Australia’s diverse economy generated a robust per-capita gross domestic product of almost US$51,000 in 2015. The country has enjoyed a long period of sustained growth, once bolstered by Chinese demand for Australia’s natural resources. But that demand has waned in recent years. While agricultural and mining sectors still account for more than half of exports, today they contribute just 12% of total GDP.
The slowdown in demand from China led to a collapse in prices for raw materials like coal, iron ore, zinc, copper and bauxite in 2015. Australia’s manufacturing sector is in decline and now accounts for less than 10% of GDP. Nonetheless, the overall economy is performing better than economists had expected. An increase in government spending and investment and strong exports in sectors other than mining are offsetting the effects of growing imports, a slowdown in consumer spending and the mining sector’s woes.
Oxford Economics expects Australia’s economic growth to rise from 2.4% in 2015 to 2.9% in 2016. The economic forecasting firm predicts growth in the 2.7% to 2.9% range for the next three years.
Business travel industry insight
Almost 7.5 million people visited Australia in 2015. New Zealand was the primary source of tourists, accounting for 18% of visitors. But arrivals from China are growing rapidly and now account for 14% of visitors, up from just 2% in 2000. Japanese travelers are visiting less; they make up just 5% of visitors—down from a high of 15%.
The business travel market is worth about US$20 billion a year, with two-thirds spent by domestic travelers. Oxford Economics expects spending to be weak in 2016, growing by less than 2% in local currency. But the market seems poised for growth as economic stability continues to restore business confidence.
Qantas and Virgin Australia dominate the local air travel market. Together with their low-cost divisions, Jetstar and Tigerair Australia, they account for 80% to 90% of flights at Sydney, Melbourne and Brisbane. The finances of both airlines have improved. Qantas recently reported record annual profits and Virgin returned to profitability after three years of losses. Recent investments by HNA Group and Nanshan Group in Virgin Australia mean it’s better positioned to benefit from Chinese demand.
Hotel room supply is concentrated in the major cities of Sydney, Melbourne, Brisbane, Adelaide and Perth, and these cities continue to attract the lion’s share of future hotel investment. But the extensive portfolios of AccorHotels, Best Western and Choice Hotels mean travelers have choices in other cities, as well.
- Outside of the mining sector, improving confidence and credit growth are supporting a modest recovery in business investment.
- Commodity prices are low, but so are costs of production. Commodity exporters are increasing supply to boost revenue and profits.
- Liquefied natural gas exports are growing as more production capacity comes online.
- The Australian economy continues to adapt to the end of the mining boom. Weaker company profits and lower wages hamper business investment and consumer spending that could help fill the gap left by the slowdown in mining.
- Low inflation means employees have greater spending power, but inflationary pressures are building.
- Over a third of the country’s exports go to China, a concentration that could put the Australian economy at risk as China shifts to slower and more balanced growth.
BCD Travel’s Research & Intelligence experts translate the trends driving international business growth in new markets. Talk to your account manager about how BCD can support your company’s growth and get your travelers where they need to be across the globe.