major macro economic indicators
|Main economic indicators||2015||2016||2017(f)||2018(f)|
|GDP growth (%)||2.4||2.5||2.5||2.9|
|Inflation (yearly average, %)||1.5||1.3||2.0||2.2|
|Budget balance (% GDP)||-2.8||-2.6||-2.0||-1.6|
|Current account balance (% GDP)||-4.7||-2.6||-1.9||-2.5|
|Public debt (% GDP)||36.0||39.0||42.0||42.0|
* 2018 fiscal year: from July 2017 to June 2018 (f): forecast
- Firm resistance to the financial crisis as well as to the collapse in commodity prices and mining investment
- Reactivity of economic policy and exchange rate flexibility
- Geographic proximity to emerging Asia
- Attractive quality of life with immigration contributing to population growth
- Mineral resources
- Moderate level of public debt
- Tourism potential
- Trade dependent on commodities (specifically iron ore, coal) and Chinese demand
- Substantial household debt (185% of gross disposable income)
- Shortage of skilled labour
- Shortage of infrastructure able to respond to vast territory
- Highly exposed to climate risks
- Disparity between the federal states
Growth close to long-term average
Activity is expected to pick up in 2018 with growth set proving steady and close to its long-term average. The decline in mining investment should bottom, while investment in other sectors (tourism, education, research and development) will rise and the construction of public infrastructure, both at Commonwealth and State level, will continue to advance. This should offset the sharp slowdown in house building, with house prices clearly stabilising in some cities against a background of tougher prudential rules on credit imposed by the Australian Prudential Regulation Authority and a slowdown in immigration. 50% of bank credit is linked to residential property. Despite continued employment growth, household consumption is expected to rise more moderately than before with little wage improvement and debt levels remaining very high - a quarter of households owe the equivalent of three or four years of earnings. Retail trade is, moreover, one of the rare sectors to lag behind, posting the highest level of bankruptcies ahead of construction. However, monetary policy will remain highly accommodative (central bank key rate at 1.5% in November 2017, unchanged since August 2016), at least if inflation remains below target (2-3%). Exports, 50% of which comprise gas, coal and iron ore, are expected to grow with the completion of several liquefied natural gas terminals. Since, at the same time, the moderation in household consumption and house building will put pressure on imports, trade’s contribution to growth is expected to increase. This assumes that commodity prices will not collapse should there be a slowdown in the Chinese economy.
Reasonable budget and external position
The authorities are aiming for fiscal equilibrium for the whole Commonwealth, States and local authorities by 2020-2021. Equilibrium is also the aim for the structural balance, i.e. smoothed out for cyclical effects. They expect to achieve this, while developing infrastructure, education and training (especially for the indigenous communities) and encouraging SMEs to invest in order to transition the economy from one focused on commodities to one that is diversified and to increase labour market participation and boost productivity. Moreover, the government plans to invest USD 30 billion in defence over the next ten years. Despite the fall in revenues due to to falling commodity prices, the deficit has only widened a little and the debt burden has grown only moderately, accounting for only 20% of GDP in June 2017, net of receivables.
The current account balance traditionally shows a moderate deficit, which, despite growing diversification, varies primarily in line with sales of commodities, namely with the volumes and prices, which depend above all on Chinese demand. As with goods, trade in services also shows a slight deficit. Tourism income and registration fees paid by foreign university students, especially from Asia, will not match spending by Australian tourists or ocean freight rates paid to foreign companies. The income balance also shows a deficit, more significantly because of dividend repatriation by mining companies and interest payments on external debt, mostly private (mining companies, banks, property sector) and denominated in Australian dollars, accounting for 128% of GDP (63% net of foreign assets).
