“Australia is a world leader in innovation with a safe, stable political and business environment and low levels of red tape.” – Matt Adam-Smith, Partner & International Business Centre Director, Grant Thornton Australia.
It took a global pandemic to halt Australia’s relentless economic progress – prior to the emergence of Covid-19, the country had enjoyed 28 years of uninterrupted growth and was the only major economy to avoid a recession in the wake of the financial crisis of 2008.
But all the elements are in place to see Australia forge ahead once again in the coming years: “We have a safe, low-risk environment with a stable political and regulatory system,” explains Matt Adam-Smith, Partner & International Business Centre Director, Grant Thornton Australia. “We are a world leader in innovation, and our low levels of red tape means that this is a straightforward place in which to do business.” Australia’s resilience will play a key role in its ability to bounce back from the pandemic, he adds.
“Our ability to adapt is our great strength, and it helps us meet current challenges. We have a flexible and resilient economy, strong institutions and open markets, all of which help us respond effectively to all manner of disruptions,” Matt adds.
Despite its somewhat remote geographical location, Australia has an important role to play in global trade. The country has strong economic and cultural ties to APAC (Asia-Pacific), and many major multinationals have APAC regional headquarters in Sydney or Melbourne – the decision to locate here is often driven also by the availability of highly skilled local labour.
The country is a leading provider of goods and services that are in high demand across the global economy: for example, Australia is one of the world’s top five exporters of minerals and fuels, and it boasts significant reserves of iron ore, gold and liquefied natural gas (LNG). It is also one of the world’s top 14 agricultural producers.
Most of Australia’s existing principal export partners are located in east Asia, and a network of 14 free trade agreements – covering around 70% of the country’s trade – gives Australian companies preferential access to these fast-growing markets.
Businesses from the United States, the UK, Belgium, Japan and Hong Kong have been the biggest investors in recent years. “We continue to see a strong appetite for overseas acquirers to continue pursuing Australian assets,” Matt says. “This is aided by the use of deal-related technology and a willingness on the part of overseas businesses to accommodate the government’s extended foreign investment approval process.”
“While historically Australia has been seen as a higher tax environment, there have been recent reductions in corporate tax rates,” Matt explains. “The basic company tax rate has fallen further to 25% for the 2021/22 financial year, making our system more competitive with other major OECD countries.”
The frameworks around setting up entities and employing staff, meanwhile, are relatively straightforward given the developed nature of the Australian economy and legal system. Matt says that bureaucracy is considerably less of a problem than in the United States, for example, where there can be major differences in red tape from state to state.
Australia has large and sophisticated financial markets, with the world’s fifth largest pool of investment fund assets. Sydney is the country’s financial hub, with strong banking and insurance sectors as well as groundbreaking developments in the fintech space.
At present, the most significant growth opportunities in Australia are in areas such as enhancing digital capabilities, investment in new technologies – in particular in the healthcare and energy sectors – as well as in investment in commodities producers and support services.
There are a number of leading universities and research institutions, making Australia a hotbed of innovation with a highly educated workforce, Matt adds. “Biotech and the life-sciences space is going to be a major driver of growth in the years ahead,” he says. “Startups and spinouts will provide a number of major investment opportunities.” Many states as well as the federal government offer incentives such as research & development tax credits for specific activities.
Personal health and old-age care are other rapidly growing parts of the economy, partly as a result of Australia’s ageing population.
The country, meanwhile, has a lot to offer its large expat population: although the cost of living is relatively high, wages have managed to keep pace. And Australia’s climate, its thriving, multicultural cities and its stunning landscapes are all major attractions – as the country’s large tourism sector demonstrates.
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Selling into, supplying or setting up operations in Australia can be a step into the unknown. At Grant Thornton, we have the experience to guide you. Our International Business Centre directors can co-ordinate access to international teams, resources and global delivery, while also helping you forge valuable trading relationships in the Australian market.