market context: factors having a direct or indirect impact on the market

Political factors
-Extremely favorable Economic Freedom ranking
-High tax burden (Individual income tax rate: 45%/Corporate income tax rate:
30%, inhibit consumer spending, corporate investment, and the distribution of
profits.)
- Worsening corruption(Government doesn’t combat the corruption and
absence of an anti-corruption agency. Lack of transparency in its real estate sector.)

- Deteriorating government finances (covid19the budget deficit and public

debt widened in 2021)

Economical factors
- Inflation to outpace global average(lead to higher prices for consumers and
increase operating costs for businesses)
- Fall in FDI intensity (Australia’s foreign direct investment, border closures and
the general lack of willingness to invest in an uncertain landscape)
- Large dependence on extractive industries(mineral products accounting for
over half of all goods exports in 2021. China is a major consumer of Australia’s
natural resources)
Social
- Growing and affluent population(Over 2022-2040, Australia’s total population
is expected to increase by 22.9%. The country’s consumer base will be expanded and
supported by rising incomes and considerable affluence.)
- Rising life expectancy (healthy living, exercise)
- Large middle class(expandconsumer expenditure increase)
- Urbanization to continue apace(urban consumers will remain extremely
important for consumer businesses in Australia)

Technological
- Steady forecast rise in internet use(allow greater implementation of e-
commerce strategies in the country, as well as ample opportunities for technology
players to extend their reach and introduce new online products.)
- Mobile subscriptions will continue to grow(more people using their mobile
devices for shopping and connecting to the internet, meaning that m-commerce
could make e-commerce through the use of tablets and desktops obsolete in the
near future.)
 - Further investment planned in digital infrastructure(Telstra, the owner of the
country’s largest mobile network, which has announced in February 2022 that it will
invest in two key telecommunications infrastructure projects that are set to improve
connectivity across the country. This will be done through the expansion of the fibre-
optics network by adding up to 20,000 route kilometres that will enable cities to
connect to each other more effectively and at very high speeds of up to 650Gbps.
- Greater use of AI in commercial activities(AI-powered chatbots and the use of
social media messaging to communicate directly with customers. customers to
become closer than ever to the brands they love and engendering brand loyalty.

Legal
-The Competition and Consumer Act (the companies are prohibited from setting
up predatory pricing, indulging in mergers and acquisitions that reduce the
competition or create a monopoly )
- -Intellectual property protection(The agriculture industry is being encouraged to
innovate and file for intellectual property protection. The government has
reduced tax rate to 17% for the patents granted.  promote more innovation in
the agricultural sector)

-Food labeling law(food in retail stores would be required to include the country
of origin where the food has been grown and packed along with classifying the food
as priority or non-priority. Also, the small businesses would now be required to bear
the brunt of GST as the government has extended the imposition of GST on the
businesses that sell imported products worth less than $1000. The GST on top of the
retail price would increase the price of the final product and this can negatively
impact the sales of the products)

Environmental
-Pollution (mining, manufacturing, and utilities)
-Climate change issue

POLITICAL ENVIRONMENT
Opportunities
Extremely favourable Economic Freedom ranking: Australia’s ranking in the Index of
Economic Freedom 2022 is amongst the top 20 countries globally, where it ranks
particularly favourably for Judicial Effectiveness, Property Rights, and Trade Freedom.
Such freedoms are afforded to the country through solid respect for the rule of law
and an independent judiciary. Consequently, this enables businesses to conduct their
operations without fear of overt state control and in an environment with limited
bureaucratic burdens.
Challenges
High tax burden: Given that the individual income tax rate is 45.0% and the
corporate income tax rate is 30.0%, Australia’s tax burden is relatively high, leading
the country to perform poorly for this indicator in the Index of Economic Freedom.
Elevated tax rates can somewhat inhibit consumer spending, corporate investment,
and the distribution of profits.

Individual income tax rate: 45%

Corporate income tax rate: 30%
Indicator in the Index of Economic Freedom perform poorly.

