OECD D ECONOMIC SURVEYS C 1998 E SPECIAL FEATURES Corporate governance Entrepreneurship O AUSTRALIA (cid:211) OECD, 1998. (cid:211) Software: 1987-1996, Acrobat is a trademark of ADOBE. All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction, lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and any elements thereof like any other copyrighted material. All requests should be made to: Head of Publications Service, OECD Publications Service, 2, rue Andr´ e-Pascal, 75775 Paris Cedex 16, France. OECD ECONOMIC SURVEYS 1997-1998 AUSTRALIA ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became Members subse- quently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996) and the Republic of Korea (12th December 1996). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention). Publie´ e´galement en franc¸ais. (cid:211) OECD 1997 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre franc¸ais d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, Tel. (33-1) 44 07 47 70, Fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: http://www.copyright.com/. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue Andre´-Pascal, 75775 Paris Cedex 16, France. Table of contents Assessment and recommendations 1 I. Recent trends and short-term prospects 15 Re-accelerating output growth 15 Sluggish employment and persistent high unemployment 20 Low inflation 25 A narrowing current external deficit 28 The outlook to 1999 30 II. Macroeconomic policies 34 Monetary policy 34 Fiscal policy 45 III. Implementing structural reform: a review of progress 55 Industrial relations reform 55 Active labour market policies 65 Education and training 68 Reform of the health care system 70 Implementing the National Competition Policy 74 Unfinished infrastructure industry reforms 79 Tariff policy 81 Reform of the financial system 84 Tax reform 86 IV. Current issues in corporate governance 93 Corporate governance in Australia: an international perspective 94 Current issues 100 Assessment 115 iii V. Entrepreneurship 116 Measuring entrepreneurship 116 Factors affecting entrepreneurship 126 The role of public authorities 137 Assessment 143 List of acronyms 145 Notes 147 Bibliography 156 Annex I. Calendar of main economic events 161 Statistical annex and structural indicators 167 Boxes 1. Intergovernmental agreements on National Competition Policy 76 2. The role of corporate governance 95 3. The Australian business sector: an overview 117 Tables Text 1. Demand and output 16 2. The labour market 22 3. Costs and prices 26 4. Current account trends 28 5. Short-term prospects 32 6. Changes in official interest rates 1994-97 37 7. Commonwealth budget developments 47 8. Budget measures and forecasts 49 9. Implementing the OECD Jobs Strategy: an overview 56 10. Key developments in the federal industrial relations system 59 11. Real GDP per capita 75 12. Business telecommunications charges 78 iv 13. Social security contributions and taxes on individual income and payrolls, 1995 88 14. Average effective tax rates on capital and labour 91 15. Market capitalisation of listed domestic equity issues at year-end 96 16. Large share-holdings: an international comparison 97 17. Ownership of exchange-listed firms 98 18. Business sector investment-output ratios 99 19. Rates of return on capital in the business sector 100 20. Substantial shareholdings in All Ordinaries Index companies 110 21. A snapshot of the Australian business sector 118 22. Enterprises and enterprise creation by states and territories 123 23. Registration requirements and costs in a sample of OECD countries for three legal forms 124 24. Bankruptcy proceedings 127 25. Compliance costs in small enterprises 128 26. Labour force status of workforce by region of birth, 1981 130 27. International comparison of informal investor characteristics 134 28. Government support for the business sector 138 29. Formal co-operation between companies 141 Statistical annex and structural indicators A. Selected background statistics 168 B. Gross domestic product 169 C. Income and expenditure of households 170 D. Prices and wages 171 E. Balance of payments 172 F. Foreign trade by commodity 173 G. Foreign trade by area 174 H. Production structure and performance indicators 175 I. Labour market indicators 176 J. The public sector 177 v Figures Text 1. The current expansion compared 17 2. Contribution to GDP growth 18 3. Business fixed investment 19 4. Housing affordability 21 5. Output and employment 23 6. Patterns of employment 24 7. International comparison of consumer prices 27 8. Competitiveness and trade 29 9. The performance of monetary policy 36 10. Nominal interest rates 38 11. Credit to the private sector 39 12. International comparison of long-term interest rates 40 13. Real interest rates 41 14. Exchange rates 42 15. Monetary conditions indicator and the Taylor rule 44 16. Underlying budget balance 50 17. Revenues and underlying outlays 51 18. Net debt 54 19. Total factor productivity in the business sector 80 20. Effective rates of assistance in manufacturing 82 21. Marginal income tax rates, 1995 88 22. Sources of tax revenue, 1995 90 23. Enterprises and employment by industry 119 24. Export performance in South East Asia 121 25. Venture capital 132 vi BASIC STATISTICS OF AUSTRALIA THE LAND Area (1 000 sq.km) 7 682.3 Population of major cities, 1995 (1 000): Agricultural area, 1986-87, per cent of total 61 Sydney 3 770 Urban population, 1991, per cent of total 85 Melbourne 3 217 Brisbane 1 489 Perth 1 262 Adelaide 1 081 THE PEOPLE Population, June 1996 (1 000) 18 289 Civilian employment, 1996 (1 000) 8 344 Number of inhabitants per sq.km 2.4 of which: Agriculture 424 Natural increase, 1996 (1 000) 125 Industry1 1 877 Net migration, 1996 (1 000) 111 Other activities 6 043 PARLIAMENT AND GOVERNMENT Composition of Parliament following latest elections: House of Party Senate Representatives Australian Democrats 7 – Australian Labor Party 29 49 Independent 1 5 Greens 2 – Liberal Party of Australia 31 75 National Party of Australia 5 18 Country Liberal Party 1 1 Total 76 148 Present government: Liberal/National Party coalition Next general elections for House of Representatives: March 1999 PRODUCTION Gross domestic product, 1996 Gross fixed capital formation, 1996 (A$ million) 499 548 Percentage of GDP 20.1 GENERAL GOVERNMENT SECTOR, PER CENT OF GDP, 1996 Current disbursement 35.6 Current revenue 35.2 Current transfers 13.5 of which: Direct taxes 17.8 FOREIGN TRADE Main exports, 1996, per cent of total: Main imports, 1996, per cent of total: Food, beverages and tobacco 21.4 Food, beverages and tobacco 4.4 Raw materials 19.7 Raw materials 2.3 Fuels 16.8 Fuels 6.2 Machinery and transport equipment 12.9 Machinery and transport equipment 47.0 Other manufactured products 29.2 Other manufactured products 40.1 THE CURRENCY Monetary unit: Australian dollar Currency unit per US dollar, average of daily figures: Year 1996 1.2769 October 1997 1.3880 1. Including mining, electricity, gas and water, and construction. Note: An international comparison of certain basic statistics is given in an annex table. vii This Survey is based on the Secretariat’s study prepared for the annual review of Australia by the Economic and Development Review Committee on 13 November 1997. • After revisions in the light of discussions during the review, final approval of the Survey for publication was given by the Committee on 26 November 1997. • The previous Survey of Australia was issued in December 1996. viii