What services could Australia export to Asia?

Australia's economy on the road to recovery

Economic development: Australia copes with the crisis comparatively well

The Australian economy is again looking slightly optimistic about the future. Thanks to successful pandemic measures, the spread of Covid-19 has been contained.

After extensive relaxation of the Corona regulations, everyday life is returning to the country's metropolises. This will initiate a broad economic recovery. The labor market in particular is sending positive signals. Since the low point in May 2020, around 650,000 new jobs had already been created by October 2020.

The economic downturn caused by Covid-19 is therefore mild in an international comparison. The Organization for Economic Cooperation and Development (OECD) expects Australia's gross domestic product (GDP) to decline by 3.8 percent in 2020. Commercial banks like Westpac are more optimistic and only expect a minus of 3.3 percent. For 2021, economists are forecasting an upswing with an increase in GDP of around 3 percent.

The deepening tensions with China's most important trading partner are causing uncertainty. Around 40 percent of Australian exports go to the People's Republic. Beijing is constantly covering Australia with new trade restrictions. A kind of needle prick tactic is used. The restrictions hurt the Australian economy but relate to goods that China can easily source from other countries.

In December 2020, Australian wine was subject to punitive tariffs of up to 200 percent. The Chinese authorities are also no longer handling cargo ships carrying Australian coal. Barley, beef and seafood were already targeted. Australian companies therefore hope that a dialogue with China can be established in the coming months. In addition to the exclusion of Huawei from the 5G network, the Australian demand for an independent investigation into the origin of Covid-19 had weighed on the relationship.

Economic key data Australia

indicator

2018

2019

Comparative data Germany 2019

GDP (nominal, billion US $)

1.421

1.387

3.854,4

GDP per capita (US $)

56.433

54.348

46.385

Population (million)

25,2

25,5

83,1

Exchange rate (annual average, 1 US $ = $ A)

0,7479

0,6952

Investments: Companies are likely to act cautiously in 2021

According to OECD forecasts, gross fixed capital formation could increase by 2.1 percent in 2021. The government provides incentives for business investment. Until June 2022, there is the option of unlimited immediate depreciation for movable assets.

An increase in investment expenditure is foreseeable for the raw materials sector. According to surveys by the national statistical office, companies want to increase their investments by 2.8 percent in the 2020/21 financial year (July to June). In addition, spending on infrastructure expansion will be increased by the equivalent of US $ 9.7 billion over the next four years. The majority flows into transport projects in the metropolises of Sydney, Melbourne, Brisbane and Perth.

Preparatory work for the new Sydney Metro West will start at the end of 2020. Work on the Airport Rail Link in Melbourne is scheduled to begin in 2022.

Selected major projects in Australia

Current calls for tenders from the Australian federal government can be found at AusTender, and there are also portals from states such as New South Wales and Victoria.

Consumption: Consumer confidence is consolidating

The improved prospects for the labor market have a positive effect on willingness to consume. Even at the height of the local corona restrictions, unemployment was feared to rise to over 10 percent. New forecasts expect a high of around 7.5 percent by the end of 2020. Numerous new jobs are likely to be created again in 2021 and unemployment is likely to fall below the 7 percent mark again.

Government aid measures such as state wage subsidies under the JobKeeper Allowance program and increased unemployment benefits will run until March 2021. Thereafter, the upswing should largely be self-sustaining.

The central bank expects wage increases to be less than 2 percent in the next two years. Due to the increase in the number of employees, a significant increase in consumer spending is to be expected in 2021.

The retail sector is getting through the crisis quite well overall. In the first three quarters of 2020, sales rose by a seasonally adjusted 4.9 percent. Housewares and electronics retailers are posting record results.

Foreign trade: raw material exports support the economy

The export of iron ore, the most important export commodity, is expected to reach a record of around 900 million tons in 2021. A new high is also expected for gold exports (383 tons). Mining companies are increasing their exploration for battery raw materials in order to be able to meet the expected increase in demand in the coming years.

In addition to raw materials, education and tourism are also important export goods. The Australian borders are likely to be reopened to international travel in the course of 2021. Foreign students are an important source of income for universities and the associated research landscape.

There are signs of a negative development for bilateral trade with Germany in 2020. In the first three quarters, German exports slumped 11.4 percent compared to the previous year.

Negotiations for a free trade agreement between the European Union and Australia are ongoing via video conferences. Completion is expected in 2021.

Foreign trade Australia (in billion US $; nominal change in percent)

2018

2019

Change in 2019/2018

Imports

237,2

223,7

-5,7

Exports

258,4

271,5

5,1

Trade balance

21,2

47,8

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