AUSTRALIA GUIDE

Australia – The Economy

Australia is a highly developed country with a market economy. As of 2021, Australia was the 13th-largest national economy by nominal GDP (Gross Domestic Product), the 18th-largest by PPP-adjusted GDP, and was the 25th-largest goods exporter and 20th-largest goods importer.

The Australian economy is set to become the world’s 13th largest economy in 2022, according to the International Monetary Fund. Australia’s nominal GDP will be around A$2.1 trillion (US$1.7 trillion). Australia is home to just 0.3% of the world’s population, but accounts for 1.6% of the global economy.

Australia took the record for the longest run of uninterrupted GDP growth in the developed world with the March 2017 financial quarter. It was the 103rd quarter and the 26th year since the country had a technical recession (two consecutive quarters of negative growth). As of June 2021, the country’s GDP was estimated at A$1.98 trillion.

The Australian economy is dominated by its service sector, which in 2017 comprised 62.7% of the GDP and employed 78.8% of the labor force. Australia has the tenth-highest total estimated value of natural resources, valued at US$9.8 trillion in 2017. At the height of the mining boom in 2009–10, the total value-added of the mining industry was 8.4% of GDP. Despite the recent decline in the mining sector, the Australian economy had remained resilient and stable and did not experience a recession from 1991 until 2020.

Australia’s economy is strongly intertwined with the countries of East and Southeast Asia, also known as ASEAN Plus Three (APT), accounting for about 64% of exports in 2016. China in particular is Australia’s main export and import partner by a wide margin.

Australia is a member of the APEC, G20, OECD and WTO. The country has also entered into free trade agreements with ASEAN, Canada, Chile, China, South Korea, Malaysia, New Zealand, Peru, Japan, Singapore, Thailand, and the United States. The ANZCERTA agreement with New Zealand has greatly increased integration with the economy of New Zealand.

Australia is well positioned to grow its resources, energy, agriculture, and education and tourism services exports to Asia’s rising 2.2 billion middle-class consumers expected by 2032.

Small and Medium-Sized Companies

Small and Medium Enterprises (SMEs) are the driving force behind the economic growth of Australia – out of 2.4 million businesses in Australia, the majority (2.35 million or 98 per cent) are small and/or medium businesses.

Nearly two-thirds of businesses are sole traders and more than a third employ 1-19 staff. Micro businesses, which employ 1 to 4 employees, account for an additional 25.7 per cent of all businesses. The remainder in the small business category (with 5 to 19 people) account for 8.9 per cent of all businesses. 

Small and medium-sized enterprises (SMEs), contribute around 55 per cent to Australian GDP, and employ about two-thirds of the business workforce in Australia.

The Australian Tax Office define SMEs based on annual turnover and categorises small businesses as those with an annual turnover of $10 million or less. By their definition, medium businesses have a turnover of between $10 million and $250 million, and large companies have an annual turnover of more than $250 million.

Due to the size of their economies and other factors, the definition of SMEs is different in the United States and the European Union.

Compliance Highlights

• Australian Taxation Office – The Australian Taxation Office (ATO) is the principal revenue collection agency of the Australian Government. Their role is to effectively manage and shape the tax and superannuation systems that support and fund services for Australians, including:
  • collecting revenue
  • administering the goods and services tax (GST) on behalf of the Australian states and territories
  • administering a range of programs that provide transfers and benefits to the community
  • administering the major aspects of Australia’s superannuation system
  • being custodian of the Australian Business Register.
• The Fair Work Ombudsman – Their purpose is to promote harmonious, productive, cooperative, and compliant workplace relations in Australia. Their functions outline the responsibilities we have as set by the Fair Work Act 2009 to achieve their purpose:
• provide education, assistance, advice and guidance to employers, employees, outworkers, outworker entities and organizations
  • promote and monitor compliance with workplace laws
  • inquire into and investigate breaches of the Fair Work Act
  • take appropriate enforcement action
  • perform our statutory functions efficiently, effectively, economically, and ethically

Labor Contracts Law

Companies hiring employees in Australia must operate within an employment framework based on federal and state legislation. The Fair Work Act (2009) and National Employment Standards (NES) are the main legal factors governing employment law in Australia.

