The economy of Australia is a prosperous, Western market economy dominated by its services sector (68% of GDP), although the agricultural and mining sectors (10% of GDP combined) account for 57% of the nation's exports.
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos (Keeling) Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu. The Australian Securities Exchange and the Sydney Futures Exchange are the largest stock exchanges in Australia.
Australia is one of the most laissez-faire capitalist economies according to indices of economic freedom. Australia's per-capita GDP is slightly higher than that of the UK, Germany, and France in terms of purchasing power parity. The country was ranked third in the United Nations 2007 Human Development Index and sixth in The Economist worldwide quality-of-life index 2005. The emphasis on exporting commodities rather than manufactures has underpinned a significant increase in Australia's terms of trade during the rise in commodity prices since the start of the century. Australia's current account is more than 7% of GDP negative: Australia has had persistently large current account deficits for more than 50 years. Australia has grown at an average annual rate of 3.6% for over 15 years, well above the OECD average of 2.5%.
In January 2007, there were 10,033,480 people employed, with an unemployment rate of 4.6%. Over the past decade, inflation has typically been 2-3% and the base interest rate 5-6%. The service sector of the economy, including tourism, education and financial services, constitutes 69% of GDP. Although Agriculture and natural resources constitute only 3% and 5% of GDP, respectively, they contribute substantially to export performance. Australia's largest export markets are Japan, China, the US, South Korea and New Zealand.
Rich in natural resources, Australia is a major exporter of agricultural products, particularly wheat and wool, minerals such as iron-ore and gold, and energy in the form of liquified natural gas and coal. Although it occupies an area similar in size to the contiguous United States, it has a labour force of only about ten million people.
In the past decade, one of the most significant sectoral trends experienced by the economy has been the growth (in relative terms) of the mining sector (including petroleum). In terms of contribution to GDP, this sector grew from around 4.5% in 1993-94, to almost 8% in 2006-07. Growth in the services sector has also grown considerably, with property and business services in particular growing from 10% to 14.5% of GDP over the same period, making it the largest single component of GDP (in sectoral terms). This growth has largely been at the expense of the manufacturing sector, which in 2006-07 accounted for around 12% of GDP. A decade earlier, it was the largest sector in the economy, accounting for just over 15% of GDP.
Australia's emphasis on reforms is often cited as a key factor behind the continuing strength of the economy. From the early 1980s to the current day, both major political parties - the Australian Labor Party and the Liberal Party of Australia - have been instrumental in the modernisation of the Australian economy. In 1983, under Prime Minister Bob Hawke, the Australian dollar was floated and prudent financial deregulation was undertaken. The early 1990s saw the Australian economy fall into recession and government debt soar to $96 Billion under Labor Prime Minister Paul Keating. The $96 Billion of government debt was successfully paid off in full between 1996 and 2007 by the Liberal Government led by Prime Minister John Howard and Treasurer Peter Costello. During this period of governance, the introduction of a goods and services tax (GST) sought to encourage the level of saving amongst lower income earners. To combat the consequential reduction in consumption for low income earners, income taxes were lowered as a trade-off for the introduction of the regressive GST. The overall level of taxation in Australia has since been consistently reduced to encourage private consumption and investment, as opposed to higher government expenditure. This economic strategy - consistent with principles of individual liberty, choice, freedom, initiative and enterprise - has led to an unprecedented period of prosperity with 16 years of continuous economic growth, moderate inflation and low unemployment.
Current areas of concern to some economists include Australia's large current account deficit, Australia's current account deficit for the 2007- 2008 financial year was up 4% to $19.49 billion (according to the Australian Bureau of Statistics), the absence of a successful export-oriented manufacturing industry, a real estate bubble, and high levels of net foreign debt owed by the private sector.