Foreign Economic Relations
Australia's currency is the Australian dollar (AUD). The exchange rate as of September 1, 2005, was US$1=AUD1.33. The Australian dollar, which has floated since 1983, is the world's seventh most traded currency.
Australia is balancing traditionally strong economic ties to the United States with a budding economic partnership with China, but the European Union is Australia's largest overall trading partner. The United States is the single largest investor in the Australian economy, and Australia buys more products from the United States than from any other nation. However, U.S. farm subsidies and trade barriers have been the source of friction. On January 1, 2005, Australia and the United States enacted a free-trade agreement, and now Australia is pursuing similar agreements with China, Malaysia, and the United Arab Emirates. China and Australia are natural economic partners because China needs Australia's raw materials, such as coal, iron ore, gas, and oil, for its manufacturing sector. Japan-the top single importer of Australian products-purchased twice as much from Australia as China did in 2004.
Although Australia generally prefers bilateral trade agreements, it sometimes is willing to advance its economic goals in a multilateral context, such as via the Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) Closer Economic Partnership and the Asia-Pacific Economic Cooperation (APEC) forum. The Australian government believes that more trade liberalization can be achieved through bilateral arrangements than under the auspices of the World Trade Organization (WTO), of which Australia is a founding member (since January 1, 1995).
In 2004 Australia imported US$110.0 billion of merchandise. The largest imports were passenger motor vehicles (7.9 percent), crude petroleum (5.9 percent), computers (3.9 percent), medicine (3.8 percent), and telecommunications equipment (3.5 percent). The principal import partners were the United States (14.5 percent), China (12.7 percent), Japan (11.8 percent), Germany (5.8 percent), and Singapore (4.4 percent).
In 2004 Australia exported US$91.7 billion of merchandise. The largest exports were coal (11.4 percent), iron ore (5.2 percent), non-monetary gold (4.8 percent), crude petroleum (4.2 percent), and bovine meat (3.9 percent). The principal export partners were Japan (18.9 percent), China (9.3 percent), the United States (8.1 percent), South Korea (7.8 percent), and New Zealand (7.4 percent). In 2004 Australia posted a merchandise trade deficit of US$18.3 billion.
In 2004 Australia's current account balance was negative US$39.6 billion, representing 6.4 percent of gross domestic product. The current account deficit was offset by a similar surplus in the capital and financial account. In particular, the inflow of portfolio investment was unusually high. In general, inbound direct and portfolio investments are needed to finance Australia's chronic current account deficit.
In 2003 Australia's external debt was US$237.9 billion, representing 30 percent of gross domestic product.
Foreign Investment: In 2004 foreign direct investment totaled US$57 billion, only slightly less than China's US$60 billion. This unusual achievement was attributable in part to investor interest in Australia's mineral resources. However, Australia also attracted foreign investment because of the country's transparent and law-abiding government institutions and strong services sector. As of year-end 2004, cumulative foreign investment in Australia totaled US$888.6 billion versus Australian investment abroad of US$460.8 billion.
In the 12 months ending in mid-2005, Australia contributed US$1.6 billion of official development assistance (ODA), representing about 0.25 percent of gross domestic product (GDP), slightly higher than the donor average. Typically, the largest recipient of ODA is Papua New Guinea, a severely underdeveloped country that receives one-fifth of the total amount. However, in January 2005 Australia announced a US$770 million tsunami aid package-divided equally into grants and loans-for Indonesia. The twin goals of the ODA program are poverty reduction and regional stability, which the government holds to be closely related. The primary aid categories are governance (20 percent), education (16 percent), health (13 percent), infrastructure (13 percent), and other (24 percent).
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