Why Australian Investment Property?
Overview of Australia
Australia is an independent Western democracy with a population of more than 20 million. It is the world’s largest island with an area of 7.7 million square kilometers, which is only slightly smaller than mainland USA or about 20 times the size of Japan. Australia is one of the world’s most urbanised countries, with about 70 per cent of the population living in the 10 largest cities. Most of the population is concentrated along the eastern seaboard and the south-eastern corner. Australia’s lifestyle reflects its mainly Western origins, but Australia is also a multicultural society, which has been enriched by over six million settlers from almost 200 nations. Four out of ten Australians are migrants or the first-generation children of migrants, half of them from non-English speaking backgrounds. The national capital is not Sydney as many may think, but Canberra in the Australian Capital Territory. Halfway between Sydney and Melbourne.
Australia is the lowest, flattest and apart from Antartica, the driest continent. It features a wide range of climatic zones from the tropical regions of the north, through the dry interior to more temperate regions in the south. About one third of the country lies in the tropics. Australia has a coastline of some 36,735km.
Australia is famous for the remote outback of its interior but with unspoilt beaches, tropical rainforest, rugged mountain ranges, vast deserts and not to forget the largest coral reef in the world, Australia is in fact a country of great contrasts. Australia has 14 World Heritage Listed Areas including the Great Barrier Reef and Uluru, outside Australia still more commonly known as Ayers Rock.
Economic Conditions
Australia has one of the strongest economies in the world, with almost two consecutive decades of growth and the unemployment rate falling to generational lows. As a result of nearly three decades of structural and policy reforms the economy is flexible, resilient and increasingly integrated with global markets. The strength of Australia’s economy has been highlighted in recent years by its ability to withstand a number of internal and external events, including a major drought, a housing boom and the Asian financial and economic crises.
Australia in Numbers:
Population:
Population Growth:
GDP:
GDP per capita:
GDP Growth:
Median Age:
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Interest Rate:
Population Growth:
GDP:
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21,450,000 (2008)
...
...
$909 billion (2007)
$43,163
...
$ (per household)
%
Source: ABS and RBA
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$909 billion (2007)
$43,163
...
$ (per household)
%
Since 1991, Australia’s real economy has grown by an average of 3.3 per cent a year. Australia’s gross domestic product (GDP) in 2007 (in value terms) was around $1 trillion. Unemployment has also fallen, from a peak of almost 11 per cent 15 years ago to below 5 per cent in 2008—the lowest level since the 1970s. As a result of sustained budget surpluses, Australia is now in a strong fiscal position.
Between 2002–03 and 2006–07, Australia’s budget surplus averaged between 1 per cent and 1.6 per cent of GDP. These surpluses have been used primarily to retire government debt. After peaking at 18.5 per cent of GDP ($95.8 billion) in 1995–96, net government debt was eliminated in 2005–06, with Australia now a net creditor equivalent to an estimated 2.7 per cent of GDP ($28.1 billion).
In its 2007 Economic Survey of Australia, the Organisation for Economic Co-operation and Development (OECD) described Australia’s macroeconomic performance as impressive, with GDP growth since 2000 averaging above 3 per cent a year and growth in real gross domestic income averaging more than 4 per cent (including the terms of trade gains). The OECD forecasts that Australia’s economic growth in 2008 will be 3.3 per cent, well above the average OECD forecast growth rate of 2.7 per cent.
According to the OECD, Australia’s standard of living has also risen significantly and now surpasses the standards of all Group of Eight countries except the United States.
Since 1970, effective rates of assistance to the manufacturing sector in Australia have fallen from 35 per cent to less than 5 per cent today. This competitive and innovative culture has resulted in more people around the world using Australian technology, expertise and manufactured products in their daily lives. Today, Australia’s infrastructure is extensive and world class, providing individuals and businesses with efficient and reliable domestic and international transport services; communications and information technology; utilities and power distribution systems; and financial services.
Changes to, and simplification of, the tax system have also led to significant reductions in business costs, especially for exporters. The goods and services tax (GST) is levied at 10 per cent and applies to almost all goods and services. There is no stamp duty on share transactions and the corporate tax rate is 30 per cent. The government also provides tax incentives of up to 175 per cent to encourage businesses to invest in research and development. Australia continues to build on the twin foundations of domestic structural reform and increased international market access, won through a competitive and innovative export base and a strong commitment to world trade liberalisation.
