Australia: Economic and Political Overview
Prior to the COVID-19-led crisis, the Australian economy experienced 27 years of uninterrupted economic growth. It was the only OECD country that did not enter into recession during the financial crisis of 2007-2008, holding one of the highest growth rates of the developed world. However, the economy showed resilience and returned to growth in recent years. In 2024, Australia’s GDP growth slowed but remained in positive territory (+1.2%, from 2% one year earlier). Strong public demand supported economic activity, while private business investment remained resilient. However, private dwelling investment contracted, and net exports weakened as softer global commodity demand offset increases in tourist arrivals and international students. As per the IMF outlook, Australia's GDP growth is projected to rise to 2.1% in 2025 and 2.2% in 2026, driven by strong public demand and a rebound in private consumption.
In FY2023/24, the Commonwealth government achieved a second consecutive budget surplus through revenue windfalls and spending reprioritization. Cost-of-living measures, including the Energy Price Relief Plan, childcare subsidies, and rent assistance, eased CPI pressures. However, the consolidated fiscal deficit widened by 0.1% of GDP due to slower state-level consolidation and falling commodity prices. Despite a slight expansion in the FY2024/25 budget, authorities remain committed to prudent medium-term fiscal policies. After achieving surpluses in 2023–2024, Australia's budget is set to return to deficit in 2024–2025. The decline is driven by rising costs for programs such as cost-of-living relief (e.g., tax cuts, energy bill support), health services, energy transition initiatives under the Future Made in Australia package, and record defence spending. Slower revenue growth (+0.9%) compared to spending (+6.3%) also contributes to the shortfall. The government projects ongoing deficits through 2027–2028, driven by rising interest payments on debt, defence, and aged care, leading to increased public debt. In fact, the debt-to-GDP ratio reached an estimated 49.3% last year, with a further 0.3 percentage point increase expected in 2025, according to the IMF. Rising fiscal costs from aged care and the National Disability Insurance Scheme remain a risk, though efforts to contain them are underway. Inflation stood at 3.3% last year, down from 5% in 2023. Lower energy costs and stable commodity prices should drive inflation down over the forecast horizon, but high rent and housing prices may slow disinflation.
Australia’s labour market remained resilient during monetary tightening, easing gradually with strong job creation. Unemployment rose to 4.2% in 2024, still below pre-pandemic levels. Migration inflows and record-high participation boosted labor supply, while vacancies declined. Nominal wage growth peaked at 4.2% y/y in Q4 2023, lagging other advanced economies due to delayed adjustments in award and collective agreements. Wage growth remains high in some service sectors, driven by labour shortages and adding to price pressures. A gradual softening of labour market conditions is expected through 2025–26, with unemployment rising modestly to around 4.5% (IMF). In general, Australians enjoy a high standard of living, with GDP per capita (PPP) estimated at USD 71,309 in 2024 by the IMF. Nevertheless, according to the Council of Social Services’ “2023 Poverty in Australia Snapshot”, 3.3 million people (13.4% of the population) live below the poverty line of 50% of median income, including 761,000 children (16.6%).
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 1,740.62 | 1,802.01 | 1,881.14 | 1,965.39 | 2,040.96 |
| GDP (Constant Prices, Annual % Change) | 2.0 | 1.2 | 2.1 | 2.2 | 2.2 |
| GDP per Capita (USD) | 64,547 | 65,966 | 67,979 | 70,112 | 71,944 |
| General Government Balance (in % of GDP) | -1.7 | -2.5 | -2.8 | -2.0 | -1.7 |
| General Government Gross Debt (in % of GDP) | 49.0 | 49.3 | 49.6 | 48.8 | 47.8 |
| Inflation Rate (%) | 5.6 | 3.3 | 3.3 | 3.0 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 3.7 | 4.2 | 4.4 | 4.5 | 4.5 |
| Current Account (billions USD) | 4.40 | -15.77 | -21.40 | -25.59 | -25.84 |
| Current Account (in % of GDP) | 0.3 | -0.9 | -1.1 | -1.3 | -1.3 |
Source: IMF – World Economic Outlook Database, October 2021
Agriculture employs 2% of the workforce and contributes 2.6% of the GDP (World Bank, 2023). However, the agricultural and mining sectors are the most important for exports: Australia is a vast agricultural country and one of the world's main exporters of wool, meat, wheat and cotton. The country is overflowing with mineral and energy raw materials, which secure substantial revenues when exported. Australia was again the world’s largest producer of iron ore in 2024, the second producer of gold, the fourth of uranium, and the world’s third-largest LNG exporter behind the U.S. and Qatar the same year. Australia also has the world's largest reserves of numerous strategic resources, such as uranium, of which it holds 40% of the world's confirmed reserves. According to the latest official government data, the national winter crop production is projected to reach 55.2 million tonnes in 2024–25, marking a 17% increase over the 10-year average.
Traditionally, Australia is an importer of finished goods. Its industrialisation is fairly recent, a fact which explains the small scale of its manufacturing sector. Nevertheless, the industrial sector is characterised by high productivity levels, with 75% of the industries rating above the global average. The secondary sector employs 19% of the workforce and contributes to just over a quarter of the GDP (27.7% - World Bank, latest data available). The manufacturing industry is built around the food industry (26.3% of the workforce), building materials, wood, furniture & other manufacturing products (18.2%), metal processing and metal goods (15.9%), machinery and equipment (13%), and the chemical and petrochemical industries (9.7% - data AI Group, 2023).
The services sector occupies a dominant position in the Australian economy, contributing to 63.6% of the GDP and employing over 79% of the workforce (World Bank). The biggest growth in this sector has been the rise of business and financial services (holding the world’s sixth-largest pool of managed fund assets). Health care and social assistance have also made a fundamental contribution to growth. Travel services, such as education-related travel, recreational travel and business travel services have also been growing significantly. The banking sector is dominated by four major banks: Commonwealth Bank, Westpac, Australia & New Zealand Banking Group and National Australia Bank. Concerning tourism, international visitors made 7.5 million trips to Australia in the year to September 2024, reaching 86% of 2019 pre-pandemic levels.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 2.1 | 19.1 | 78.7 |
| Value Added (in % of GDP) | 2.6 | 27.7 | 63.6 |
| Value Added (Annual % Change) | 4.6 | 0.9 | 4.8 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: February 2025
