Australia

Histogramme

AA1

LOW RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD1339.1bn (World ranking 13, World Bank 2015)
Population 23.8mn (World ranking 53, World Bank 2015)
Form of state Federal Parliamentary Democracy (Commonwealth)
Head of government Malcolm TURNBULL
Next elections 2019, Federal elections
  • Large natural resource endowments
  • Strong infrastructure and business environment
  • Proximity with Emerging Asia
  • Low public debt
  • Top touristic destination
  • Dependent on Chinese demand and commodity prices evolution
  • Highly exposed to a change in climate and to natural hazards
  • External vulnerabilities stem from chronic current account deficit and high external debt
  • High household debt (above 180% of disposable incomes)

Dragged by bad weather…

Bad weather conditions (Cyclone Debbie) put a drag on first-semester economic performance. Coal production and exports have been disrupted due to mines closures and damaged freight infrastructure. Tourism and agriculture have also been affected.

GDP growth is set to pick up speed in the remainder of the year. The policy mix will aim to boost economic growth with a loose stance on fiscal and monetary policy. 

Public spending and investment are set to gather pace due to rebuilding efforts. Exports may accelerate at a gradual pace in line with improving global demand, stronger LNG exports capacity and a rebound in tourism.

The scale of acceleration will depend on household consumption. It is likely to be moderate due to high leverage (189% of disposable incomes) and modest growth in wages. Against this backdrop, we expect GDP growth to rise by a humble +2.3% in 2017 before accelerating to +2.6% in 2018.  

The balance of risks has somewhat improved. Externally, global demand and commodity prices have gained some traction since last year. Domestically, high household’s debt and unbalanced property market pose significant risks.  

Solid buffers provide leeway to support growth

The Reserve Bank of Australia is expected to stay on hold in 2017, maintaining its accommodative policy stance.

First, inflation should remain in the target range of 2% to 3% on average in 2017. Second, the institution will likely wait for more tangible evidence of sustainable recovery before raising policy rates. These include growth acceleration from the second semester onwards and a signal of wage reflation. Post-2017, the likelihood of a rate hike will increase with stronger growth and higher inflation (2.5% on average).

On the fiscal side, the rate of consolidation will be lowered. Public finances are sound with low debt (43% of GDP) and lower deficit compared to other high-income economies. This provides some leeway to support growth. Potential supportive measures include a corporate tax cut, additional infrastructure spending, and more inclusive growth-supportive measures. 

External vulnerabilities remain manageable

The large current account deficit is expected to narrow gradually in the medium term (-1.5%  GDP in 2018) on the back of rising exports of services dedicated to wealthier Asian economies, improving goods exports as LNG exports capacity strengthen and commodities’ prices potentially maintain their recovery.

At over 100% GDP, external debt remains a source of vulnerability. However, policy buffers such as low public debt, favorable investors’ confidence, and relatively positive economic outlook (compared to other high-income economies) provide some cushion.  

Trade structure by destination/origin

(% of total)

Exports Rank Imports
China 32%
1
23% China
Japan 16%
2
11% United States
South Korea 7%
3
7% Japan
United States 5%
4
5% South Korea
India 4%
5
5% Thailand

Trade structure by product

(% of total)

Exports Rank Imports
Metalliferous ores 28%
1
12% Road vehicles
Coal, coke and briquettes 15%
2
11% Petroleum
Gas 7%
3
6% Other industrial machinery
Gold, non-monetary 6%
4
5% Telecommunication
Meat 5%
5
5% Electrical machinery

The payment behavior of domestic companies is good compared to international standards. However, delays are registering a deteriorating trend and average DSO now stands at 50 days.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

The court system is complicated by the country's federal structure and provides no fast-track proceedings for the settlement of undisputable claims. The courts are otherwise efficient, but delays and costs tend to be significant and enforcing foreign judgments may prove difficult

Insolvency proceedings are complex and expensive, and chances of recovery are very low.

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Collection complexity Australia

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