Australia achieves high overall compliance with international standards and codes, with a score of 69.17 out of 100 in our Standards Compliance Index. Australia's compliance in the areas of macroeconomic fundamentals and financial supervision is high. Observance of international standards on auditing, however, lags behind. The government has though had a long-standing policy of moving toward convergence of national standards with International Standards on Auditing (ISAs). In July 2004, Australia formally made the International Financial Reporting Standards the basis of Australian Accounting Standards. There is no assessment available of Australia's compliance with the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. However, it has been reported that in 2005, Australia implemented reforms aimed at improving the nation's insolvency regime.

Macroeconomic Policy and Data Transparency

According to the International Monetary Fund's Special Data Dissemination Standard (SDDS) website, as well as its 2005 Article IV Consultation report and two 2007 IMF reports, Australia's data dissemination regime complies with SDDS specifications and is "adequate for surveillance purposes." Australia provides and adheres to advance release calendars as required by the SDDS, as well as summary methodologies for all data categories. Requirements of simultaneous release and the protection of confidentiality are fulfilled and appropriate information is made available to assess the integrity of official statistical data. Advance notice of changes in methodology are generally provided, however, for a few data categories such notice is provided only at the time of release. Also, in terms of certain aspects of the integrity dimension for data on analytical accounts of the banking sector, the Australian authorities fail to provide the required information on the IMF's SDDS website. Nonetheless, Australia continues to make improvements in its data dissemination practices, as noted by the IMF's 2007 Annual Observance Report of the SDDS. Australia became a subscriber to the SDDS in April of 1996. More »

The primary source by which to assess Australia's compliance with this standard is a 1999 self-assessment of transparency practices carried out by the Australian Treasury department. The self-assessment was benchmarked against the underlying principles of what would shortly become the IMF's Code of Good Practices for Monetary Transparency. The Treasury report found Australia's monetary policy transparency practices to be generally consistent with the IMF's Code. However, it recognized that one deficiency had to do with Australia's reliance on convention rather than legislation to establish its accountability framework. Beginning with the 2004 IMF Article IV Consultation report and carrying forward in subsequent years, it has been reported that Australia's monetary policy framework is both transparent and effective. Based on the provisions of the Reserve Bank Act of 1959, the primary policy objective was to maintain currency stability, but beginning in 1993 that objective shifted to inflation targeting. The 2007 IMF Article IV Consultation notes that Australia's prudent monetary policy has resulted in relative strength even in the context of the U.S.-led credit crisis. More »

The IMF has not carried out a full-scale fiscal policy transparency assessment for Australia, but in 1999 it acknowledged the Australian Treasury's 1999 self-assessment as both objective and credible. The Treasury's assessment compared Australian fiscal policy transparency against the IMF's principles and found them generally in compliance, with some minor deficiencies. Since that time, the IMF has published several Article IV Consultation reports that describe Australia's fiscal policy framework as both transparent and effective, and consistent with the IMF's code of good practices, again noting only minor deficiencies. The IMF reports from 2004 to the present describe the Australian government's ongoing commitment to improving its already high standards. Australian fiscal policy is based on the principles of fiscal management set forth in the Charter of Budget Honesty Act, which mandates a balanced budget, on average, and requires that, in periods of strong economic growth, the government maintain a budget surplus on forward estimates. This policy framework has enabled Australia to enjoy the benefits of fiscal surpluses over most recent years, leading the IMF to observe in its 2008 Article IV Consultation's "Concluding Statement" that Australia's current fiscal position is "an enviable situation by international standards." More »