A weak government
Having won 76 out of 150 seats in the Chamber of Representatives, i.e. a loss of 15 seats compared with the previous term, the centre-right coalition led by Prime Minister Malcolm Bligh Turnbull and made up of liberals and nationalists was victorious but weakened after early elections in July 2016. Its tiny majority was then lost following the ruling that MPs with dual nationality were ineligible to sit in Parliament. Nor has the government majority in the Senate and the Liberal Party is riven by splits, further damaging the adoption of legislation. In these circumstances, government instability, which has prevailed since 2010 (five prime ministers in seven years), is therefore expected to last. There is little likelihood of this government holding on until the normal election date of November 2019, which could lead to a change in majority from 2018. However, this is unlikely to have much impact on the economy, given the convergence towards diversification.
Externally, Australia’s policy is to align itself economically more closely with the Asia-Pacific region (especially China) and Europe, with which it has signed trade agreements while maintaining preferential relations with the United States. The authorities are paying greater attention to Chinese investments in the country, given the sectors concerned, as well as to immigration, which is not considered to sufficiently benefit the economy.
Last update: January 2018
Payment methods include:
- a) Cash: widespread payment method used by consumers for low-value transactions (37% of all transactions in 2016). Entities providing a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act must report cash transactions over AUD 10,000 to AUSTRAC.
- b) Personal cheques and bank cheques: used for domestic and international transactions. Cheque use has declined (-20% in 2016). In commercial transactions, they are generally bank cheques.
- c) Credit cards: have replaced cash as a payment method – increasing by 57% between 2010 and 2015.
- d) Electronic transactions: on its way to becoming the dominant payment process. This includes point-of-sale (POS) electronic transactions, as well as mobile apps, electronic funds transfer (EFR) and internet transactions.
- e) EFT electronic funds and SWIFT bank transfers: the most commonly used payment method for international transactions. The majority of banks are connected to the SWIFT electronic network.
- f) The Australian dollar is now also part of the Continuous Linked Settlement System (CLS), a highly automated interbank transfer system for processing both legs of foreign exchange transactions simultaneously.
Parties are encouraged to negotiate and take “genuine steps” to settle commercial disputes prior to commencing certain legal proceedings in the Federal Court and Federal Circuit Court. Examples of such steps include notifying the debtor of the issues and offering discussions in view of resolving the dispute, and providing relevant information and documents to the other person in order to solve the dispute. These steps are largely dependent on the amount of the claim, with greater success seen in disputes where the value is less than about AUD 50,000. With larger matters involving debtor companies with more than one director, attempts by the creditor to enter into settlement negotiations are ultimately unsuccessful.
Australian law does not provide for fast track legal proceedings as such. If the amicable phase fails, ordinary proceedings will take place. However, the New South Wales (NSW) Supreme Court has a special list for commercial disputes: once a matter is identified as being appropriate for that list, it will be proactively managed by the court to try and ensure an efficient resolution. Similar lists also operate for commercial disputes in the Supreme Courts of Victoria, Western Australia and Queensland.
If a corporate debt remains unpaid and the creditor’s claim is due for payment, uncontested, and over AUD 2,000, the creditor may issue a creditor’s statutory demand for payment of debt demanding payment within 21 days. Unless the debtor settles the claim within the required timeframe to the creditor’s satisfaction, or applies to the Court to have the statutory demand set aside, the creditor may lodge a petition for winding-up of the debtor’s company, The latter is presumed insolvent three months following the company’s failure to comply with the statutory demand. For individuals, the process is similar , but ,proceedings are required to be commenced in the Fed Circuit Court.
In NSW, under ordinary debt recovery proceedings, a statement of claim must be personally delivered and served to the debtor, who must then pay the debt, or file a defence on the creditor within 28 days. Failure to do so may result in a default judgment being entered against the debtor. It is worth nothing that there are different time frames for different states. If the debtor does not pay the debt and files a defence, orders will be made by the court to prepare the matter for hearing. This will ordinarily involve activities such as discovery and the preparation and exchange of evidence that will be relied upon at the hearing.
