The Ease of Doing Business and the Future of Australia's Economy

Australia Country Paper: Doing Business Down Under

Today, Australia is classified as a middle-income nation that enjoys the unique distinction of being the only island continent in the world. Although an “island mentality” has affected Australia’s relations with the international community over the years, this mindset has not substantively affected its commerce nor its economic and military alliances and the country remains a steadfast ally of the United Kingdom and United States. To help determine the current status of this island nation, the purpose of this paper is to provide an analysis of the unique cultural, political, economic and legal aspects of doing business in Australia, drawing on the peer-reviewed and governmental literature as well as recent mainstream media accounts. Finally, a summary of the research and key findings about doing business in Australia are presented in the paper’s conclusion.

Australia’s Geography and History

The map at Appendix A illustrates Australia’s geographic location in Oceania between the South Ocean and the Indian Ocean. Although humans have lived in Australia for tens of thousands of years, it was first discovered by Westerns in 1770 when Captain James Cook claimed possession of the east coast of Australia (Australia history 2021). Great Britain established a penal colony in New South Wales in southeast Australia (Australia’s penal colony roots 2012), and all of Australia was subsequently claimed in the name of Great Britain in 1829 following the creation of Western Australia as a British colony (Australia history 2021). This colorful history has translated into a nation of friendly, hard-working people who share a common heritage with much of the rest of the English-speaking world, but their history has also contributed to a unique culture which is discussed further below.

Cultural Aspects

The 26 million people of Australia (Australia population 2021) may live on an island, but their cultural reach is global. Indeed, Australian YouTube influencer Ethan Marrell, better known as “Ozzy Man,” has provided tens of millions of people around the world with first-hand glimpses of some prominent features of Australian culture over the past several years. Given their proximity to the ocean, it is also not surprising that seafood is a popular choice for many Australians, but international cuisine and conventional “fast fooderies” abound across the country (Food in Australia 2021). In addition, there are other, lesser-known aspects of Australian culture that are also relevant for foreign visitors and expatriates, though, including the fact that Australia largely managed to avoid the same types of rancorous and event violent labor-management animosities that characterized the United States in the 20th century.

This “we’re all in this together so we might as well get along” attitude has translated into a relatively amicable relationship between Australian workers and managers today. For instance, according to sociologist Geert Hofstede, Australia has a low context culture: “Within Australian organizations, hierarchy is established for convenience, superiors are always accessible and managers rely on individual employees and teams for their expertise” (Australian cultural dimensions 5). Likewise, communications and dress codes in the Australian workplace tend to be informal in nature, there are few silos since information is freely shared and workers and managers alike are consulted for decision-making purposes in organizational meetings (Hofstede 2021).

Beyond the foregoing, there are some other aspects of Australian culture that should be of interest to foreigners seeking to do business there. For instance, Australian culture places a high priority on trusting the government to “do the right thing” to ensure the safety and wellbeing of all Australians through domestic and international policymaking (Abelson 2019). There is also a prevailing sense that the government should promote social justice and “soften the blows” of economic downturns on the general populace (Abelson 2019). Moreover, although gift-giving is not generally part of Australian business culture, foreign invitees to dinners and other social gatherings may bring a gift that reflects their home country, with the thoughtfulness of the gift far outweighing the its cost in terms of its appropriateness (Gift-giving etiquette in Australia 2021).

Finally, about one-quarter of Australians belong to a Protestant faith, while slightly fewer (22.6%) are Roman Catholics. Other Christian faiths, Islam, Buddhism and Hindu are also represented, although with far fewer adherents. It is also noteworthy that fully 30% of Australians report that they do not subscribe to a specific religion, and another 10% are classified as “unspecified” with respect to their religion (Australian people 2021). These cultural features of Australia also have an effect on the nation’s political aspects and these issues are discussed further below.

Political Aspects

The national Australian government is a federal parliamentary democracy under an umbrella constitutional monarchy, with territories and states having commonwealth status (Australia government 2021). In addition, other aspects of Australia’s polity include the following:

· Strong government support for equity resourcing of education;

· Many markets are heavily regulated;

· Several independent agencies oversee competition policy and set prices for major (energy, transport and water) utilities;

· Unemployment benefits that do not require previous employment history;

· An independent public broadcasting corporation; and,

· A substantial compulsory private retirement savings scheme (which also reduces public spending) and corporate tax dividend imputation (Abelson 38).