Institutional and market infrastructure

According to the International Association of Insolvency Regulators website, in October 2005, Australia launched an "integrated package of reforms" aimed at improving the nation's insolvency regime. According to the website, the reforms sought to enhance protections for creditors, impede the ability of company officers to commit misconduct, improve regulation covering insolvency practitioners, and fine-tune the voluntary administration procedure. It was anticipated that draft legislation would be circulated for public comment in early 2006. All insolvency procedures applying to corporate entities are provided for in Chapter 5 of the Corporations Act of 2001 and the Corporations Regulations. The Australian Securities and Investment Commission (ASIC) regulates all corporations within Australia as well as financial system participants. Included as part of its broad role, ASIC regulates the corporate insolvency system. However, ASIC does not administer any insolvency cases directly. The courts have a general oversight role in the corporate insolvency system. However, there is insufficient publicly available information regarding Australia's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

According to a 2006 National Institute of Accountants in Australia (NIAA) self-assessment, Australia adopted International Financial Reporting Standards (IFRSs) promulgated by the International Accounting Standards Board (IASB) effective January 1, 2005. However, the Deloitte IAS Plus website noted that at the time of issuance, the Australian Standards were not 100% compatible with IFRSs. IFRSs were adopted with some modifications - such as removing options and adding Australian paragraphs - due to the fact that Australian standards, unlike the international standards, are not exclusively meant for the for-profit sector. As a consequence, to bring Australian standards in line with IFRSs, in November 2006, the Australian Accounting Standards Board (AASB) issued Exposure Draft (ED) 151 "Australian Additions to, and Deletions from, IFRSs" for comment. According to the text of ED 151, the adoption of IFRSs in Australia is an ongoing process and the AASB must consider providing new or amended Australian equivalents in line with the amendments made to IFRSs. The Deloitte Accounting Alert of September 2007 noted that in March 2007, the AASB released Amending Standard AASB 2007-4 "Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments" which implements the majority of the proposals in AASB ED 151 and also includes other amendments arising due to changes introduced by the IASB. The update further noted that these amendments will bring Australian standards in line with IFRSs. In addition, the text of the amended Australian standards, except for IAS 26, confirms that Australian standards are in compliance with IFRSs for the for-profit sector. More recently, in line with the IASB "Improvements Project," the AASB adopted Accounting Standard AASB 2008-5 "Amendments to Australian Accounting Standards arising from the Annual Improvements Project." As of May 2008, this standard amends 23 existing AASBs bringing them in line with the changes made to IFRSs. More »

According to a 2006 Technical Note published by the IMF as part of the Financial Sector Assessment Program, the corporate governance framework in Australia is "largely healthy and dynamic" and built on a solid legal and regulatory foundation. The report finds that shareholder activism is high and periodic disclosure requirements are in line with international best practices and exceeds the requirements in many other countries. Overall, implementation and enforcement of disclosure and corporate governance requirements was found to be strong, specifically among the top tier listed companies but there seems to be a significant gap in corporate governance disclosure compliance between larger listed companies and smaller companies. The IMF notes that following the implementation of the reforms introduced under the Corporate Law Economic Reform Program Act (CLERP 9) of 2004, the Australian government strengthened auditor independence, and improved financial reporting and disclosure. In addition, in 2003, the Australian Stock Exchange (ASX) Corporate Governance Council released its Principles of Good Corporate Governance Practice and Best Practice, which were updated in August of 2007 in a Second Edition of Corporate Governance Guidelines. The ASX Principles are not prescriptive and listed entities follow a comply-or-explain approach towards compliance. The oversight authority for corporate governance is the Australian Securities and Investments Commission which has wide-ranging enforcement powers. More »

