Efforts by the opposition Liberal-National coalition to damage the standing of the Labor prime minister, Julia Gillard, dominated the last parliamentary sitting of 2012. The opposition claims that Ms Gillard acted illegally in the early 1990s by assisting her then boyfriend, an official in the Australian Workers' Union (AWU), to establish a union "slush fund". The prime minister has denied the claims and to date no telling evidence has been presented-although the matter has called her judgment into question. Although the AWU scandal will remain a talking point going into next year's election, recent opinion polls suggest that the opposition's attacks have roused a backlash among voters.
In the final week of the parliamentary year, the opposition coalition raised new questions about Ms Gillard's involvement in the AWU scandal in an effort to portray the prime minister, and by extension the union-backed Labor Party, as unfit to govern. The opposition has pointed to Ms Gillard's role in providing legal services for the incorporation as a legal entity of the AWU Workplace Reform Association-a body that was later accused of misusing union funds-as proof that she does not have the character to lead the country. For her part, Ms Gillard denies any wrongdoing in the creation of the association. The call for the prime minister resign over this 20-year-old episode has appeared excessive to commentators and the public alike.
This presents a problem for the opposition leader, Tony Abbott, who wants to keep the issue in voters' minds in the next few months and in the run-up to the election, while also not being identified too closely with the attacks. Mr Abbott's earlier personal criticisms of the prime minister over the resignation of the parliamentary speaker, Peter Slipper, and the legal charges filed against a former Labor MP, Craig Thomson, provoked Ms Gillard's famous speech on misogyny, which left the opposition leader scrambling to defend his own views towards women.
Mr Abbott is now so sensitive on this issue that the deputy leader of the opposition, Julie Bishop, conducted many of the attacks on the prime minister during parliament's final week in late November. Nevertheless, the fact that Ms Gillard's former employer, the Slater & Gordon law firm, conducted an internal probe over the AWU matter means that it has too much potential for the opposition to ignore. Further, recently surfaced transcripts of the 1995 probe showed that Ms Gillard herself described the AWU association as a "slush fund" to be used for the re-election of union leaders.
Do voters care?
Given the uneven performance of the economy, voters appear primarily focused on issues such as job security and social services rather than the conduct of the prime minister two decades ago. Although the opposition is likely to revive the matter next year, its impact on the election due to be held in 2013 looks set to be marginal. A poll by Galaxy in late November found that although only 20% of those surveyed believed that Ms Gillard was fully honest about her role in the AWU scandal, most also stated that it would not alter their vote. According to the latest Newspoll survey, published in The Australian on December 11th, primary support for Labor had fallen to a recent low of 32%, while support for the opposition has increased to 46%. However, a Nielsen poll published on December 17th found less evidence of a slump in Labor's popularity, reporting that the government's primary support stood at 35%, compared with 43% for the opposition.
Meanwhile, Ms Gillard remains far more popular than Mr Abbott. The prime minister's "net satisfaction rating" (her satisfaction rating minus her dissatisfaction rating) did not change in the Newspoll survey and it remains twice as high as that of the opposition leader. The Nielsen poll showed that Mr Abbott's disapproval has risen to 63%-the highest level during his leadership of the opposition. A court ruling on December 12th that dismissed the case against Mr Slipper is likely to have reinforced voters' perceptions that the opposition leader is focusing on attacking Labor at the expense of providing clear policy alternatives ahead of the next election.
Pre-election legislation
Despite the attacks on Ms Gillard, Labor used the last few sessions of parliament to introduce several bills, including those dealing with reforms to education (including substantially higher spending) and the introduction of a costly National Disability Insurance scheme. Both pieces of legislation are likely to be key elements in the prime minister's pitch for re-election on the basis of a promised return to traditional Labor values. Labor's last-minute legislative drive will put pressure on the opposition to stop attacking the prime minister and to start engaging in a policy debate. This is especially true since the apparent leftwards shift by Labor towards its traditional support base opens up more of the middle ground.
The government's proposals to raise spending on education and disability insurance will also complicate fiscal policy. Having staked its economic policymaking credibility on accomplishing a budget surplus by the end of fiscal year 2012/13 (July-June), the administration has little room for manoeuvre. Labor has already shown a willingness to reduce middle-class welfare, for example by income-testing tax rebates for private health insurance, but there is insufficient time to implement tax changes before the end of 2012/13. To fund its new plans without worsening its chances of achieving a budget surplus, the government would need to delay or reduce spending in other areas-or simply to hope that higher global commodity prices push up receipts from corporate and resources taxes.
