Business Migration

AUSTRALIA - A BACKGROUND

1. Preface

This background paper outlines an understanding of some of the issues and information required by someone (be it an individual, family or corporation) wishing to come to Australia to live and possibly set up or acquire a business. This information is general and subject to change and should be used for guidance only. For specific matters, readers are advised to obtain further information and, of course, take professional advice from John Griffiths and Co. before making any decisions.

This background is reviewed from time to time to ensure that it is current. Of course, one of the major influences at this time (October /November 2008) is the world-wide Banking and Credit crisis and the associated flow on effects in most economies. With respect to Australia, the opinion is that it will suffer a short recession next year but should be well placed to come through this crisis in reasonable shape. This is due to many factors – the main ones being that much of our exports are commodities and energy to China and Asia, a free floating currency, our Australian bank’s Balance Sheets are strong, Australia’s prudential regulations are strong and the country has been in domestic surplus for many years and there is no net Commonwealth Government debt.

2. Business environment

Australia is a free and flexible place in which to do business. It is a large country geographically (about the size of continental USA) with a relatively small population of around 21 million. It has a stable political system and is one of the wealthiest countries in the world.. This, together with open and free markets, a highly skilled, diverse and well educated workforce and vast natural resources, combine to make Australia an attractive prospect for individuals and their families, foreign investors and business migrants who see it as a land of opportunity.

Facts about Australia

Australia is an independent self governing country, located in the Asia Pacific region on the edge of the Pacific Rim in the world’s fastest growing region. It covers 7.7 million square kilometres in area and consists of six States and two Territories: The capital city, Canberra, is located in the Australian Capital Territory in SE Australia. Because of its size Australia is divided into three time zones with the east coast two hours ahead of the west (three during summer with daylight saving). The Eastern States are 10 hours ahead of GMT.

Population

Australia has a population of 21 million and is expected to reach 35 million by 2056. Approximately 90% of Australians live near the coast, concentrated around the main cities of Brisbane, Sydney and Melbourne. Sydney is the largest city with a population of about 4.2 million (projected to be 7 million in 2056) Melbourne has approximately 3.5 million (6.8 million), Brisbane 1.6 million (4 million) , Perth 1.6 (3.4 million) and other capitals showing similar rates (except Tasmania). In 2056, it is estimated that Queensland will replace Victoria as Australia’s second most populous state.

Australia is a migrant society and has successfully integrated many groups into the community. Since the mid 20 th century migrants have arrived from Europe, the Middle East and increasingly from the Asia Pacific region. While the population is principally of British and Irish descent, migrants come from more than 160 countries. Indigenous people make up approximately 1% of the population. Net Overseas Migration is presently running at about 199,000 per annum with a long term average of around 140-150,000.

Language

The official language is English but there are newspapers, radio stations and television programs catering for various ethnic communities in their own languages.

Standard of living

Australia’s standard of living is one of the highest in the world. This is due to many factors – some being it’s clean environment, equitable climate combined with attractive working conditions, world class health and education facilities, high quality reasonably priced housing and few extremes of wealth or poverty.

Employment

In August 2008 the national unemployment rate was 4.2%. The rates in the “engine room” states of Western Australia and Queensland were around 3.2%. Because of the world credit crunch at the moment, this is expected to rise in the next 12 months but the effect may be different in each state.

GDP

In 2007, the Australia’s Gross Domestic Product (GDP) measured on purchasing power parity basis was estimated at $760 billion and accounted for 1.1% of the gross world product. The nation has one of the highest GDP per capita, estimated at $43,000, according to the International Monetary Fund.

CPI

Inflation rate is running at about 5 % pa at the moment (October/November 2008). This is above the range tolerated by the Reserve Bank ( 2 to 3 %) but is expected to reduce in 2009.

Interest rates

The Reserve Bank earlier this month slashed rates by 100 basis point to 6 per cent in response to the global financial crisis and the risk of a sharp economic slowdown.

“Nonetheless, there is still a big task ahead to bring inflation down and this could limit room for manoeuvre on monetary policy,” Mr Battellino (Deputy Governor of the Reserve Bank) said.

