Pestle Profile of Australia

Companies have many important decisions to consider before conducting business within a foreign country. Companies use a PESTLE model to analyze a country’s macro-environment, competitive forces, uncertainties and risks. A PESTLE profile includes the political and legal systems, economy, socio-culture, geographic environment, and technology of a country. This will help determine whether it is beneficial and profitable for a company to conduct business within a particular country. The PESTLE model for Australia will help businesses decide if Australia is an ideal location for their company. Political and Legal Systems:

Australia is an English speaking democratic country that derives its procedures from their written constitution. The Australian Constitution explains how their government should function and what kinds of issues laws can be passed on (Australia.gov.au, 2011). Similar to the United States, Australia’s federal government, which is led by Prime Minister Julia Gillard, delegates power between its overall government and its individual states. Australia’s House of Representatives is made up of 148 representatives, while, their Senate is made up of 12 elected senators, two from each state. Political Stability: For the last 11 years, the IMD World Competitiveness Yearbook 2010 ranked Australia as the worlds third for political stability and was ranked a 9.24, which indicates a very high level of stability (NSW Government, 2010).

Companies will not be affected by political unrest. Corruption: On a scale of 0-149 (0 being none and 149 being very high) for corruption, Australia ranked an eight (World Audit, 2011). Particularly for large companies, corruption within a country is crucial when considering the negative influence of corrupt politicians and authorities. Australia will allow a company to run an ethical business model due to a low corruption rating. Significant International Disputes: In 2006, Australia released Indonesian cleric Abu Baker Bashir and this caused a “difficult” relationship to develop between Indonesia and Australia. Australia then revoked the visas of 42 Papuan asylum seekers that had been granted sanctuary (McGrath, 2006). Many people believed that Australia was trying to please Indonesia by doing this, but instead Australia was seen as contradicting its original action. Economy:

Australia’s economy shows common characteristics of a developed country. The economic structure based on GDP has a small agricultural industry that accounts for 3.8 percent of the total economy. The service sector accounts for 71.3 percent of the economy while the industrial sector accounts for 24.9 percent (refer to data table 1-1 in Appendix A). World Bank Classification: Australia is a developed country with a very high HDI and is classified as having a high-income economy with a gross national income of $12,276 or more (The World Bank Group, 2011). Australia has a high-income member grade category of 0 within the OECD risk classification system meaning that there are no minimum premium rates for transactions involving obligors as long as they do not undercut private market pricing (The World Bank Group, 2011). GDP and GDP Per Capita (Latest 5 years): GDP and GDP per capita are increasing overall, except, for a small decline during 2009. From 2006 to 2010, GDP has increased from US$ 784 billion to US$ 1,237 billion, an increase of 57.8 percent. GDP Per Capita increased by US$ 18,090; an increase of 48.1 percent.

GDP per Capita is an important indicator of the relative performance and productivity of a country (refer to Table 1-2 in Appendix A). Retail Price Inflation & Unemployment Rate: Retail price inflation in Australia is fairly stable due to a decrease of 2.8 percent during 2010. This helped balance the increase of 2.3 percent in 2009. Retail price inflation remains in the low one percent’s. The rate of inflation seems to be stable due to a decrease of 2.8 percent during 2010. However, it also appears that the unemployment rate continues to rise. Unemployment rates seem to decline as RPI remains in the low one percents. In 2010, the RPI, decreased 2.8 percent and unemployment increased by 1.334 percent. Therefore, high deflation can increase the unemployment rate (refer to Table 1-3 in Appendix A). Disposable Personal Average Income: According to World Salaries, the average disposable personal income in Australia for 2004 is 18,348 US$ which is well above average. The exchange rate for the AU$ against the US$ went from 0.8532 in 2007 to 1.0715 in 2011. From 2007 to 2010, Australians had more purchasing power in buying U.S. goods (refer to Table 1-4 Appendix A). Industry:

Infrastructure: To achieve long-term economic prosperity, Australia is improving links between jurisdictions, and shifting decisions about infrastructure. They are moving from a traditional project-by-project and jurisdiction-by-jurisdiction approach, to a broader and deeper focus on national objectives and priorities. The Department of Infrastructure works closely with Infrastructure Australia and with the Australian government to modernize the country’s infrastructure. In the last year, the Department of Infrastructure has invested more than $3.9 billion in direct and indirect grants. They also took part in completing nearly 40 major rail and road projects, and started another 51 (refer to Chart 1-5). The key industries are mining, tourism, agriculture, and manufacturing. International Trade:

Membership in Major International Organizations: BIS, CCC, GATT, IBRD aka World Bank, ICC, ICFTU, INTERPOL, IDA, IFC, IFAD, ILO, IMF, ISO, INTELSAT, OECD, UN, UNESCO, UNIDO, WHO, WIPO (refer to Appendix B). Exports, Imports, and Trading Partners: Australia imports primarily from China, Japan, and the U.S., and exports to China, Japan, South Korea, and India. Australia and China are major trading partners consisting of 18.7 percent of imports and 25.1 percent of exports. Australia exports to South Korea, India, and the U.S. account for 20 percent of all exports. Imports from Thailand, Singapore, and Malaysia amount for 19.6 percent of all imports (refer to Table 1-6 in Appendix A). Aggregate Value of Exports and Imports: Table 1-6 depicts a consistent percentage growth for both the value of imports and exports. In 2009, possibly due to the recession in the U.S., exports declined by 1.9 percent and imports declined by 9 percent. The balance of trade remains negative as imports grow at a faster rate than exports.

