In June 2021, Australia experienced an outbreak of the Delta variant of COVID-19. A number of states went into lockdown. As a result, Australia’s economic outlook for the second half of 2021 is uncertain. Economic activity and employment are expected to fall in the third quarter.
The high transmissibility of the new variant means a gradual reopening of the economy in affected areas may be needed. Lengthy lockdowns, however, are unlikely.
The Australian economy expected to bounce back in 2022
The Australian economy is expected to bounce back in 2022 for a number of reasons. These include:
- the government’s substantial fiscal support
- the economy’s underlying momentum
- the financial support to households and businesses in areas affected by lockdowns
- the vaccination rollout’s progress.
Resources and energy export projected to remain strong in 2020–21
Australia’s resources and energy exports have increased by a factor of five in 20 years. Exports of these two commodities increased by 3% to over A$290 billion in the year to June 2020 (Source: Department of Industry, Science, Energy and Resources, Resources and Energy Quarterly, June 2021).
Australia’s resources and energy exports are projected to hit A$310 billion in 2020–21. This is an impressive result during a global pandemic. Our vaccine rollout is spurring economic activity among Australia’s trading partners, including China and the US.
Continued strong trade links across the Asian region
Australia is a highly globalised economy. Trade accounts for over 40% of our nominal GDP. Twelve of Australia’s 15 largest trading partners are in the Asia region. These partners account for two-thirds of Australia’s total exports. This reflects Australia’s geographical good fortune and our free trade agreements with key Asian economies.
China remained Australia’s largest trading partner in 2020, accounting for around 31% of total two-way trade. Japan and Korea continue to be important trade partners, representing around 13% of total trade.
Many exporters have diversified their markets. For example, the ASEAN region now accounts for almost 13% of total trade. Australia also maintains strong trading links with traditional partners. The EU and the UK account for 13% of total trade. The US accounts for another 9%.
A highly educated, multicultural country
Australia is one of the world’s most literate and educated nations. Australia ranks eighth in the world on the UN’s Human Development Index, a comparative measure of literacy and education. According to the World Economic Forum’s latest Global Competitiveness Report, Australia’s scientific publication scores are among the world’s highest. So are its metrics for critical thinking in teaching.
Australia also boasts a multicultural workforce. In 2019, we had the third highest proportion of foreign-born citizens among OECD countries. Twenty-nine per cent of our population was born overseas, twice the average for OECD countries (Source: Why Australia Benchmark Report 2021, accessed September 2021).
Australia ranks eighth for the proportion of immigrants in its labour force, according to the International Institute for Management Development. This makes it relatively easy for international companies to employ skilled, multilingual workers with intercultural understanding.
Lower cost of living relative to major cities in Asia
Australian cities have become more internationally competitive for expatriates. Our cities offer a lower cost of living compared to most major cities in the Asia–Oceania region according to Mercer’s 2021 Cost of Living Index.
This makes Australia a cost-competitive destination for:
- international companies that want to relocate employees and their families
- young workers who want to broaden their horizons.
A stable and efficient and business environment
Australia has one of the world’s strongest and most efficient regulatory environments. According to the IMD, Australia ranks highly in terms of labour regulations, equal opportunity legislation and access to credit.
In the World Economic Forum’s latest survey, Australia ranks:
- lowest in the world for debt dynamics (the change in the public debt-to-GDP ratio)
- second highest for social capital (which includes social cohesion and engagement)
- third highest for trade openness.