Recent Developments
• Australia’s economy expanded 2.3% in 2011, up slightly from 2.2% in 2010. The IMF expects the Australian economy to grow 3.3% in 2012.
• Jobless rate stood at 5.2% in February 2012, up from 5.1% in January.
• Consumer Price Index recorded an annual growth rate of 3.1% in 2011.
• Retail sales grew 2.5% year-on-year (YoY) in February 2012, after 2.7% gain in January.
• The Westpac-Melbourne Institute Index of Consumer Sentiment dropped from 101.1 in February 2012 to 96.1 in March (an index below the 100 level shows pessimistic sentiment).
• Hong Kong’s total exports to Australia gained 9.2% in 2011, with the growth moderating to 8.9% YoY in the first two months of 2012. Imports from Australia fell 6.6% YoY in the first two months of 2012, reversing the 20% growth in 2011.
Current Economic Situation
Australia is one of the fastest growing economies among developed countries, registering an annual growth rate of 2.3% in 2011, up from 2.2% in 2010. In the final quarter of 2011, real GDP gained 2.3% YoY, moderating from 2.6% in the third quarter. The economy is expected by the IMF to grow 3.3% in 2012.
Jobless rate stood at 5.2% in February 2012, up from 5.1% in January. The number of people employed decreased by 15,400 to 11,444,000 in February 2012, mainly driven by the fall in part-time employment.
Consumer Price Index (CPI) recorded an annual growth rate of 3.1% in 2011. In light of the moderation in domestic inflation and weak outlook of developed economies Reserve Bank of Australia, the country’s central bank, kept interested rates unchanged at 4.25% in April 2012.
Retail sales grew 2.5% YoY in February 2012, after 2.7% gain in January. Considering the population growth at 1.5% and retail price inflation at 1.5% during the same period, the growth rate of retail sales implied declines in per-capita retail sales volume. The result was in line with slowdown in domestic demand as reported.
The Westpac-Melbourne Institute Index of Consumer Sentiment dropped from 101.1 in February 2012 to 96.1 in March, with the index below the 100 level showing pessimistic sentiment. Recent data releases showing weak growth in GDP in the final quarter of 2011 and a rise of the unemployment rate in February are seen as contributing to the pessimistic consumer sentiment.
The resources sector continues to play a vital role in Australia’s economy, providing more than 150,000 jobs in the country. It has been the main contributor to Australia’s export spree, thanks to rising commodity prices since 1999. The share of resources sector in total export share has surged to more than 50% in 2011 from about a quarter in 1999.
Trade Policy
Australia is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding. Most goods can be freely imported.
Australia has been active in pursuing free trade agreements. According to the Australian government, free trade agreements (FTAs) have been signed with New Zealand, Singapore, the US, Chile, Thailand and ASEAN. Currently, it is pursuing FTAs with China, India, Malaysia, Japan, Korea, Indonesia, and the Gulf Cooperation Council.
China-Australia Trade
China surpassed Japan to become the largest trading partner of Australia in 2009, with bilateral trade totaling A$85.1 billion (US$68.1 billion). In 2011, bilateral trade between China and Australia reached A$114 billion (US$110.7 billion), accounting for some 23% of the total merchandise trade of Australia. China is the biggest destination of Australian exports, followed by Japan and South Korea. In 2011, China bought A$71.9 billion (US$69.8 billion) worth of merchandise products, accounting for 27% of Australia’s total exports.
On the other hand, China is Australia’s largest source of imports, ahead of the US and Japan. In 2011, Australia imported A$42.1 billion (US$40.9 billion) worth of goods from China, accounting for some 18% of the country’s total imports. Major imported items included clothing, toys, computers, communications equipments, furniture, prams and sporting products.
China and Australia commenced FTA negotiations in April 2005, following a consideration of a joint feasibility study and 17 rounds of negotiations, with the last round concluded in November 2011, focusing mainly on market access for goods and liberalisation of service and investment.
To forge closer economic ties, Australia and China signed some framework agreements to provide expanded business opportunities for Australian enterprises on the Chinese mainland. Framework agreements were signed with Hubei and Anhui Provinces in December 2009 and May 2010 respectively, focusing on clean energy, autos and other strategic sectors.
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