Australia has had a long-standing policy of convergence and harmonization of national standards with International Standards on Auditing (ISAs) promulgated by the International Auditing and Assurance Standards Board (IAASB). In 2004, this policy was further consolidated with the enactment of the Corporate Law Economic Reform Program and the subsequent issuance of the Financial Reporting Council's (FRC) strategic direction with regard to the Australian auditing framework. In 2005, the FRC directed the Australian standard-setter, the Auditing and Assurance Standards Board (AUASB), to use ISAs as a base for redrafting of Australian standards issued prior to 2004. On May 1, 2006, the Auditing and Assurance Standards Board (AUASB) issued 35 new legally enforceable Australian Auditing Standards (ASAs), following a review of the existing auditing standards. The issuance of the redrafted standards was accomplished in two phases. According to the CPA Australia website, Phase 1 achieved the legal enforceability of the standards while in an ongoing process Phase 2 will focus on enhancement of existing ASAs to bring them in line with the most recent version of ISAs. Following the IAASB's policy, the AUASB has an ongoing Clarity Project to amend the extant ASAs. Under the Corporations Act, the same set of auditing standards is mandatory for listed as well as non-listed companies. With regard to small and medium-size enterprises, the annual report points out that in March 2007, the AUASB released a discussion paper for comment "Auditing Small and Medium-Sized Entities (SMEs)" followed by participation in several other discussion forums. However, the report states that the discussions only revealed a lack of demand for a separate standard on SMEs. More »

The Financial Action Task Force (FATF) conducted a mutual evaluation of Australia's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime against its own 40+9 recommendations and special recommendations in 2005. In its assessment, the FATF concludes that Australia is fully compliant with 12, largely complaint with 15, partially compliant with 13, and non-compliant with 9 recommendations and special recommendations. The report observes that although Australia's legal framework for AML/CFT is comprehensive, its effective implementation needs enhancement. More specifically, the report identifies several shortcomings in the preventive measures currently in place in Australia's financial institutions, the most significant of them being non-compliance with FATF requirements on customer due diligence (CDD). Further, Australia is non compliant with most FATF recommendations relating to Designated non-Financial Business and Professions (DNFBPs). However, according to the FATF's mutual evaluation and a 2008 report by the U.S Department of State (DoS), the Australian authorities are aware of these shortcomings and are committed to remedying them. The 2008 DoS report also points to the Australian authorities' intent in implementing the revised FATF 40+9 recommendations and thus bringing the country's AML/CFT regime in line with international standards. The report notes that Australia introduced the Anti-Money Laundering and Counter-Terrorism Financing Act in 2006 as part of a legislative package that implements reforms in the regulatory regime over a period of two-years concluding in December 2008. Some of the weaknesses with regard to CDD and DNFBPs pointed out by the FATF are being addressed by the new reforms. More »

The IMF's 2006 Financial System Stability Assessment (FSSA) report on Australia concludes that Australia's Reserve Bank Information and Transfer System (RITS) is a sound and efficient payment system and complies with all the Core Principles (CPs) for Systemically Important Payment Systems developed by the Committee on Payment and Settlement Systems. The Reserve Bank of Australia (RBA) owns and operates RITS, which is classified as the only systemically important payment system in Australia. RITS, which has been operational since 1991, was launched as a real time gross settlement system in 1998. The RBA oversees RITS and other payment and securities clearing and settlement systems operating in Australia and its oversight of RITS is deemed robust by the FSSA. The payments system policy and oversight are the responsibility of the Payments System Board (PSB) that resides within the RBA. RITS is judged to be operating on a solid legal basis, its risk management structures appropriate, and its governance framework effective and transparent. The IMF has forwarded recommendations pertaining to some CPs only in order to further enhance the operations of RITS and its regulatory environment. However, the Australian authorities declare their intent to work towards addressing the potential gaps brought up by the FSSA, and indeed mention that they have been working on upgrading the RITS user interface to make it more confidential. The 2007 annual report of the PSB also indicates continued and consultative reform initiatives to make payment systems in the country more efficient, cost-effective and user friendly. More »

