Major Economic Indicators

Recent Developmentsf

• The Australian economy slowed to 2.1% in 2008. In the first three months of 2009, it further slowed to 0.3% year-on-year (YoY) growth, given the weakening external demand on commodities amid the global economic downturns.
• Australia is the 10th largest export market for Hong Kong. Hong Kong's total exports to Australia fell 8.1% to US$1.4 billion in the first four months of 2009, reversing the 13% growth in 2008. Imports from Australia declined by 2.6% to US$650 million, after increasing 0.6% in 2008.
• Australia has been active in pursuing free trade agreements. The Australia-Chile FTA entered into force on 6 March 2009, eliminating immediately Chile's tariffs on almost 92% of tariff lines covering 97% of goods currently traded. Currently, the country is pursuing FTAs with China, Malaysia, Japan and the Gulf Cooperation Council.
  

Current Economic Situation

Australia’s economy slowed to 2.1% in 2008. With the declining external demand, the country recorded meagre GDP growth of 0.3% in the first quarter of 2009 from the year-earlier quarter. Facilitated by low unemployment and higher capacity utilisation, consumer spending and business investment had been performing well in the past several years. Australia is a major exporter of agricultural products, minerals and energy such as natural gas and coal. Iron ore and coal together accounted for about 34% of the country’s merchandise exports.

Recent economic woes have hard hit the exports of Australian commodities. The slowing demand has affected both the price and volume of commodity exports, given the weakening global industrial activities. The Reserve Bank of Australia estimated that commodity export prices fell by a weighted average of 8.2% month-on-month in May 2009, following an 18.1% drop in April. Australian imports fell 25% during the first three months in 2009, reflecting the decline of the country’s domestic demand. According to the latest projection by IMF, Australian GDP is forecast to fall by 1.4% in 2008.

Nevertheless, signs of improvement of the economy have emerged recently. The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 12.7% in June 2009 from 88.8 in May 2009 to 100.1, the largest monthly increase in the last 22 years despite the jobless rate also rising to 5.4% in the first quarter of 2009. In addition, retail sales in the first quarter of 2009 increased 2.6% quarter-on-quarter, the sharpest gain since the third quarter of 2007.

Trade Policy

Australia is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding. Most goods can be freely imported.

The Australian government has started progressive reductions of trade barriers since 1988, except for special items like passenger motor vehicles (PMVs) & automotive components, alcoholic and tobacco products, and textile, clothing & footwear (TCF) products, which are still subject to higher import tariffs.

Australia has been active in pursuing free trade agreements. According to the Australian government, free trade agreements (FTAs) have been signed with New Zealand, Singapore, the US, Chile, and Thailand. Currently, it is pursuing FTAs with China, Malaysia, Japan and the Gulf Cooperation Council. The country also opened the first round of negotiations of the Australia-Korea Free Trade Agreement in May 2009.

China-Australia Free Trade Agreement Negotiations

China became Australia’s largest trading partner during FY2007-08 of Australia, with bilateral merchandise trade totaling A$57.9 billion (US$ 49.5 billion). Australia’s exports to China mainly included agricultural, mineral and energy products amounting to A$26.93 billion (US$23 billion), while imports from China of A$31.00 billion (US$ 26.5 billion) comprised mainly manufactured products, including computer and electrical equipment, industrial products and clothing.

China and Australia commenced FTA negotiations in April 2005, following a consideration of a joint feasibility study and 13 rounds of negotiations. The 13th round of negotiations was held in Beijing in December 2008, mainly discussing the liberalisation of services and investment.

Hong Kong's Trade with Australia

During the first four months of 2009, Australia was the 10th largest export market for Hong Kong. Hong Kong's total exports to Australia totalled US$1.4 billion in the first four months of 2009, down 8.1% YoY. Major export items included telecommunications equipment & parts (19% share of total exports), toys, games & sporting goods (9%), medicaments (7%), other articles of apparel, of textile fabrics (7%) and computers (5%).

Hong Kong's imports from Australia amounted to US$650 million in during the same period, down 2.6% YoY. Major import items included crustaceans, molluscs & aquatic invertebrates, chilled, frozen, dried, salted or in brine (15% share of total imports), pearls, precious & semi-precious stones (9%), fruit and nuts (not including oil nuts), fresh or dried (7%), telecommunications equipment & parts (6%), and engines & motors, non-electric, & parts (5%).

Australia's Economic Involvement in Hong Kong

Australia has a considerable investment in Hong Kong. It is estimated that there are around 450 registered Australian companies in the territory. As at the end of 2008, there were about 13,712 Australian nationals residing in Hong Kong.

According to Hong Kong’s Census and Statistics Department, there were 19 regional headquarters and 61 regional offices of Australian companies in Hong Kong, as of 1 June 2008. All the "big four" banks (namely Australia & New Zealand Banking Group Ltd. (ANZ), Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation) have presence in Hong Kong. Other major Australian companies in Hong Kong include Leighton Asia (construction) and Telstra Corporation Ltd. (telecommunications).