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Australia: Market Profile

Major Economic Indicators

Table: Major Economic Indicators of Australia
Table: Major Economic Indicators of Australia

Recent Developments

  • After rising 2.5% in 2015, the Australian economy is expected to maintain GDP growth of the same rate in 2016.
  • The Reserve Bank of Australia (RBA), the country’s central bank, cut interest rates twice in 2016 to a record low level of 1.5%.
  • Australian exports in goods and services plunged by 2.5% year-on-year (YOY) to US$136 billion in the first seven months of 2016, while imports fell by 3.1% YOY to US$147 billion in the same period.
  • Australia’s unemployment rate fell from 6.1% for the whole year of 2015 to 5.7% in August 2016; as consumer price inflation recorded a YOY increase of 1% in Q2 2016.
  • The Westpac-Melbourne Institute Consumer Sentiment Index rose by 2.3% from 99.1 in March 2016 to 101.4 in September 2016.
  • Retail sales recorded a YOY growth of 0.1% in July 2016, same as both June and May 2016.
  • Hong Kong’s total exports to Australia decreased by 10.1% YOY in the first seven months of 2016, while imports from Australia increased by 16.7% YOY during the same period.

Current Economic Situation

Australia’s economy is expected to maintain the 2015 growth rate of 2.5% in 2016, with moderate growth sustained by steady domestic demand and public spending. The Reserve Bank of Australia (RBA), the country’s central bank, cut its policy rate twice in 2016 to a record low level of 1.5%. Downward pressure on the RBA policy rate is expected to persist in 2016.

The Australian economy has diversified from mining (among the top 5 industries in terms of GDP contribution) to other industries such as energy, professional, scientific and technical services and arts and recreation services. Dwellings investment is continually supported by confidence in the housing market.

Australia’s exports in goods and services decreased by 2.5% YOY to US$96.8 billion in the first seven months of 2016, while imports fell by 3.1% YOY. In 2015 Australia recorded a fall in exports of 10.6% to the East Asian market (Australia’s largest export markets). China has been the largest trading partner of Australia since surpassing Japan in 2009. China reported its slowest GDP growth of 6.9% in 25 years in 2015, pointing to an economic transition that may adversely affect Australia’s export sector. Further, China is both the largest export market and import source of Australia, accounting for 33.6% of the latter’s exports and 20.5% of its imports in 2014 based on IMF statistics. Australia’s largest group of exports to China is iron ores & concentrates and coal.

The jobless rate was 5.7% in August 2016, with the overall labour market remaining stable. Australia’s Consumer Price Index (CPI) recorded a growth of 1% in Q2 2016. Weak inflation is placing downward pressure on the RBA’s policy rate.

The Westpac-Melbourne Institute Consumer Sentiment Index rose by 2.3% from 99.1 in March to 101.4 in September 2016. Latest retail sales grew by 0.1% month-on-month (MOM) in July 2016, with same MOM growth reported in June and May. However, household goods retailing and department store sales fell by 0.4% and 0.9% respectively MOM. Clothing, footwear and personal accessory retailing, cafes, restaurants and takeaway food services rose by 0.6% and 0.5% respectively in the same period.

Trade Policy

Australia is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding. Most goods can be freely imported.

Australia has been active in pursuing free trade agreements (FTAs). According to the Australian government, FTAs have been concluded with New Zealand, Singapore, the US, Chile, Malaysia, Thailand, Japan, Korea, China (concluded but not yet in force) and ASEAN. Currently, it is negotiating bilateral FTAs with India and Indonesia, while concluding talks under the frameworks of the Australia-Gulf Cooperation Council (GCC) Agreement, the Pacific Trade and Economic Agreement (PACER Plus), Trade in Services Agreement (TiSA) and the Regional Comprehensive Economic Partnership Agreement (RCEP). Australia is a member of the Trans-Pacific Partnership (TPP), which was agreed in October 2015 and is now being rectified by TPP members.

Hong Kong's Trade with Australia

Table: Hong Kong Trade with Australia
Table: Hong Kong Trade with Australia

In the first seven months of 2016, Australia was the 18th largest export market for Hong Kong. Hong Kong's total exports to Australia amounted to US$2,392 million from January to July 2016, down by 10.1% from 2015 over the same period. Major export items included telecom equipment & parts (27.7% share), computers (8.8%), other articles of apparel, of textile fabrics (5.7%), travel goods and handbags (3.8%) and jewellery (3.2%).

Hong Kong's imports from Australia rose by 16.7% YOY to US$1,304 million from January to July 2016. Major import items included telecom equipment & parts (12.5% share),fruit and nuts (excluding oil nuts), fresh or dried (11.5%), edible products and preparations (7.0%), milk and cream and milk products other than butter or cheese (6.8%) and crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (4.9%).

Australia's Economic Involvement in Hong Kong

Australia has considerable investment in Hong Kong. According to the Hong Kong Census and Statistics Department, there were 40 regional headquarters (RHQs), 48 regional offices and 94 local offices of Australian companies in Hong Kong as of 2015. All "big four" Australian banks, namely Australia & New Zealand Banking Group Ltd. (ANZ), Commonwealth Bank of Australia, National Australia Bank, and Westpac Banking Corporation, have a presence in Hong Kong. Other major Australian companies in Hong Kong include Leighton Asia (construction), Telstra International Group (telecom) and AME Group (mining), which have established their RHQs in Hong Kong.

Content provided by Picture: Kenix Lee
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