Financial Regulation and Supervision

A 2007 report by the IMF mentions that banking supervision in Australia meets very high international standards, and that prudential supervision by the Australian Prudential Regulation Authority (APRA), the banking sector supervisor, is well established. The IMF conducted a Financial Sector Assessment Program (FSAP) for Australia in 2006 and concluded that Australia has a high overall level of compliance with the Basel Core Principles (BCPs) for Effective Banking Supervision. The IMF's Detailed Assessment (published in 2006) of banking supervision in Australia also indicates that Australia is compliant with 26 of the 30 BCPs (considering that Principle 1 is divided into 6 subsections), largely compliant with 3, and materially non-compliant with 1. The report rates Australia materially non-compliant with BCP 15 relating to the monitoring of banks for money laundering activities. A subsequent report by the IMF (2007 Article IV) notes that the Australian authorities have made progress in addressing this issue, and the Anti-Money Laundering and Counter-Terrorism Financing Act was passed in December 2006 with the aim of addressing many of the weaknesses pointed out in the 2006 FSAP. In general, the IMF's 2006 assessment and its subsequent reports point to very favorable banking supervision practices in Australia. Moreover, Australia is moving towards a risk-sensitive framework of supervision with the adoption of the Basel II framework in January 2008. More »

The 2006 IMF FSAP also concludes that Australia has a high overall level of compliance with the International Organization of Securities Commissions (IOSCO) Principles. The assessment adds that the Australian Securities and Investments Commission (ASIC) - the securities regulator in Australia - is generally at the forefront of international best practices in supervision and regulation, and is continuously reforming itself to improve its capacity as well as supervisory policies and practices. The areas with less than full compliance include operational independence of the supervisor, disclosure and insolvency regimes, and licensing and regulation of collective investment schemes, where Australia is only broadly compliant; prudential regulation of intermediaries, and regulation of large exposures, defaults and market disruptions, where Australia is partly compliant; and inspection, investigation and surveillance powers of the regulator, where Australia is judged non-compliant. A 2007 IMF report notes the progress made by Australia to implement the 2006 FSAP recommendations and reports that funding to the ASIC has increased to support better regulation and enhance supervisory resources and practices and welcomes the continued effort of the Australian authorities to formalize the failure resolution and crisis management framework. The 2007 IMF report observes progress in the anti-money laundering/combating the financing of terrorism area as well. Several other laws, ASIC Policy Statements/Regulatory Guides and auditing standards have been framed or amended after the FSAP that bring Australia closer in line with IOSCO requirements. More »

According to the IMF's 2006 FSSA, the insurance regulatory and supervisory regime in Australia highly observes the Insurance Core Principles promulgated by the International Association of Insurance Supervisors. Australia has introduced substantial reforms to incorporate international best practices and promote market innovation in the insurance sector. Within the larger insurance industry, the regulatory regimes of the general insurance sector and the life insurance sector are distinct. Therefore, the IMF conducted separate assessments of these sectors and assigned to them different compliance levels for individual principles. Both sectors get high grades from the FSSA; however, the IMF does come up with a few recommendations to further improve Australia's supervisory regime. They pertain to the supervisory authority of the Australian Prudential Regulation Authority (APRA), the country's integrated financial sector supervisor; the regulatory role of the Treasury; insurance fraud; and the country's anti-money laundering/combating the financing of terrorism (AML/CFT) framework. A 2008 U.S. Department of State report mentions that Australia enacted the Anti-Money Laundering and Counter-Terrorism Financing Act in 2006 (after the IMF FSSA) with the potential of addressing many of the weaknesses in its AML/CFT regime. The 2007 APRA annual report notes that Australia moved towards a risk-sensitive framework of supervision, harmonized prudential standards for the life insurance sector, refined and updated standards for the general insurance sector, and enhanced overall supervisory consistency and flexibility. A 2007 IMF report adds that the APRA received additional funding in the 2007/08 Budget. Legislative changes were also made to strengthen cross-border coordination in crisis management between the APRA and the New Zealand supervisor. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AA+/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 908.826 billion USD (IMF)

2007 GDP (Per Capita): 43,312 USD (IMF)

2008 GDP (Growth Forecast): 3.2% (IMF)

2008 Inflation (CPI): 3.5% (IMF)

2007 Unemployment: 4.4% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 24.022 billion USD (UNCTAD)

FDI (Outward): 22.347 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 2123 million USD (OECD)