The depth, liquidity and sophistication of Australia’s markets underpin Australia’s attractiveness as a global financial services centre. The 2007–08 World Economic Forum Global Competitiveness Report ranked Australia’s financial markets as the seventh most sophisticated in the world. The Australian foreign exchange market is ranked seventh in the world by turnover and the Australian dollar is the sixth most actively traded currency in the world, after the US dollar, the euro, the Japanese yen, the UK pound and the Swiss franc. Australia’s status as the Asia–Pacific centre for funds management has attracted global financial institutions since the mid-1990s.
As a result of a universal, compulsory employer-funded pension scheme, Australia’s investment funds asset pool of around $US864 billion continues to be the largest in the Asia–Pacific region and the fourth largest in the world. The pool’s size and rapid growth offer substantial business opportunities for international financial groups. Overseas companies manage around half of Australia’s total investment funds, either directly or through joint ventures with local companies.
In 2006–07, the finance and insurance sectors comprised 7.3 per cent of the Australian economy (compared to 7 per cent for mining, including services to mining). Financial services have had an average annual real growth rate of 4.7 per cent over the past 20 years.
Foreign investment is governed by the Foreign Investment Review Board (FIRB) and regulations for investment in residential real estate are reasonably flexible.
The resources sector, which is the largest single export sector and accounts for half of GDP, seems to be slowing with numerous projects being delayed or cancelled. In November 2008, unemployment rose to 4.4%, and is forecast to reach 5.3% in 2009, and to 6% in 2010, as more Australians lose their jobs due to worsening economic conditions. To boost the economy and combat the global financial crisis, the government introduced massive fiscal stimulus packages and loosened monetary policy.
Australia’s central bank, the Reserve Bank of Australia (RBA), cut interest rates to a six-year low of 4.25% in December 2008. Standard variable mortgage rate dropped to 8.35% in October 2008 from 9.45 in April 2008. The 3-year fixed mortgage rate also fell to 7.75% in October 2008 from 8.95% in July 2008.
Australia's estimated resident population as of 2008 was just under 21.5 million, an increase of 1.6% over the previous year and one of the highest population growth rates in the Western world. Australia’s population is estimated to increase by some 60% to around 34 million people by the year 2050 (see article on Australian Demographics).
The growth of Australia's population has two components: natural increase (the number of births minus the number of deaths) and net overseas migration (net permanent and long-term migration plus the migration adjustment). Since Federation in 1901, Australia's population has increased by over 18 million people. The main component of population growth in Australia has been natural increase, which has contributed about two-thirds of the total growth since the beginning of the 20th century.
Since 1945, over six million people from 200 countries have come to Australia as new settlers. Migrants have made a major contribution to shaping modern Australia and people born overseas make up almost one quarter of the total population.
Most of Australia’s population is concentrated in two widely separated coastal regions. By far the larger of these, in terms of area and population, lies in the south-east and east. The smaller of the two regions is in the south-west of the continent. In both coastal regions the population is concentrated in urban centres, particularly the state and territory capital cities.
Australia is the world’s smallest continent and sixth-largest country but despite its wide spaces, Australians are mostly urban dwellers. More than 80 per cent live in big coastal cities, particularly in southern areas of the continent. The largest city, Sydney, has a population of 3 645 153 over 1771 square kilometres—a density of 2058 people per square kilometre. In contrast, in the whole of the largest state, Western Australia (which has approximately the same area as Greenland), the population density is less than one person per square kilometre. The preliminary estimated resident population of Australia at 30 September 2007 was 21 097 100 persons. This was an increase of 318 500 since 30 September 2006, an annual population growth rate of 1.53 per cent—Australia’s fastest annual growth rate since 1989 when it was 1.56 per cent.
In common with many other developed countries, Australia is experiencing a demographic shift towards an older population, with more retirees and fewer people of working age as a result of low fertility and increased life expectancy. The median age of the resident population was 37 years in 2006, up from 35 years in 2001. The proportion of the population aged 55–64 years increased from nine per cent to 11 per cent between the 2001 and 2006 censuses. Over the same period the proportion of children aged 14 or below in the population decreased slightly. However, there were about 16 500 more young children aged 0–4 years in 2006 than in 2001, indicating an increase in Australia’s birth rate.
There are about five million families in Australia. Couples with children continue to be the most common family type, although as a proportion of all families, this type decreased slightly to 45 per cent between 2001 and 2006. The proportion of couples without children is around 37 per cent. One parent families make up 15.8 per cent of the total families counted in the 2006 Census. Just under half (49.6 per cent) of the Australian resident population is married.