These aspects of the Australian political system naturally have a profound effect on the nation’s economy as discussed below.

Economic Aspects

As noted in the introduction, Australia’s island mentality has not affected its international trade, and the country is therefore vulnerable to downturns in the global economy as vividly depicted in Figure 1 below.

Fig. 1. Australia GDP growth rate: 2012 to date

Source: https://d3fy651gv2fhd3.cloudfront.net/charts/australia-gdp-growth.png?s=aunagdpc&v =202106082315V20200908&d1=20110612

As can be clearly discerned from the GDP growth rate shown in Figure 1 above, Australia’s GDP suffered a significant downturn as a direct result of the global Covid-19 pandemic, but has since rebounded to its pre-pandemic growth rate with a major trade surplus. Notwithstanding this short-term downturn, Australia is also well situated to take advantage of the ongoing post-pandemic economic boom, as evidenced by its sustained economic growth (Australia GDP growth rate, 2021). Indeed, with a per capita GDP of about $50,000, Australia ranks 30th in the world despite its comparative lack of fossil fuel reserves versus oil-rich Middle Eastern countries (Australia economy 2021). This is not to say, though, that Australia lacks fossil fuels given its status as a major exporter of natural gas, and the country enjoys significant amounts of other natural resources including most especially minerals which has made it an attractive destination for foreign investors (Australia economy 2021).

At present, Australia’s major exports include iron ore, natural gas, gold and aluminum oxide with its major trading partners being China, Japan, South Korea and India, in that order (Australia economy 2021). Major imports to Australia include refined petroleum, automobiles, crude petroleum, broadcasting equipment and delivery trucks with major import partners including China, the U.S., Japan, Germany and Thailand (Australia economy 2021). In addition, Australia’s low unemployment rate of just 5.14% ranks its 83rd in the world, but recent trade disputes with China, a major trading partner, threaten to disrupt this sustained economic growth in the short-term until these issues are resolved (Australia economy 2021).

These bilateral issues, however, have not created any significant constraints to Australia’s long-term economic growth, and the government’s emphasis on minimal regulations on imports and exports and progressive stance towards international commerce in general have contributed to a flexible and dynamic economy (Australia economy 2021). In addition, one Australian dollar equaling about 75 cents U.S. and currency fluctuations have largely mirrored its GDP levels as shown in Figure 2 below.

Fig. 2. Australian dollar to U.S. dollar currency fluctuation rates: June 2016 to date

Source: https://www.xe.com/currencycharts/?from=AUD&to=USD&view=5Y

Further, Australia is also an active member of the World Trade Organization (WTO), the G20 and the Asia-Pacific Economic Cooperation organization as well as belonging to numerous national, regional and international trade forums. In addition, Australia is also negotiating with a number of other countries to forge stronger economic ties in the future (Australia economy 2021). Likewise, in an effort to resolve its ongoing trade disputes with China and anger by Chinese leaders concerning Australia’s demands for an independent investigation of the origins of the Covid-19 virus, the Australian government has also requested the WTO to mediate differences concerning tariffs on barley exports, and other countries are expected to join in this case (McGuirk 2021).

Legal Aspects

Like the U.S., the legal system in Australian is based on the common law system and business activities are regulated by a number of different state-level and national laws and regulations (Doing business in Australia 2021). At present, though, the Australian government has only modest regulations on imports and exports and strongly encourages foreign direct investments (Australia economy 2021). In fact, the World Bank ranked Australia 14 (out of 190 economies) in terms of the ease of doing business in 2019, an improvement from its rank of 18 in 2018 (Ease of doing business in Australia 2021), reflecting a sustained improvement over the past decade as shown in Figure 3 below.

Fig. 3. World Bank ranking for ease of doing business in Australia: 2010 to date

Source: https://d3fy651gv2fhd3.cloudfront.net/charts/australia-ease-of-doing-business.png?s= ausicbuseasexq&v=202106092315V20200908

Furthermore, Australia continues to be ranked among the least corruption nations in the world and its score of 79/100 by Transparency International ranks it 13 out of 168 countries (Corruption and integrity issues 2021). In sum, Australia is an attractive destination for companies seeking to expand their operations overseas, and American expatriates in particular will likely find themselves “right at home.”