Most Australian economists expect the Reserve Bank to lower interest rates by another 50 basis points when its board meets in November. That would reduce official rates to 5.5 per cent, the lowest level since March 2005.

Currency

The unit of currency is the Australian Dollar, quoted as the AUD. There are 100 cents to the dollar. The AUD is one of the most traded in the world, primarily due to the fact that Australia is a commodity exporting country.

Banking

The central bank is called the Reserve Bank which is independent of the Government. It oversees interest rates and maintains a responsible financial and monetary system for the country. It is a transparent institution which meets monthly and publishes details of it’s decisions.

Australia has a system of four major trading banks (“high street banks”) being National Australia, Westpac, Commonwealth and ANZ. There are also a number of regional banks – about two per state. The Banks are quite regulated and have capital ratio reserves well in excess of international standards.

System of government

Australia was initially settled by the British in the late 1700s. The individual settlements (colonies) came together as states and all the states agreed to join together to establish a Commonwealth in 1901.This was called Federation.

Australia is governed by a constitutional monarchy with the Queen as head of state and represented in Australia by the Governor General who is always an Australian. The head of Government, the Prime Minister, is the leader of the party, or coalition of parties, holding the majority seats in the Federal Parliament – the lower house is called the House of Representatives and the Upper House (representing the States along the US style) is called the Senate. The form of government is modeled on the Westminster system, with some influences from the American congressional system.

Three tiers of government

Federal

The Federal Government, based in Canberra, legislates for Australia at a national level, controlling matters such as the national budget and taxation (treasury), national security and defence, migration, foreign policy and trade, customs and excise, communication, banking and insurance.

State and Territories

The State and Territories are all self governing (most with two chambers), although they all co-operate closely with the Federal Government. They have their own Westminster derived forms of government and each passes its own legislation dealing with more local matters, such as transport, health, education, law enforcement, agriculture and mineral development. As a result, legislation relevant to doing business in Australia can vary in detail and complexity across the country. It must be noted though that Taxation and Company and Securities matters are in the purview of the Federal Government.

Local

Local Governments have limited powers and govern planning, local environment and transport and other local issues.

Market conditions

The economy

Australia has a western style economy which is about the 12th largest in the world. It is a prosperous country and ranks highly for overall quality of life. It has a free enterprise system with an orderly marketing of products and is very dependent on international trade – particularly in food, agriculture, minerals and energy and tourism.

Australia currently has one of the world’s highest economic growth rates and has a high international credit rating. The strength of the Australian economy is in part due to policy reform over the last 15 years including a freely floating currency, broad financial deregulation and changes to the taxation system. The taxation system changes mainly have been a lowering of individual tax rates and also moving to a more indirect taxation system with the introduction of a Value Added Tax called the GST (Goods and Services Tax) which is presently at a rate of 10%. Industrial relations reform has also been a continuing process leading to a more flexible labour market. The reform process has also been helped by low interest rates, a strong housing market as well as low unemployment anda stable rate of inflation. Because of these issues and the fact that the Federal Government has been in surplus for many years (as have most State Governments) the Australian economy has not been as affected by the US credit crisis as have other major countries.

Industry base

Australia has a diversified industrial base - with the economy dependent on the export of mainly mining, energy and agriculture products. It also has a range of manufacturing industries such as mining, industrial and transportation equipment, food processing, chemicals and steel. In addition, Australia also has active industries in high technology, IT manufacturing (including scientific and medical equipment), medical research and products, biotechnology, telecommunications and software. There is also a very active services sector - business and finance, construction and project management and planning, communication, property, health, education and tourism.

Trade

Whilst Australia exports a huge range of primary industry commodities including food products and grains, it also exports minerals (such as iron ore, coal, gold, nickel, bauxite, zinc) and energy (gas and aluminium) Over the 20 years, there has also been substantial growth in exports in value added and manufactured products - these include cars, computers, electrical goods and medical technology. Major imports include consumption and manufactured goods such as cars, computers, fuels, machinery and equipment, transport and machinery parts, and telecommunications equipment.