In its 2007 Economic Survey of Australia, the Organisation for Economic Co-operation and Development (OECD) described Australia’s macroeconomic performance as impressive, with GDP growth since 2000 averaging above 3 per cent a year and growth in real gross domestic income averaging more than 4 per cent (including the terms of trade gains). The OECD forecasts that Australia’s economic growth in 2008 will be 3.3 per cent, well above the average OECD forecast growth rate of 2.7 per cent.
According to the OECD, Australia’s standard of living has also risen significantly and now surpasses the standards of all Group of Eight countries except the United States.
Stable economic structure
As a result of the continuous structural and policy reforms implemented since the 1970s, Australia today has a sound, stable and modern institutional and regulatory structure that provides certainty to business and offers a welcoming destination for investment. As part of its ambitious reform agenda, Australia has progressively dismantled or cut many of its former protectionist tariffs, introduced domestic competition laws, deregulated its financial market, floated its exchange rate, decentralised its labour market and credibly ‘anchored’ its macroeconomic policies. Australia has lowered barriers to trade and investment and there is substantial competition across the economy, including in key areas such as the financial, air transport and telecommunications sectors.Since 1970, effective rates of assistance to the manufacturing sector in Australia have fallen from 35 per cent to less than 5 per cent today. This competitive and innovative culture has resulted in more people around the world using Australian technology, expertise and manufactured products in their daily lives. Today, Australia’s infrastructure is extensive and world class, providing individuals and businesses with efficient and reliable domestic and international transport services; communications and information technology; utilities and power distribution systems; and financial services.
Changes to, and simplification of, the tax system have also led to significant reductions in business costs, especially for exporters. The goods and services tax (GST) is levied at 10 per cent and applies to almost all goods and services. There is no stamp duty on share transactions and the corporate tax rate is 30 per cent. The government also provides tax incentives of up to 175 per cent to encourage businesses to invest in research and development. Australia continues to build on the twin foundations of domestic structural reform and increased international market access, won through a competitive and innovative export base and a strong commitment to world trade liberalisation.
Trading with the world
Australia’s two-way trade in goods and services was valued at $443.6 billion in 2006–07, or about 1 per cent of total world trade. Japan is Australia’s largest trading partner, followed by China, the United States, the United Kingdom and Singapore. Australia’s exports of goods and services rose 16 per cent to reach their highest value on record of $215.8 billion in 2006–07—about 21 per cent of Australia’s GDP. Australia’s businesses are competitive across a wide range of sectors. Australia has long been a major exporter of agricultural, minerals and energy commodities. More recently Australia has diversified into new services and sophisticated manufacturing export markets.Australia’s e-readiness
Information and communications technology is a key driver of Australia’s strong economic growth and innovation. According to a survey by the Economist Intelligence Unit, Australia ranked ninth out of 69 countries in terms of e-readiness in 2007. It ranked first in the Asia–Pacific region and equal second in the world for both its ‘e-literate’ social and cultural environment and its legal environment. According to a survey by the Australian Bureau of Statistics, 60 per cent of Australian households had home Internet access in 2005–06 and 70 per cent had access to home computers. There has been a significant transformation in the telecommunications sector in the past 10 years, following the Australian Government’s introduction of open competition in the market in 1997.Sophisticated financial services sector
Australia is a major regional financial centre, with a sophisticated financial system and transparent markets. According to the most recent Global Stock Market Review by Standard and Poor’s, Australia’s stock market is the ninth largest in the world in total market capitalisation terms and the second largest in the Asia–Pacific region, after Japan’s. More than 2000 companies, with a total market capitalisation of $1.6 trillion, were listed on the Australian Stock Exchange in 2007. Australia has one of the highest rates of share ownership in the world; more than 50 per cent of the adult population owns shares in publicly listed companies. Australia’s trading day spans the close of business in the United States and the opening in Europe.The depth, liquidity and sophistication of Australia’s markets underpin Australia’s attractiveness as a global financial services centre. The 2007–08 World Economic Forum Global Competitiveness Report ranked Australia’s financial markets as the seventh most sophisticated in the world. The Australian foreign exchange market is ranked seventh in the world by turnover and the Australian dollar is the sixth most actively traded currency in the world, after the US dollar, the euro, the Japanese yen, the UK pound and the Swiss franc. Australia’s status as the Asia–Pacific centre for funds management has attracted global financial institutions since the mid-1990s.
As a result of a universal, compulsory employer-funded pension scheme, Australia’s investment funds asset pool of around $US864 billion continues to be the largest in the Asia–Pacific region and the fourth largest in the world. The pool’s size and rapid growth offer substantial business opportunities for international financial groups. Overseas companies manage around half of Australia’s total investment funds, either directly or through joint ventures with local companies.
