What's Australia’s GDP?

According to the World Bank, Australia’s GDP currently sits at US$1.68 trillion – or around AU$2.58 trillion. Much of the country's economic value comes from sectors like mining (Australia is the largest world producer of aluminium ore); health & education; construction; finance; and manufacturing.

If you’re curious about where Australia stands in global terms, the country is 12th in the world for total GDP. It's behind the US, China, Japan, Germany, India, the UK, France, Russia, Canada, Italy and Brazil.

Wait, what is GDP?

GDP stands for ‘gross domestic product’. The term might sound a little complex, but its meaning is simple: it’s the overall value of every single good and service produced within Australia.

Australia’s GDP is assessed quarterly by the Australian Bureau of Statistics (ABS) by averaging the results of three different measures:

• Production (the total value provided by goods and services)
• Income (the total income created by businesses and employees)
• Expenditure (the total value of spending on goods and services by consumers, businesses and governments)

Why is GDP important and how has Australia’s GDP changed over the years?

GDP is important because it’s a reflection of how well the economy is doing. Changes to GDP reveal the economy’s performance over time; if it’s positive, it’s growing, and if it’s negative, it’s shrinking. This is known as economic growth.

Pre-pandemic, Australia’s economic growth sat at 2.6% per year. Between 2019 and 2020, the economy shrank (perhaps understandably) by 0.1%.

However, between 2022 and 2023, the economy actually performed slightly better – there was a 3.4% improvement to be exact. This was thanks to strong economic recovery following nationwide lockdowns.

GDP is also an important measure of Australia’s standard of living. Economic growth effectively has to outrun population growth in order for Australia’s standard of living to improve. For that reason, economists like to see economic growth going up by about 2% each year.

By comparison, population growth in Australia has averaged around 1.3% over the last 30 or so years. This could be a good indicator that Australia’s standard of living is indeed getting better.

That being said, GDP does have its limitations in terms of living standards. For example, it’s not an accurate reflection of how well wealth is spread across individual Australians.

What about GDP per capita?

You’ll also see the term ‘GDP per capita’ being used to describe Australia’s economic output. This is perhaps a more accurate indicator of economic growth because it divides total GDP by the population and shows how much a country’s GDP can be credited to each person.

Australia’s current GDP per capita is US$64,491 (AU$98,983) according to World Bank data, which is pretty good by global standards. It puts Australia in 17th position.

What about the average net worth of each Australian?

While you’ll see GDP referred to in ‘per capita’ figures, this isn’t necessarily a reflection of how wealthy the average Australian is.

Wealth (or net worth ) is typically measured by weighing up a person’s assets (i.e. everything they own that has a value attached, such as property, shares and super) and liabilities (things like debt , home loans and other outstanding payments). A person’s net worth is their assets minus their liabilities.

Currently, Australia is home to some of the wealthiest adults in the world – at least according to Credit Suisse’s Global Wealth Report.

The nation is fourth behind Switzerland, the US and Hong Kong for mean wealth per adult (US$496,820) and second behind Belgium for median wealth per adult (US$247,450). The mean is total wealth divided by Australia’s population, while the median is the exact mid-point between each half of the population.

Obviously, not every single Australian is this wealthy. The figures are skewed by those at the very top who have millions and millions (or billions and billions) of dollars. In fact, according to the Australian Council of Social Service (ACOSS) and the University of NSW, 10% of Australian households maintain 46% of the country’s overall wealth. On the other hand, 60% hold just 17% of Australia’s wealth.

Why are Australians so comparatively wealthy?

So, how did the country manage to nab such a high position in the Global Wealth Report?

Australia’s superannuation system is largely to thank. Since 1992, employers have been required to make mandatory superannuation contributions on behalf of their employees. It's a framework that helps boost an individual’s net worth ahead of finishing work and ensures they can benefit from a comfortable retirement .

