,739 billion in 2023.
Nominal GDP of USD 1,721 billion in 2022.
GDP per capita of USD 65,509 compared to the global average of USD 10,589.
GDP per capita of USD 65,340 compared to the global average of USD 10,589.
Average real GDP growth of 2.4% over the last decade.
Average real GDP growth of 2.5% over the last decade.
Sector Analysis
In 2021, services accounted for 72% of overall GDP, manufacturing 6%, other industrial activity 20%, and agriculture 2%. Looking at GDP by expenditure, private consumption accounted for 52% of GDP in 2021, government consumption 21%, fixed investment 23%, and net exports 4%.International trade
In 2021, manufactured products made up 8% of total merchandise exports, mineral fuels 28%, food 11%, ores and metals 43% and agricultural raw materials 2%, with other categories accounting for 8% of the total. In the same period, manufactured products made up 77% of total merchandise imports, mineral fuels 10%, food 6%, ores and metals 2% and agricultural raw materials 1%, with other goods accounting for 4% of the total. Total exports were worth USD 412 billion in 2022, while total imports were USD 289 billion.Main Economic Indicators
Economic growthUp until the pandemic, Australia exhibited steady GDP growth, underpinned by strong commodity exports and robust domestic consumption. The economy was resilient against global economic shifts, maintaining growth even during commodity price downturns. However, the COVID-19 pandemic caused a significant but short-lived recession in 2020. Post-pandemic, Australia's economy rebounded quickly, driven by effective health management and fiscal stimulus. To read more about GDP growth in Australia, go to our dedicated page.
Fiscal policy
Australia's fiscal position over the last decade saw a mixture of surpluses and deficits. Initially, the government focused on reducing the deficit, achieving a near-balanced budget by 2019. However, the COVID-19 pandemic in 2020 necessitated substantial fiscal stimulus, leading to a significant deficit. By 2022, efforts were underway to gradually reduce this deficit, translating into a budget surplus in the fiscal year ending in June 2023. Find out more on our dedicated page.
Unemployment
Australia's unemployment rate over the last decade showcased the economy's resilience. The rate remained relatively low and stable, fluctuating around 5-6% for most of the period. The country's effective economic policies contributed to a steady job market, even amidst global challenges. The COVID-19 pandemic caused a brief spike in unemployment, but Australia's quick recovery and strong policy response saw a swift return to low unemployment levels by 2022. For more information on Australia's unemployment click here.
Inflation
Australia's inflation was stable at around 2% in the years leading up to the pandemic, thanks to effective monetary policy. However, the aftermath of the COVID-19 pandemic brought a rapid rise in inflation, reflecting the global trend of increased consumer prices due to disrupted supply chains and economic stimulus measures. Go to our Australia inflation page for extra insight.
Monetary Policy
Australia's central bank maintained relatively low policy rates for much of the last decade. Rates were cut several times to historic lows, particularly during the COVID-19 pandemic, to support economic growth and mitigate the pandemic's impact. However, monetary policy was then tightened sharply, with the policy rate rising to over 4% by end-2023, as the central bank looked to ward off inflation. See our Australia monetary policy page for additional details.
Exchange Rate
The Australian dollar experienced notable fluctuations over the last decade, but has generally been on a depreciatory trend against the U.S. dollar. Overall, the Australian dollar's movement reflected the country's strong ties to global commodity markets and domestic interest rates relative to those in the U.S. For more info on the Australian dollar, click here.
Economic situation in Australia
Our panel expects sequential economic growth to have accelerated in Q3 from Q2’s uninspiring result and remained robust at the outset of Q4. Available data supports these predictions, as retail sales rose at a faster quarter-on-quarter pace in Q3 than in Q2, aided by lower inflation and a strong labor market in the quarter. In addition, the services sector PMI averaged firmly in expansionary territory, and goods exports improved in quarterly terms in Q3. Less positively, fixed investment likely remained weak owing to tight financing conditions, while survey data hints that the manufacturing sector remained in the doldrums through October. In other news, China recently agreed to lift a four-year-long ban on Australian lobster imports, while Singapore approved a multi-billion dollar project to import solar energy from Australia via undersea cable, boding well for trade and investment.Australia Economic Forecasts
Projections out to 2034.50 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 34 expert analysts.
Want to get insight on the economic outlook for Australia in the coming years? FocusEconomics collects projections out to 2034 on 50 economic indicators for Australia from a panel of 34 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Australia economy. To download a sample report on the Australia's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Australia Economic Indicators
Frequently Asked Question about Australia's Economy
What is the future of the Australian economy?
Why is Australia so successful?
Is Australia headed for a recession?
Australia is expected to continue benefiting from rapid population growth and its strong natural resource sector, but economic performance will depend on diversification efforts, trade relationships, and measures to address economic challenges like income inequality and climate change. Investing in innovation, education, and infrastructure will be crucial for driving long-term economic prosperity.
Australia's success can be attributed to various factors, including its stable political environment, skilled workforce, abundant natural resources, strong institutions, and open market policies.
Australia's economy faces uncertainty amid global trade tensions, a waning Chinese economy and stubborn price pressures. Despite these challenges, economic growth is expected in 2023 and 2024, and the Australian economy should avoid recession.