Gross domestic product — The service sector dominates the Australian economy accounting for about 68 percent of gross domestic product. But its agricultural and mining sectors, which combined account for only 8 percent of GDP account for 65 percent of its exports. Manufacturing accounts for less than 12 percent of GDP. Australia is a major exporter of agricultural products, particularly grains and wool, and minerals, including various metals, coal, and natural gas. A downturn in world commodity prices can thus have a large impact on the economy. Australia's competitive advantage in primary products is a reflection of the natural wealth of the Australian continent and its small domestic market. Just over 20 million people occupy a continent the size of the contiguous United States.

Third quarter gross domestic product was up 1.0 percent and 4.3 percent when compared with the same quarter a year ago. The consumer — as in Canada and the U.S. — has been a major spark for growth. Household consumption was up 1.2 percent and 4.5 percent on the year while business investment was up 0.2 percent and 12.9 percent on the year. The GDP chain price index was up 0.2 percent but soared 3.2 percent on the year. Despite high interest rates and the worst drought in a century Australia continues to surprise thanks to the demand for the country’s natural resources especially from China.

Like Canada, and unlike the U.S., Australia releases GDP data once a quarter, usually about two months after the reference quarter’s end and is usually the last of the major industrial countries to do so.

Inflation — Unlike most other industrial nations, Australia releases it consumer price index and producer price indexes only once a quarter rather than every month. One of the reasons that the Reserve Bank of Australia has been forced to increase interest rates has been due to higher prices for both consumer and producer goods. While consumer prices eased in the fourth quarter, they remain above the RBA’s inflation target range of 2 to 3 percent. Unlike most other major industrial countries, the Australian Bureau of Statistics does not publish a core consumer price measure.

Third quarter CPI eased to a gain of 0.7 percent on the quarter and was up 1.9 percent when compared with the same quarter a year ago. Food prices, reflecting drought conditions in agricultural areas jumped 1.9 percent on the quarter but are up 1.8 percent on the year. Housing prices jumped 1.8 percent and were up 4.2 percent on the year. Prices declined for education by 1 percent while household contents & services prices sank 2.4 percent. The Reserve Bank of Australia’s preferred measure of annual underlying inflation, the so-called trimmed mean, was up 2.9 percent in the third quarter, up from 2.7 percent in the second quarter. The measure removes the most volatile price movements.

Third quarter producer price index was up 1.1 percent on the quarter and up 2.4 percent when compared to the same quarter a year ago. Domestic prices were up 1.5 percent and 3.7 percent on the year while import prices sank by 1.5 percent on the quarter and were down 5.5 percent on the year.

Unemployment — A major problem for the Australian economy is not underemployment but rather a labor shortage that threatens to drive up wages and inflation. Employment increased by the most jobs in four years as mining and energy companies expanded to feed China's demand for natural resources. The labor shortage has bedeviled the mining industry especially for the last two years, creating a dearth of engineering and construction workers and tradesmen. Companies are being forced to use incentives such as bonuses and accelerated promotions to attract and retain workers according to the Reserve Bank of Australia. The unemployment rate in October was 4.3 percent, up from 4.2 percent in September which was at the lowest since records began in 1978.

Merchandise trade — The merchandise trade deficit has ballooned thanks in part to the virtually insatiable appetite for imports and despite the demand for Australian minerals by developing Asian countries, and especially China. A severe drought has combined with the devastating impact of typhoons in the agricultural sector to curtail production. This has curbed traditional exports while expanding imports. And Australia’s consumers continue to buy imports despite the relatively high value of the Australian currency to the yen and U.S. dollar.