Investing in Australia

Financial Environment

Australia continues to be one of the strongest performing economies in the world - the result of sound and transparent macroeconomic policies and an economy made more flexible and resilient through an ongoing reform agenda.

Australia's average annual GDP growth rate from 1998 to 2005 is 3.6 per cent, well above the rate of world growth and ahead of other developed economies including the USA, Japan, Germany and the UK. The robustness of the Australian economy is one of the main attractions of Australia as a global financial services centre in the Asian time zone.

Australia has one of the largest and most highly developed marketplaces for financial services in the Asia-Pacific region. In the 2003/4 financial year, total turnover in Australia's financial markets exceeded A$68,900 billion, an increase of 20.4 per cent on the previous year.

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Banking

The Reserve Bank of Australia (RBA) ensures overall financial stability in the banking sector by monitoring developments in macro-economy, financial markets and institutions; controlling the issue of Australian currency; and lending funds to the official money market. In 1988 responsibility for supervising financial institutions was transferred to a new regulator, the Australian Prudential Regulation Authority. The sector is controlled by the Banking Act of 1959.

Reform to Australia's banking industry began in the early 1980's when the government floated the dollar, scrapped interest rate ceilings and eased restrictions on merchant banks. At the end of 1997, other reforms were initiated to promote competition and improve efficiency. These changes included allowing credit unions and building societies to offer expanded banking services; granting insurance companies banking licenses; and permitting foreign companies to take over Australian banks. Australia's four largest banks - Commonwealth Bank of Australia, National Australia Bank, Australia-New Zealand Banking Corporation (ANZ) and Westpac - have been prevented from buying into each other under the countries "four pillars policy".

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Foreign Exchange

Australia's open economy and sophisticated financial services sector have provided the impetus for the expansion of Australia's foreign exchange market activity over the past decade. A sophisticated base of international investors, intermediaries, investment banks, fund managers and ancillary service providers forms a deep market with an appetite for specialist products such as hedge funds and mortgage-backed securities.

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Securities

Securities - Australia has six major stock exchanges. Australia's stock market is the largest and most liquid in the Asia-Pacific region (ex-Japan). The depth, liquidity and sophistication of Australia's markets underpin Australia's attractiveness as a global financial services centre.

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Unit Trusts

Australia's status as the Asia-Pacific centre for funds management, with growth opportunities in areas such as private banking and advantages as a site for back and middle-office processing, have attracted global financial institutions since the mid-1990s.

As a result of a forward-thinking, compulsory employer-funded superannuation, Australia's investment fund asset pool is the largest in Asia and the fourth largest in the world.

The pool's growth offers international financial groups substantial business opportunities, while its size, together with the strength of the local economy, offers a hedge against global volatility. Overseas companies manage 45 per cent of Australia's total investment funds (A$406 billion) either directly or in joint ventures with local companies.

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Tax - About Australia's Taxation System

Most government revenue in Australia is derived from company and individual income tax, but contributions are increasing from indirect taxes especially the goods and services tax (GST) introduced in 2000.

Other indirect taxes include customs and excise duties, fringe benefits tax, capital gains tax and resource taxes. Some tax revenue is distributed to other levels of government. State governments impose their own taxes, such as payroll tax and land tax. Municipal governments impose taxes on real estate to finance local services.

For the latest tax information, please visit the website of the Australian Taxation Office.

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