Worsening corruption: In the Corruption Perceptions Index 2021, Australia’s ranking

deteriorated markedly to stand at 18th globally. This is due to the government’s
failure to combat corruption in the public sector, which is notable by the absence of
an anti-corruption agency that could independently investigate graft. Another area of
weakness is lack of transparency in its real estate sector, which was exposed by the
Pandora Papers, making the country attractive for individuals looking to hide their
assets.

Corruption Perceptions Index 2021 ranked 18th globally.Government doesn’t combat

the corruption and absence of an anti-corruption agency. Another area of weakness
is lack of transparency in its real estate sector, which was making the country
attractive for individuals looking to hide their assets.

May 2022 election a source of instability: discontent with the incumbent

government has been growing in Australia, partly flamed by the handling of floods
that hit New South Wales and Queensland. The response of the government to the
COVID-19 pandemic is also likely to create a backlash against the ruling coalition,
given that some sectors, such as events and entertainment, have suffered
disproportionately. Additionally, intelligence agencies believe that several external
sources are trying to obstruct the election process, which could create instability.
Consequently, Australia’s ranking in the Political Stability and Absence of Violence
Index could suffer going forward, given the instability brought about by the election.

Deteriorating government finances: Owing to the detrimental impact of the COVID-

19 pandemic on state coffers, both the budget deficit and public debt widened in
2021. The budget deficit increased from 1.5% of GDP in 2016 to 13.8% in 2021.
Greater government spending to support businesses and individuals through the
pandemic, such as the COVID-19 Disaster Program and grants for corporations, was
the major contributor to deteriorating government finances, equating to around
20.0% of 2024/2025 GDP (according to the International Monetary Fund). However,
public debt levels are considerably lower than other developed nations, and continue
to be sustainable and not a threat to stability.

ECONOMIC ENVIRONMENT
Opportunities
Economy on track: despite the Omicron strain of COVID-19 that has caused
disruptions for businesses in the form of employees isolating to reduce the spread of
the virus, the Australian economy is expected to maintain some momentum in 2022,
with annual real GDP growth forecast to be 3.5% that year. This will be particularly
helped by the opening of Australia’s borders to international travellers, which will aid
both tourism and alleviate supply-chain disruptions. Furthermore, higher vaccination
rates against COVID-19 could also aid recovery, as the economy increasingly opens up
and learns to live with the virus. An expected reduction in taxes is also anticipated to
be supportive for consumer expenditure.
Challenges
Inflation to outpace global average: In the medium term to 2026, Australia’s
inflation rate is anticipated to remain considerably above the global average. This is
due to supply chain constraints caused by border closures as well as the more recent
impact of the Russia-Ukraine war, which has caused a significant spike in oil prices
that will have a knock-on effect on all aspects of the economy, such as freight and
production costs that will ultimately lead to higher prices for consumers and increase
operating costs for businesses. A tight labour market is also contributing to
inflationary pressures, as wages remain on an upward trajectory. This will also mean
that inflation is expected to overshoot the central bank’s target rate of 2.0-3.0%.

Fall in FDI intensity: Over 2018-2020, Australia’s foreign direct investment (FDI)
inflows as a percentage of GDP declined markedly, owing to new rules introduced
and designed to fortify the screening process of FDI on grounds of the threat to
national security. Whilst investment from developed countries has not been affected,
scrutiny over investments derived from elsewhere in the world may have had a
detrimental impact on FDI intensity over that period. The COVID-19 pandemic, which
caused a slowdown in business activity in 2020 as a result of Australia’s border
closures and the general lack of willingness to invest in an uncertain landscape, may
also have contributed to the fall in FDI inflows that year. Attempts to reinvigorate FDI
activity have been launched by the government, which is offering incentives to
overseas businesses interested in investing in food and beverage production, medical
equipment, renewable resources, space and defence, and critical mineral processing.
Nevertheless, ongoing supply chain bottlenecks, rising energy prices, and inflationary
pressures across the globe could hamper investment growth over the medium term.
Large dependence on extractive industries: With mineral products accounting for
over half of all goods exports in 2021, Australia demonstrates that it is extremely
reliant on the success of its extractive sector, which is a major contributor to GDP.
This makes the country highly vulnerable to global commodity price fluctuations.
Relations with China, which is a major consumer of Australia’s natural resources and
accounts for over half of all Australian exports to a single destination, have also been
strained in the last couple of years, owing to questions over the origins of the COVID-
19 virus, which could create tensions in trade activity with this major trading partner.