Australia, like many other developed nations, needs to increase its exports to achieve a positive trade balance (refer to Table 1-7 for statistical data). Major Export and Imports Items: Major exports for Australia from 2009 through 2010, included coal, iron ore, gold, alumina, meat, wool, wheat, machinery and transport equipment (CIA, 2011). At the same time, major imports were machinery, transport and telecommunication equipment, computers and office machines, crude oil and petroleum (CIA, 2011). Australia’s Comparative Advantage Analysis: Australia is a large highly developed country with high GDP per capita and disposable personal income, as well as, many natural resources. Although Australia cannot compete with low-wage labor, their close proximity to this market offers businesses a unique advantage. It enables companies to conduct business more efficiently with low-wage labor countries due to reduced shipping costs, faster delivery times, and having similar time zones. Australia’s high DPI also allows businesses to have access to a large and growing domestic market. Therefore, Australia can generate income by selling domestically as well as exporting to other countries. Socio-Culture and People:

Population and Demographics: Australia’s population grew by 1.4 percent (320,800 people) to 22.6 million (22,620,600) during the year ending in June 30, 2011. The growth rate has been declining since the peak of 2.2 percent for the year ending December 30, 2008. There were 296,800 births in the year ending June 2011, which is 1.9 percent (291,200) more than the previous year. Australia’s median age increased by 4.7 years over the past 20 years, from 32.4 years in June 1991 to 37.1 years in 2011. During the same period, the proportion of children aged 0-14 decreased by 3.1 percent, and people aged 65 years and over increased by 2.4 percent. Culture: Australia is a tolerant, inclusive, and multilingual society that is heavily influenced by its British and European origins. Australia’s government is making major efforts to preserve its culture, including that of the Aborigines. In the 2006 census, the most common ancestry was Australian 37.15%, followed by English 32%, Irish 9%, Scottish 8%, Italian 4%, Germany 4%, Chinese 3%, and Greek 2%. Other cultural influences come from large-scale immigration from non-English speaking countries. Environment/Geography:

Australia is the sixth largest country in the world and is an island. It is located on the smallest continent in the world (refer to Map 1-8 in Appendix A). Much of Australia has a continental climate. Australia has dramatic landscapes, such as the outback, large areas of grasslands, mountains, and plateaus scattered throughout the country, as well as beautiful coastal beaches. Australia’s major industries include tourism, sheep farming and mining bauxite, coal, copper, gold and iron. There were severe thunderstorms in Melbourne, Australia in 2003, 2005, and 2010. In 2008, a severe thunderstorm caused major flooding in Queensland, Australia. Also, tropical cyclones have occurred in 2005, 2006, and 2007. The most recent 5.0 magnitude earthquake hit Kalgoorlie-Boulder in 2010. Australia has also experienced large bush-fires, droughts, floods, and tornadoes. Technology:

Australia is well positioned as an innovative country among global competitors. Australian’s are committed to promote and support innovation within its government, scientific and technological community, academia, and industries. They have a reputation for leadership in social reform, encouraging creative and innovative thinking, and facilitating collaboration. It is ranked 40th out of 219 countries in rapid growth of mobile telephones, and ranked 25th for Internet usage. The Australian workforce is approximately 10 million and is highly trained; many senior managers and technical staff have a university, trade or diploma qualification. Conclusion:

PESTLE model shows that Australia is a sound country to conduct business in. It offers a Western business culture with a workforce capable of operating in Asian and Western business environments, since it has a wide range of native Asian language skills in the region. They are an English speaking country and more than 5 million of its people speak a second language. Australia is a democratic country with constant political stability and low corruption. Overall, Australia’s economy is favorable because it has a high income economy, ranks high in world bank classifications, GDP and GDP Per Capita are increasing, retail price inflation is stable, average disposable personal income is higher than average, and is a large highly developed country with many natural resources.

Australia has a large population that consumes a large number of imported products. The country has many memberships in major international trade organizations and is in good standing with its trade partners. It is has an attractive, tolerant, safe and friendly environment. Australia is well positioned among global competitors and is committed to staying competitive. Australia is innovative, collaborates, and invests in its government, communities and industries. Information and communications technology is important to Australia for their economic growth and innovation. All these forces together shape a strong and dynamic future. Australia is an ideal country for companies that export products at low costs or who offer technologically advanced and innovative equipment and consumer commodities. Appendix

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