This paper provides a broad introduction to Australia as a nation, covering its colonial origins and path to federation in 1901, its federal democratic government modeled on both British and American traditions, and the evolution of its tax system from the earliest colonial levies to modern income and goods-and-services taxes. The paper also examines Australia's major industries, natural resources, GDP growth, per capita income, inflation history, and energy production. Together, these sections offer a concise reference portrait of Australia's political and economic landscape in the early 2000s.
The paper demonstrates effective use of multiple authoritative government and institutional sources (CIA World Factbook, Australian Tax Office, Reserve Bank of Australia, U.S. Department of State) to build a fact-based reference overview. By triangulating across sources for related claims, the writer reinforces credibility even within a relatively brief essay format.
The paper is organized into five thematic sections: a brief colonial history, a description of federal government structure, a chronological survey of tax law development, a review of major industries and GDP, and a section on per capita income and inflation. Each section stands somewhat independently, making this a useful reference document. The conclusion is embedded in the final statistics section rather than presented as a separate summary.
Australia's recent history is tied to that of the United States. After being populated for approximately 40,000 years by Aboriginal Australians, Europeans began exploration of the continent in the late 17th century. Captain James Cook claimed possession of the island continent in 1770. The continent soon attracted Great Britain's attention following the successful American Revolution: once the United States separated from England, Britain needed a new site for exiling selected prisoners and founded a penal colony in Australia. Eventually six colonies were formed, and in 1901 these colonies joined together in a federation and became the Commonwealth of Australia (CIA, 2004). The new country also included several areas classified as territories.
Australia's government is strongly influenced by the policies of Great Britain. The government is a federal democracy, with certain responsibilities allotted to the federal government in the Constitution, which was modeled in part after the United States Constitution (USDOE, 2004). Anything not assigned to the federal government is by default the responsibility of the individual states. The country recognizes the British monarch as the head of state, and an attempt to change the country from this commonwealth status to a fully independent republic failed in 1999 (CIA, 2004). The legal system is based on the English system of common law (CIA, 2004).
Because Australia is a Commonwealth country, the Chief of State is the Queen, known in Australia as "Queen of Australia." Her representative is the Governor-General. The Head of Government is the Prime Minister. John Winston Howard held that post from 1996 onward at the time of writing (CIA, 2004). The Prime Minister is the leader of whichever political party or party coalition holds the majority in Parliament. The Governor-General is appointed by the monarch based on the recommendation of the Prime Minister (CIA, 2004). Thus, party control is a major factor in Australian governance. The majority party at the time was a coalition made up of the Liberal and National Parties (CIA, 2004).
Australia's Parliament is made up of two houses: the Senate (76 seats — 12 each from the six states, and 2 each from the two mainland territories) and the House of Representatives, elected based on population but with each state guaranteed at least five representatives.
Australian tax law dates back to 1788, when the first Governor of New South Wales (NSW) acted for the King in imposing taxes as needed. NSW's first taxes were used to build the colony's first jail and to provide support for orphans. These taxes were followed by import duties, especially on alcoholic beverages and items classified as "luxury goods" (Commonwealth of Australia, 2004). By 1824, other customs duties and excise taxes had been added to various products, including tobacco. Taxes varied from colony to colony (Commonwealth of Australia, 2004). Most colonies imposed taxes on wills and other legal documents, and used "stamp duties," whereby certain products were required to carry a tax stamp showing that the tax had been paid (Commonwealth of Australia, 2004).
Australia's first income tax was imposed in 1880 by the Colony of Tasmania and applied to the profits of public companies. South Australia followed with an income tax in 1884, and NSW introduced one in 1895 at a rate of six pence per pound. By 1900, just before Australia became an independent nation, all colonies had established an income tax, each with different rules (Commonwealth of Australia, 2004).
In 1901 the colonies organized into the nation of Australia and established a federal government with powers to tax. The Commonwealth government retained 25% of the taxes it collected and redistributed the remainder to the states. New taxes were added over time: in 1910 the government established the Land Tax, designed to fund national defense and to cover expenses caused by expected large waves of immigrants. This tax encouraged individuals who owned large tracts of land to make it available for settlers. Much of this land was held by residents of England who rarely used it, and the goal was to see the land used more productively (Commonwealth of Australia, 2004).
In 1915 the federal government introduced its own income tax. This federal tax rapidly increased the country's revenue, and by 1918 income taxes made up one third of federal government income and up to half of the states' incomes (Commonwealth of Australia, 2004). The system was further refined in 1942, with much of the federally collected revenue being returned to the territories and states. Currently, Australia uses a "Pay-As-You-Earn" (PAYE) system for wages and salaries, and a "provisional tax" payment method for income other than wages or salaries (Commonwealth of Australia, 2004).
Australia also passed a sales tax in 1930, applied to imports and paid at the wholesale level. The wholesaler builds the cost of that tax into retail pricing (Commonwealth of Australia, 2004). Australia embarked on a major restructuring of its economy in the 1980s (USDOE, 2004) after experiencing severe inflation (Stevens, 2003). As part of this restructuring, the country shifted its economic emphasis from a domestically focused model to one that competes on the world market. Reforms included reducing high tariffs and other barriers to world trade, floating the exchange rate for the Australian dollar, deregulating banks, loosening rules for foreign banking, reorganizing labor relations, privatizing many public utilities, and overhauling the tax system. This overhaul included the establishment of a Goods and Services Tax (GST) (USDOE, 2004).
Central Intelligence Agency of the United States (CIA). (2004). Australia. The World Factbook. Retrieved November 1, 2004, from
Commonwealth of Australia. (2004). Australian tax history. Retrieved November 1, 2004, from
Department of Foreign Affairs and Trade, Australia (DFAT). (2004). Australian government. Retrieved November 1, 2004, from
Stevens, G. R. (2003, April). Inflation targeting: A decade of Australian experience. Reserve Bank of Australia Bulletin. Retrieved November 1, 2004, from www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_apr03/bu_0403_3.pdf
U.S. Department of State (USDOE). (2004). Background note: Australia. Bureau of East Asian and Pacific Affairs. Retrieved November 1, 2004, from
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