December 19, 2012
Kevin Rudd
The prime minister and leader of the Labor Party, Mr Rudd, is former diplomat who came to the House of Representatives (the lower house of parliament) from state politics in Queensland. He wrested the national Labor leadership from Kim Beazley in 2006. He has reinvigorated the party and struck a chord with an electorate that had grown weary of a coalition government that had been in power for 11 years. More recently, his appeal has begun to fade, as the public has become frustrated with his ‘everyman' persona and the growing gap between his rhetoric and his actions.
Wayne Swan
The treasurer, Wayne Swan, is a former university lecturer and was a political advisor to the previous Labor leader, Kim Beazley. He was the shadow treasurer during 2004-07. Having lifted spending and increased debt in 2009, he now faces the challenge of rebuilding the public finances. Although that task has been made simpler by continued economic growth at home and a renewed wave of demand for Australia's resources from Asia (especially from China and India), the looming federal election is constraining his ability to make politically unpopular changes to taxation and spending.
Tony Abbott
Mr Abbott became leader of the Liberal Party in December 2009, defeating the former leader, Malcolm Turnbull. Mr Abbott is renowned for his conservative social views and tends to rate poorly with female voters. His tendency to make policy announcements without prior agreement with coalition frontbenchers has caused internal friction. Nonetheless, he is likely to remain as leader unless the coalition performs poorly at the next election.
Joe Hockey
Mr Hockey has been the shadow treasurer since February 2009, and is a potential future Liberal Party leader. However, a question mark hangs over his appetite for the role. Prior to entering parliament in 1996, Mr Hockey was a banking and finance lawyer. He is a formidable parliamentary performer, but has an affable and personable manner that appeals to voters.
Bob Brown
Mr Brown is the leader of the Greens, which have five seats in the Senate (the upper house). Together with two independents, they hold the balance of power in the Senate and have the opportunity to work with the Labor government to further their aims in relation to environmental issues. However, their ability to influence policy in these areas is limited by the generally more conservative stance taken by the independents and the electorate's focus on economic issues. Mr Brown has a reputation for leading vocal protest campaigns. He was suspended from parliament in 2003 for interjecting during an address by a former US president, George W Bush.
May 14, 2010
Official name
Commonwealth of Australia
Form of state
Federal democracy
Legal system
Based on the constitution of 1901
National legislature
Bicameral: the 150-member House of Representatives (the lower house) is directly elected by a preferential voting system for a three-year term; the 76 members of the Senate (the upper house) are directly elected by proportional representation for six-year terms, with one-half of the chamber's members retiring every three years, usually to coincide with elections for the House of Representatives. The Senate may not initiate or amend money bills, and in certain circumstances the governor-general may dissolve it
Electoral system
Compulsory universal direct suffrage over the age of 18
National elections
An election for the lower house and one-half of the seats in the upper house was held in August 2010. The next election (for the lower house and the other one-half of the seats in the upper house) is due in 2013
Head of state
Queen Elizabeth II, represented in Australia by a governor-general; Quentin Bryce was appointed to the post in 2008
State legislatures
Five of the six states have bicameral legislatures; that of Queensland is unicameral
National government
A cabinet, presided over by the prime minister, is appointed by the governor-general on the basis of party strength in the House of Representatives. The Labor Party is currently in power, backed by three independents and one member of the Greens
Main political parties
Labor Party; Liberal Party and National Party (in long-term coalition)
Prime minister: Julia Gillard
Deputy prime minister & treasurer: Wayne Swan
Cabinet ministers
Agriculture, fisheries & forestry: Joe Ludwig
Attorney-general & emergency management: Nicola Roxon
Broadband communications & the digital economy: Stephen Conroy
Climate change & energy efficiency, industry & innovation: Greg Combet
Defence: Stephen Smith
Families, communities & indigenous affairs: Jenny Macklin
Finance & deregulation: Penny Wong
Foreign affairs: Bob Carr
Health: Tanya Plibersek
Immigration & citizenship: Chris Bowen
Infrastructure & transport: Anthony Albanese
Mental health & ageing: Mark Butler
Regional Australia, local government & the arts: Simon Crean
Resources, energy & tourism: Martin Ferguson
Schools, early childhood & youth: Peter Garrett