During the preliminary phase, the parties may request and exchange particulars of the claim or defence made by the other party. This may involve the exchange of documents referred to in the claim or defence, including copies of the relevant unpaid invoices and statements of account. If discovery is ordered, the parties will be required to exchange all documents that are relevant to their case. Otherwise, all documents which the parties wish to rely upon at the hearing must be included in the evidence of the parties. Before handing down its judgment, the court will examine the case and hold an adversarial hearing in which the witnesses of each party may be cross-examined by the other parties’ lawyers. In most cases, straightforward claims are likely to be settled within two to four months but more disputed claims may last more than a year.
If a party is not satisfied with the judgment awarded by the court, it may appeal the decision. In general, appeals lodged against Supreme Court decisions are heard by the Court of Appeal in that state/territory. Any further appeal thereafter is heard by the High Court of Australia, the party seeking to appeal must seek leave and persuade the court in a preliminary hearing that there is a special basis for the appeal, as the High Court will only re-examine cases of clear legal merit.
Local Courts or Magistrates Courts (depending on the state/territory) hear minor disputes involving amounts ranging up to a maximum of AUD 100,000 (NSW, Victoria, South Australia, Northern Territory, Western Australia, and Tasmania), AUD 150,000 (Queensland) or AUD 250,000 (Australian Capital Territory). Beyond these various thresholds, disputes involving financial claims up to AUD 750,000 in NSW, Western Australia, South Australia or Queensland are heard either by the County Court or District Court. There is no County Court or District Court in Tasmania, Northern Territory or Australian Capital Territory.Claims greater than AUD 750,000 in NSW, Queensland, Southern Australia, and Western Australia are heard by the Supreme Court of each State. The Victorian County Court and Supreme Court have an unlimited jurisdiction. In the other states and territories, the Supreme Court hears claims greater than: AUD 100,000 in the Northern Territory; AUD 250,000 in Australian Capital Territory; and AUD 50,000 in Tasmania.
Enforcement of a legal decision
A judgment is enforceable as soon as it is rendered by the court. The plaintiff has up to fifteen years following the entry of judgment to pursue enforcement of an Australian judgment through Examination Notices, Garnishee Orders or Writs of Execution. Examination Notices force the debtor to provide information on its financial situation and assets, helping to establish a recovery strategy. It must be requested from the court after judgment has been entered. The Garnishee Order allows the creditor to recover its debt directly from the debtor’s bank account or salary as well as from the debtor’s debtors, until the principal and interest are paid off. Finally, the Writ of Execution orders a sheriff to seize and sell the debtor’s property to the benefit of the creditor in payment of the debt (together with interest and costs) owing to the creditor. As for foreign awards, enforcement in Australia is governed predominantly by statutory regimes (Pt 6 of the Service and Execution of Process Act 1992 (Cth) for judgments given in Australia and Foreign Judgments Act 1992 (Cth) for judgments given outside Australia) and common law principles, such as the exequatur procedure. Furthermore, recognition depends on whether a reciprocal recognition and enforcement agreement exists between Australia and the issuing country.
Administration: A debtor company can be placed into administration by its directors, or by creditors that are owed money. The administrator will take full control of the company, and investigate and report to creditors as to the company’s business, property, affairs, and financial circumstances. There are three options available to creditors: end the administration and return the company to the director(s); approve a deed of company arrangement through which the company will pay all or part of its debts; or wind up the company.
Receivership: A receiver is appointed by a secured creditor who holds security or a charge over some or all of the company’s assets. His primary role is to collect and the company’s assets to repay the debt owed to the secured creditor. If the process fails, a liquidation procedure may be initiated.
Liquidation: Creditors or a court may wind up a company, and appoint a liquidator who collects, protects, and realises the company’s assets into cash, keep the creditors informed about the company’s affairs and distribute any proceeds of sale of company assets. Upon completion of the liquidation, the company is then deregistered.