‘Modern Award’ and Enterprise Agreements can apply to individual workplaces and companies and are industry- and legislation-based agreements that set minimum pay and conditions. Australia’s Human Rights Act also enforces other regulations in association with a number of specific acts prohibiting discrimination at all stages of employment.

Under common law, all employees in Australia should have a contract, whether verbal or in writing (which is preferable). Contracts come under Australian Government laws but can also be subject to state and territory legislation.

Workplace (or Enterprise) Agreements set out the rights and obligations between an employer and group of workers. Terms and conditions supplant basic minimums in the National Employment Standards (NES).

Similarly, Awards apply terms and conditions to a particular industry or occupation, and they are also in addition to NES provisions.

These considerations come into play during the first stages of hiring and onboarding – drawing up a contract with your new employee. General requirements apply to all contracts. These include:

• New employees must receive a Fair Work Information Statement setting out the essential terms of their role, as soon as possible after beginning work
• Oral agreements are permitted under common law, although written contracts are strongly recommended and should detail essential terms and conditions of employment
• Where work comes under Modern Awards or Enterprise (collective) Agreements, employees should have written confirmation in their contract or job offer specifying the award or enterprise agreement that covers their role
• Workplace agreements, which should exceed minimum limits under National Employment Standards
• Providing copies of company policies on conduct, confidentiality, social media, role and responsibilities, health, and safety, for example
• Contracts are subject to government laws and, in some cases, state legislation

Under National Employment Standards (NES) requirements, every employee must receive a copy of the Fair Work Information Statement or a copy of the Casual Employment Information Statement. A contract of employment should cover:

• Full names and addresses of employer and employee
• Start date
• Contract type – indefinite or fixed term for example
• Remuneration and payment schedule
• Place of work
• Outline of employees’ duties
• Maximum hours per week
• Paid vacation entitlement
• Termination, severance, and notice period information
• Which Modern Award or Enterprise Agreements apply (if any)
• Company’s policies and procedures

The main contract types/agreements that affect employment in Australia include:

1. Indefinite, Open-ended Employment Contracts: Typically for full-time, permanent employees usually working between 38 and 40 hours each week, on average. They are entitled to written notice or payment in lieu. Terms and conditions can be set by the contract, or by an award or registered agreement. Entitlements include annual, illness and carers’ leave among others.
2. Fixed-term Employment Contracts: These apply to a definite time period, say three or six months, or a specific task. Employees can be full- or part-time and are entitled to the same wages and benefits as full-time employees, which may be improved by awards or agreements.
3. Part-time Employment Contracts: Generally, for fewer than 38 hours a week but on a regular work schedule, with the same minimum entitlements as full-time employees but adjusted on a pro rata basis.
4. Casual Employment Contracts: Tend to work as required without the employer’s commitment to offering future work. To compensate for not having minimum benefits, such as paid illness leave and vacations, their hourly rate is ‘casual loaded’ to a higher hourly rate.
   Note: If a full- or part-time contract is mutually changed to casual the same regulations apply as to ending employment. Employees must be given notice of the change and any leave, pay or entitlements must be fulfilled.
5. Probation Periods: Trial periods typically last between three and six months, during which the individual has the same rights as other employees. If probation is towards full- or part-time work, they accrue rights to paid leave and sickness benefit. If the trial period is unsuccessful, the individual must be given notice and paid for any unused leave.
6. Apprentice and Trainee Agreements: Individuals enrolled with a Registered Training Organization (RTO) can enter a training agreement with an employer, under guidance of a trained person on a fixed-term basis.
7. Collective Bargaining Agreements, or equivalent: Australia’s Workplace (or Enterprise) Agreements are the general equivalent of the more commonly known Collective Bargaining Agreements (CBAs) from other employment markets. The agreements set out the rights and obligations between employer(s) and groups of workers or individual workers, by which the employer can organize conditions suited to their business.
   
   Terms and conditions will supplant basic minimums in the National Employment Standards (NES). The Fair Work Act (2009) codifies the rules and regulations that apply to such agreements.