Sustainable population, environment & water: Tony Burke
Tertiary education, skills, science & research: Chris Evans
Trade & competitiveness: Craig Emerson
Workplace relations, financial services & superannuation: Bill Shorten
Central bank governor
Glenn Stevens
December 01, 2012
Outlook for 2013-17
Review
December 01, 2012
Fact sheet
| Annual data | 2011 | Historical averages (%) | 2007-11 |
| Population (m) | 22.5 | Population growth | 1.5 |
| GDP (US$ bn; market exchange rate) | 1,485.9 | Real GDP growth | 2.6 |
| GDP (US$ bn; purchasing power parity) | 923.4 | Real domestic demand growth | 3.6 |
| GDP per head (US$; market exchange rate) | 66,082 | Inflation | 2.9 |
| GDP per head (US$; purchasing power parity) | 41,067 | Current-account balance (% of GDP) | -4.0 |
| Exchange rate (av) A$:US$ | 0.97 | FDI inflows (% of GDP) | 3.3 |
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Background: The Commonwealth of Australia was established in 1901. Since the end of the second world war the US has replaced the UK as Australia's main defence ally. A mass-immigration programme that began in 1947 has resulted in sweeping demographic, cultural and social change and stronger ties with Asian countries. Australia is a resource-rich country, and booming commodity exports to China have made that country Australia's largest trade partner since 2009.
Political structure: The Commonwealth of Australia is a democratic federal state within the Commonwealth of Nations. Formally, executive power is vested in the governor-general (who represents Queen Elizabeth II). The legislature consists of a federal parliament comprising a 76-member Senate (upper house) and a 150-member House of Representatives (lower house). Elections are held at maximum intervals of three years, when one-half of the senators (who serve six-year terms) and all the representatives are elected by compulsory ballot. Each of the six states in the federation has its own government, with a governor and a bicameral legislature, apart from Queensland, which has a unicameral legislature.
Policy issues: The government is launching a series of new policies in traditional areas of strength for the Labor Party, such as education and health, and is attempting to neutralise areas where it may be vulnerable to attacks by the opposition ahead of the next election, such as the public finances and the processing of asylum-seekers. Businesses are growing restless at the lack of clarity on the tax regime, against the background of a last-minute reversal of a planned cut in the corporation tax rate. Increasing attention will be paid to the operating environment for the mining sector, which is undergoing a huge expansion that will entail a restructuring of the national economy. Various free-trade agreements are being pursued.
Taxation: The corporation tax rate of 30% is applied both to retained earnings and to dividends. Shareholders receive credits for corporation tax already paid on dividends. Personal income tax is progressive, with the top marginal rate of 45% levied on earnings over A$150,000 (US$155,000). In addition, the federal government collects a levy of 1.5% of personal taxable income as a contribution towards healthcare.
Foreign trade: Following a contraction of 18.1% in exports of goods in 2009 (IMF data, on a balance-of-payments basis) as a consequence of the 2008-09 global economic and financial crisis, growth picked up again in 2010. Exports increased by 37.5% in 2010, while imports rose by 22.4%.
| Main exports 2011 | % of total | Major imports 2011 | % of total |
| Metalliferous ores | 29.4 | Machinery & equipment manufacturing | 27.8 |
| Coal | 17.9 | Transport equipment | 12.7 |
| Manufactured metals | 13.3 | Oil & gas extraction | 10.2 |
| Oil & gas extraction | 9.0 | Chemicals | 9.9 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| China | 27.4 | China | 18.4 |
| Japan | 19.2 | US | 11.3 |
| South Korea | 8.9 | Japan | 7.8 |
| India | 5.8 | Germany | 4.6 |
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December 01, 2012
Data and charts: Annual trends charts
December 01, 2012
Australia: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: The Labor Party government, led by the prime minister, Julia Gillard, has endured a difficult time in office since it was re-elected in 2010. Labor performed disappointingly in that year's general election, winning 72 seats in the House of Representatives (the lower house of parliament), compared with 73 for the opposition Liberal-National coalition. This has meant that it is dependent on the support of independents and the Greens' sole member of parliament (MP) to advance its legislative agenda. However, as these alliances do not extend beyond confidence motions and supply bills, Labor will have to continue to negotiate hard and offer policy concessions to ensure parliamentary support. Furthermore, the government's wafer-thin majority means that it is vulnerable to indiscretions and defections by its MPs.
