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- GDP (PPP):
- $970.8 billion
- 3.6% growth
- 2.5% 5-year compound annual growth
- $42,640 per capita
- Inflation (CPI):
- FDI Inflow:
Australia’s economic freedom score is 82, making its economy the 3rd freest in the 2014 Index. Its overall score is 0.6 point lower than last year, with a gain in investment freedom outweighed by declines in monetary freedom and labor freedom. Australia is ranked 3rd out of 42 countries in the Asia–Pacific region.
Over the 20-year history of the Index, Australia has advanced its economic freedom score by 7.9 points, one of the 10 biggest improvements among developed economies. Substantial score increases in six of the 10 economic freedoms, including business freedom, investment freedom, and freedom from corruption, have enabled Australia to achieve and sustain its economically “free” status in the Index.
With an economy that benefits from sound fundamentals including monetary stability, low public debt, and a vibrant employment market, Australia has weathered the global economic uncertainty well. Openness to global trade and investment is firmly institutionalized, supported by a relatively efficient entrepreneurial framework and a well-functioning independent judiciary. Australia has a strong tradition of reliable property rights protection, and the legal system is transparent and evenly applied. Effective anti-corruption measures are in force.
Since the early 1980s, successive governments have deregulated financial and labor markets and reduced trade barriers. In September 2013, Liberal Party leader Tony Abbott became prime minister following his coalition’s victory in national elections. Australia is one of the Asia–Pacific’s richest countries and has enjoyed economic expansion for over two decades. It came through the global recession relatively unscathed, but stimulus spending by the previous Labor government generated a deficit. Australia is internationally competitive in services, technologies, and high-value-added manufactured goods. Mining and agriculture are important exports.
Anti-corruption measures generally discourage bribery of public officials. In 2013, however, a special Independent Commission Against Corruption investigated two former state ministers in New South Wales on allegations of a conspiracy to profit from mining leases. Australia’s judicial system operates independently and impartially. Property rights are secure, and enforcement of contracts is reliable. Expropriation is highly unusual.
Australia’s top individual tax rate is 45 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added-tax (VAT) and a capital gains tax. The carbon tax has been abandoned for a cap-and-trade system. The overall tax burden has fallen to 25.6 percent of GDP. Government spending amounts to 35.3 percent of total domestic output, and public debt remains at 27.6 percent of GDP.
Australia’s highly competitive regulatory framework promotes business formation and operational efficiency. With no minimum capital standards, starting a company requires only one procedure. Flexible labor regulations enhance employment and productivity growth. A controversial carbon pricing scheme encourages consumers to use alternative energy sources that otherwise would not be economically viable.
Australia has a 1.8 percent average tariff rate. The government has reduced tariff and non-tariff barriers both unilaterally and through negotiated trade agreements. Foreign investment in a few “sensitive sectors” is limited. The open financial sector is highly competitive and well-developed. All banks are privately owned, and prudent regulations have allowed them to withstand the global financial turmoil with little disruption.