But, it’s a scheme that not every country enjoys. In fact, Australia is considered to have one of the best pension systems in the world, partly due to mandatory super contributions.

The strength of the Australian property market is also a factor, but more on that later.

How much is the Australian stock market worth?

If you’re new to investing , the Australian Securities Exchange (ASX) is the local marketplace for trading shares, bonds, exchange-traded funds (ETFs) and other investments.

As of September 2023, there are 2,219 listed entities on the ASX and its market cap sits at US$1.72 trillion. The ASX is also the biggest exchange in the Southern Hemisphere and is in the top 20 of all listed exchanges in the world. Currently, it’s ranked number 17 globally.

This makes the ASX a reasonably sizeable stock exchange, and a diverse and lucrative place to invest.

Since the year 1900, the Australian stock market has seen strong growth of 13.2% per annum on average. Only a small proportion of those 123 years have seen a stock market decline, with the overwhelming majority experiencing positive growth.

It’s helpful to note that the value of the stock market isn’t necessarily an indicator of Australia’s worth. But, the two have historically often correlated pretty closely. When the economy is doing well, it usually boosts stock market performance.

Because GDP is measured using production and income metrics, a higher output of both usually means a higher valuation for Australian businesses – and higher stock prices.

What about the property market?

The Aussie property market has a somewhat hefty worth of over $10 trillion (and that only covers residential properties).

Australia is also home to some of the most expensive real estate markets in the world. According to the 2022 Demographia International Housing Affordability report, Sydney and Melbourne rank second and fifth respectively for housing affordability across the entire globe. The report measures by weighing up median house prices and median household income.

Going back to the country’s wealth, many Australians and even international investors choose to invest in property to help grow their net worth. According to the latest ATO data, around 20% of Australians own an investment property.

Australia’s property market as a whole has a history of providing stable, long-term capital growth. There are several reasons for this, including robust population growth, limited supply of housing and land, and the historical ease of access to credit.

The federal government also makes it somewhat lucrative to invest in Australian property, with legislation and tax strategies like negative gearing giving property investors access to tax breaks.

How does inflation factor into Australia’s worth?

You’re undoubtedly aware of the numerous interest rate rises that have taken place in recent months.

These have been implemented to help combat inflation – AKA the rise in the price of goods and services over a period due to demand exceeding supply. When a business knows that customers are willing to pay high prices for its goods or services, it can comfortably increase them.

In Australia (and around the world), inflation is high. Australia’s inflation rate hit 7.8% in Q4 2022 and has since decreased slightly to a (still-high) rate of 5.4% in Q3 2023.

Rates are up for several reasons. These include global supply chain problems (due in part to the pandemic and the war in Ukraine), bad weather affecting internal supply, and the unforeseen strength of the economic recovery following lockdowns.

Thanks to government stimulus packages and a stockpile of household savings during the pandemic, there’s also simply more money floating around waiting to be spent and, consequently, higher demand for goods and services.

This factors into Australia’s economic growth because inflation has a strong impact on it.

High inflation can be damaging to the economy for several reasons. First, it reduces spending, which helps drive economic growth. Second, it lowers the real returns on investments. Third, it can lead to demands for higher wages, and the consequent risk of businesses either hiking their prices or reducing employment.

To that end, the Reserve Bank of Australia (RBA) aims to maintain a sustainable inflation rate of 2-3% each year.

So, how much is Australia worth as a whole?

Traditionally, GDP has been the go-to metric for measuring a country’s worth. That means it could be fair to say that Australia is currently valued at around AU$2.58 trillion.

But, as we know, there are several drawbacks to only looking at GDP. Beyond the fact that GDP doesn’t assess the spread of wealth, it also doesn’t take into account unpaid labour (like domestic work and childcare), the environment, fair pay, health, education, homelessness and other factors that determine a nation’s success.

This means it’s really hard to say what Australia’s really worth. But, these numbers at least give an indication of its value on an economic scale.