ELECTION WATCH: The next general election, for the House of Representatives and one-half of the Senate (the upper house), is due in late 2013. However, the fragile balance of power in the lower house means that a poll could be held sooner. If Labor were to replace Ms Gillard with a new leader of whom its independent allies disapproved, the withdrawal of their support would trigger an early poll. An election in the next few months would not suit either Labor or the coalition, both of which are struggling to build momentum in opinion polls.
INTERNATIONAL RELATIONS: Ms Gillard is attempting the delicate balancing act of maintaining a close political relationship with the US (reconfirmed during a visit to Australia by the US president, Barack Obama, in late 2011) while strengthening economic ties with China (which became Australia's largest trading partner in 2009). In 2013-17 she will be hoping to demonstrate that the two relationships are not incompatible. Australia will hold a seat on the UN Security Council during 2013-14-a role that will raise the country's global profile but also potentially complicate its efforts to balance US and China ties. The government will also be an advocate of free trade on the global stage. Negotiations on free-trade agreements with Japan, China, India, Malaysia and South Korea are under way, and Australia is participating in discussions on the proposed expansion of a pan-Pacific free-trade bloc, the Trans-Pacific Partnership.
POLICY TRENDS: With one eye on the next general election, the government has begun to make what will prove to be a string of big-ticket policy announcements. They include plans for a National Disability Insurance Scheme, a proposed revamp of dental funding for the less well-off and increased education spending. The government is also trying to neutralise any policy areas where it feels that it is vulnerable to pre-election attacks. In August it abandoned its commitment to a three-year carbon-price floor of A$15 (about US$15) per tonne that would have come into effect after the planned shift from the carbon tax to an emissions trading scheme in mid-2015. Instead, pricing will be linked to the cost of carbon permits in the EU. Ms Gillard and her immigration minister, Chris Bowen, will hope that the cross-party parliamentary agreement on asylum-seekers has limited Labor's exposure on that issue too. In the forecast period increasing attention will be paid to the mining sector, which is undergoing a huge expansion that will result in the restructuring of Australia's economy. Export-exposed industries, such as car manufacturing and steel production, are suffering as a result of an upward step change in the value of the Australian dollar and will continue to appeal for public assistance to ensure their survival. The government will have to weigh the political benefits of supporting such industries against the boost to productivity that could be achieved by channelling resources into sectors, such as mining, in which the country has a comparative advantage.
ECONOMIC GROWTH: At 3%, the Economist Intelligence Unit's forecast for GDP growth in 2013 is lacklustre. This partly reflects base effects from 2012, when the economy grew at the rapid rate of 4.1% year on year on average in the first six months. The continued development of the mining sector will ensure that gross fixed investment makes the greatest contribution to growth. Demand for capital imports for construction projects in the sector, combined with a boost to consumer goods imports provided by the high Australian dollar, will mask a strong export performance, ensuring that the external sector detracts from growth again. Heavily indebted Australian consumers responded to the 2008-09 global financial crisis by increasing the rate of household saving, which stood at 10.7% on a seasonally adjusted basis in 2011, compared with an annual average of 3.3% in 2004-08. Relatively loose monetary policy will counteract this caution to an extent, ensuring that private consumption growth remains respectable at 3.2% in 2013.
INFLATION: Consumer price inflation is forecast to average 2.8% in 2013, up from an estimated 1.9% in 2012. The introduction of the carbon tax in mid-2012 pushed up consumer prices in the third quarter and will continue to generate inflationary pressures. Government modelling suggests that the tax will add 0.7 percentage points to consumer price inflation in fiscal year 2012/13 (July-June), which explains our relatively rapid forecast that otherwise appears at odds with the slowdown in GDP growth that will occur next year. Our inflation forecast of 2.7% on average in 2013­17 is subject to equal degrees of upside and downside risk. It is possible that interest rate rises could take some of the inflationary pressure out of the economy, but a revival of the housing market and even faster growth than we are forecasting in the mining sector could cause inflation to pick up quickly. The Reserve Bank of Australia (the central bank) is also concerned that skill shortages in some areas of the economy could lead to demands for higher wages that push up the cost of living unless commensurate increases in productivity occur.