In 2006–07, the finance and insurance sectors comprised 7.3 per cent of the Australian economy (compared to 7 per cent for mining, including services to mining). Financial services have had an average annual real growth rate of 4.7 per cent over the past 20 years.
Foreign investment
Australia welcomes foreign investment. It recognises the important role of foreign investment in boosting economic growth, developing competitive industries, creating jobs and increasing exports. The stock of foreign investment in Australia (portfolio, direct, financial derivatives and other investment) in June 2007 totalled $1.6 trillion. Portfolio investment makes up about 63 per cent of total foreign investment. In 2006–07, foreign direct investment totalled $331 billion. In the decade to 2007, Australia was the fifth largest net recipient of foreign direct investment in the OECD.Foreign investment is governed by the Foreign Investment Review Board (FIRB) and regulations for investment in residential real estate are reasonably flexible.
Latest Economic News
The Australian economy is expected to slow down as the contagion from the global credit crunch spreads. Projected GDP growth is 2.5% in 2008 and 1.7% in 2009, according to the latest forecasts from OECD. In Q3 2008, the economy grew by a negligible 0.1%, its lowest growth in 8 years, but so far Australia has avoided falling into recession unlike most other Western economies.The resources sector, which is the largest single export sector and accounts for half of GDP, seems to be slowing with numerous projects being delayed or cancelled. In November 2008, unemployment rose to 4.4%, and is forecast to reach 5.3% in 2009, and to 6% in 2010, as more Australians lose their jobs due to worsening economic conditions. To boost the economy and combat the global financial crisis, the government introduced massive fiscal stimulus packages and loosened monetary policy.
Australia’s central bank, the Reserve Bank of Australia (RBA), cut interest rates to a six-year low of 4.25% in December 2008. Standard variable mortgage rate dropped to 8.35% in October 2008 from 9.45 in April 2008. The 3-year fixed mortgage rate also fell to 7.75% in October 2008 from 8.95% in July 2008.
Population
Australia's estimated resident population as of 2008 was just under 21.5 million, an increase of 1.6% over the previous year and one of the highest population growth rates in the Western world. Australia’s population is estimated to increase by some 60% to around 34 million people by the year 2050 (see article on Australian Demographics).
The growth of Australia's population has two components: natural increase (the number of births minus the number of deaths) and net overseas migration (net permanent and long-term migration plus the migration adjustment). Since Federation in 1901, Australia's population has increased by over 18 million people. The main component of population growth in Australia has been natural increase, which has contributed about two-thirds of the total growth since the beginning of the 20th century.
Since 1945, over six million people from 200 countries have come to Australia as new settlers. Migrants have made a major contribution to shaping modern Australia and people born overseas make up almost one quarter of the total population.
Most of Australia’s population is concentrated in two widely separated coastal regions. By far the larger of these, in terms of area and population, lies in the south-east and east. The smaller of the two regions is in the south-west of the continent. In both coastal regions the population is concentrated in urban centres, particularly the state and territory capital cities.
Australia is the world’s smallest continent and sixth-largest country but despite its wide spaces, Australians are mostly urban dwellers. More than 80 per cent live in big coastal cities, particularly in southern areas of the continent. The largest city, Sydney, has a population of 3 645 153 over 1771 square kilometres—a density of 2058 people per square kilometre. In contrast, in the whole of the largest state, Western Australia (which has approximately the same area as Greenland), the population density is less than one person per square kilometre. The preliminary estimated resident population of Australia at 30 September 2007 was 21 097 100 persons. This was an increase of 318 500 since 30 September 2006, an annual population growth rate of 1.53 per cent—Australia’s fastest annual growth rate since 1989 when it was 1.56 per cent.
In common with many other developed countries, Australia is experiencing a demographic shift towards an older population, with more retirees and fewer people of working age as a result of low fertility and increased life expectancy. The median age of the resident population was 37 years in 2006, up from 35 years in 2001. The proportion of the population aged 55–64 years increased from nine per cent to 11 per cent between the 2001 and 2006 censuses. Over the same period the proportion of children aged 14 or below in the population decreased slightly. However, there were about 16 500 more young children aged 0–4 years in 2006 than in 2001, indicating an increase in Australia’s birth rate.
There are about five million families in Australia. Couples with children continue to be the most common family type, although as a proportion of all families, this type decreased slightly to 45 per cent between 2001 and 2006. The proportion of couples without children is around 37 per cent. One parent families make up 15.8 per cent of the total families counted in the 2006 Census. Just under half (49.6 per cent) of the Australian resident population is married.