SOCIAL ENVIRONMENT
Opportunities
Growing and affluent population: Over 2022-2040, Australia’s total population is
expected to increase by 22.9%. Consequently, the country’s consumer base will be
expanded and supported by rising incomes and considerable affluence. The housing
market is expected to continue to play a major role in the perceived wealth of
households, as rising property prices are expected to maintain their upward
trajectory.
Rising life expectancy: Greater focus on healthy living, both in terms of diet and
exercise, is leading to a continued rise in life expectancy in Australia. This will also be
supported by access to high-quality healthcare. Increasing health awareness, ageing,
and rising disposable incomes should encourage growth in demand for consumer
health-related segments.
Large middle class: Higher disposable incomes over 2022-2040 will contribute to the
dominance of the middle classes in Australia. Social Classes C and D (the middle and
lower-middle classes) will expand at a significantly faster rate in Australia than the
developed-countries average over the forecast period. This will allow consumer
expenditure to continue to expand, with particular focus on discretionary spending in
categories such as miscellaneous goods and services that include the luxury
segments.
Urbanisation to continue apace: The urban population will continue to surge, as the
country remains one of the most urbanised globally, whilst the rural population will
start to fall after peaking in 2029. The urban population will account for 89.4% of the
total population in 2040, therefore, urban consumers will remain extremely
important for consumer businesses in Australia.
Challenges
Ageing populace: A low fertility rate, which will remain below the replacement rate
of 2.1 children born per female, is expected to contribute to Australia’s ageing
population. Over 2022-2040, those aged 65+ are forecast to increase by 42.9%,
whilst those age 0-14 are expected to grow by only 15.8%. Consequently, pressure is
expected to be exerted on state finances in the form of higher healthcare costs for
the elderly and in the provision of state pensions.

TECHNOLOGICAL ENVIRONMENT
Opportunities
Steady forecast rise in internet use: By 2026, the percentage of the population using
the internet is expected to rise to 96.1% and approach universal levels, which will
allow greater implementation of e-commerce strategies in the country, as well as
ample opportunities for technology players to extend their reach and introduce new
online products.
Mobile subscriptions will continue to grow: Over 2022-2026, the number of mobile
telephone subscribers is expected to expand to reach 30.9 million at the end of that
period, supported by affluence in the population allowing the purchase the latest
technology in handsets and the universal availability of 4G/5G networks. This also
points to multiple handset and mobile telephone number ownership, which suggests
that the population is increasingly using mobile phones for work purposes. The trend
towards m-commerce is also accelerating in Australia, with more people using their
mobile devices for shopping and connecting to the internet, meaning that m-
commerce could make e-commerce through the use of tablets and desktops obsolete
in the near future.
Further investment planned in digital infrastructure: Australia’s developed-nation
status allows it to invest in the latest technological development to aid its economic
progress in the digital age. Indeed, capital investment in telecommunications grew
strongly over 2013-2021, facilitating technological advancement. One such example
is Telstra, the owner of the country’s largest mobile network, which has announced
in February 2022 that it will invest in two key telecommunications infrastructure
projects that are set to improve connectivity across the country. This will be done
through the expansion of the fibre-optics network by adding up to 20,000 route
kilometres that will enable cities to connect to each other more effectively and at
very high speeds of up to 650Gbps. Connections to the satellite network will also be
enhanced in the second project earmarked for investment. The company’s total
investment in these two projects is expected to be AUD1.6 billion (USD1.1 billion) in
the next five-year period.
Greater use of AI in commercial activities: The increasing use of artificial intelligence
(AI) remains one of the most important stories in Australia’s digital landscape. The
rise of the digital age has been nothing short of revolutionary for Australia’s retail
sector, enabling customers to become closer than ever to the brands they love and
engendering brand loyalty. New channels of engagement have emerged, such as live
chat, AI-powered chatbots and the use of social media messaging to communicate
directly with customers. This has created a springboard for companies looking to
launch a more coordinated and monitored approach to developing their operations,
with customer-facing employees now in possession of the tools to develop stronger,
more meaningful relationships with consumers than ever before. This is likely to see
the use of AI continue to develop in all areas of Australia’s digital landscape.
Challenges
Decline in fixed lines in use: Over 2013-2021, Australia witnessed a relatively rapid
decrease in the number of fixed telephone lines in use. High urbanisation rates mean
that access to mobile networks is abundant, with the trend in fixed lines in use likely
to experience a downward trajectory in the medium term. Greater smartphone
adoption and affordable data plans are driving the use of mobile technology amongst
the Australian population, to the detriment of the fixed line network.