EXCHANGE RATES: Buoyed by high prices for commodity exports and the substantial interest-rate differential with other developed economies, the local currency has performed strongly against the US dollar in the past two years, reaching a 29-year high of A$0.89:US$1 in July 2011. But the country's onerous foreign debt-servicing obligations make the Australian dollar a risky currency to hold, and it is therefore exposed to any rise in investor risk aversion. This vulnerability can be seen when changes in the local currency's value are tracked against developments in the euro zone debt crisis. The Australian dollar is also often viewed by investors as a proxy indicator of the performance of China's economy, owing to the strengthening trade ties between the two countries. This suggests that Chinese data releases will exert a greater effect on the behaviour of the local currency in 2013-17. We now expect the Australian dollar to remain above parity with the US dollar on an annual average basis for the third consecutive year in 2013. The eventual revival of the US economy in 2014-15 will cause a very slight depreciation of the Australian dollar in those years, but it will subsequently rally modestly, to reach A$1.02:US$1 by end-2017.
EXTERNAL SECTOR: We estimate that the merchandise trade account will post a surplus for the third consecutive year in 2012, having recorded sizeable deficits during most of the past decade. Nevertheless, some weather-related disruptions and weak global demand are thought to have narrowed the trade surplus to A$1.1bn (US$1.1bn), from A$27bn in 2011. Rising mining capacity will facilitate continued strong growth in overseas sales during the forecast period, so that we expect the value of merchandise exports to be over 40% higher in local-currency terms in 2017 than in 2012. The income deficit will remain the largest area of weakness, reflecting the cost of servicing foreign debt. The strong currency will impede growth in services exports, as Australia will prove prohibitively expensive for some potential students and tourists. Following a deficit on the current account equivalent to an estimated 2.9% of GDP in 2012, we expect the shortfall to average 3.9% in 2013-17.
December 01, 2012
Country forecast overview: Highlights
Country forecast overview: Key indicators
| Key indicators | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
| Real GDP growth (%) | 3.3 | 3.0 | 3.5 | 3.4 | 3.3 | 3.5 |
| Consumer price inflation (av; %) | 1.9 | 2.8 | 3.0 | 2.6 | 2.5 | 2.6 |
| Budget balance (% of GDP) | -0.7 | 0.1 | -0.2 | -0.5 | -1.2 | -1.2 |
| Current-account balance (% of GDP) | -2.9 | -3.6 | -3.8 | -4.0 | -3.9 | -4.2 |
| Deposit rate (av; %) | 3.9 | 3.9 | 4.4 | 4.9 | 5.1 | 5.1 |
| Exchange rate A$:US$ (av) | 0.97 | 0.97 | 1.00 | 1.04 | 1.03 | 1.02 |
| Exchange rate A$:¥100 (av) | 1.22 | 1.18 | 1.16 | 1.17 | 1.12 | 1.07 |
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December 01, 2012
Land area
7,682,400 sq km (61% agricultural, 5% forest)
Population
22,598,522 (June 2010)
Main towns
Population in '000 (June 2006):
Sydney: 4,284
Melbourne: 3,471
Brisbane: 1,629
Perth: 1,393
Adelaide: 1,108
Canberra (capital): 319
Climate
Temperate in the south; subtropical or tropical in the north; hot and dry inland
Weather in Canberra (altitude 560 metres)
Hottest months, January and February, 13-28°C; coldest month, July, 0-11°C (average daily minimum and maximum); driest month, June, 37 mm average rainfall; wettest month, October, 69 mm average rainfall
Language
English
Measures
Metric system
Currency
Australian dollar (A$); A$1 = 100 cents. Average exchange rate in 2011: A$0.97:US$1
Time
Hours ahead of GMT (summer time in brackets):
New South Wales, Tasmania, Victoria & the Australian Capital Territory: 10 (11)
Queensland: 10
Northern Territory: 9.5
South Australia: 9.5 (10.5)
Western Australia: 8
Fiscal year
July 1st-June 30th. Most Australian statistics are reported on a fiscal-year basis
Public holidays
January 1st (New Year's Day); January 26th (Australia Day); April 6th-9th (Easter); April 25th (Anzac Day); June 11th (Queen's Birthday, except in Western Australia); December 25th (Christmas Day); December 26th (Boxing Day); plus other days at state level
March 01, 2012