Environmental factors in Australia

Australia is one of the most beautiful countries in the world with stunning beaches,
mountains and forests. It is also widely known for its brilliant biodiversity. In fact,
more than one million species of plants and animals are found in the country. No
wonder why millions of overseas visitors visit the country every year.

However, Australia faces some environmental challenges. For instance, Australia is

the driest inhabited continent on earth. Likewise, climate change is also a great
challenge. A recent Senate inquiry has concluded that climate change is a ‘current
and existential national security risk’ to Australia. Water insecurity, the spread of
infectious diseases, and regional conflicts over food, water and land are some of the
potential outcomes of climate change.
In Australia, 91% of the pollution is generated by three main industries and these are
mining, manufacturing, and utilities, for example, gas, water, and waste. Further,
Australia contributes 1.4% to the global carbon emissions, and from mining itself, the
country generates around 57 tons of carbon emissions per person per year (Swann,
2019).

Legal environment in Australia

The Competition and Consumer Act

- the companies are prohibited from setting up predatory pricing, indulging in
mergers and acquisitions that reduce the competition or create a monopoly 
- 禁止企業設置掠奪性定價，進行減少競爭或形成壟斷的併購
Intellectual property protection
- The agriculture industry is being encouraged to innovate and file for intellectual
property protection. The government has reduced the corporate tax rate for the
eligible companies to 17% for the patents granted after 29 March 2022 by the
Australian Pesticides and Veterinary Medicines Authority, Public Chemical
Registration Information System, or Plant Breeders Rights. This would benefit the
companies and promote more innovation in the agricultural sector, hence the
companies would be able to make their operations more unique and efficient
(Australian Tax Office, 2022).
- 鼓勵農業產業創新和知識產權保護備案。對於澳大利亞農藥和獸藥管理局、
公共化學品註冊信息系統或植物育種者權利在 2022 年 3 月 29 日之後授予的
專利，政府已將符合條件的公司的企業稅率降至 17%。這將使公司受益，並
促進農業領域的更多創新，從而使公司的運營更加獨特和高效（澳大利亞稅
務局，2022 年）。
Food labeling law
- Further, the food labeling laws have been changed and the companies that sell
their food in retail stores would now be required to include the country of origin
where the food has been grown and packed along with classifying the food as
priority or non-priority. Also, the small businesses would now be required to bear
the brunt of GST as the government has extended the imposition of GST on the
businesses that sell imported products worth less than $1000. The GST on top of
the retail price would increase the price of the final product and this can
negatively impact the sales of the products.
- 此外，食品標籤法已經改變，現在要求在零售店銷售食品的公司包括食品種
植和包裝的原產國，並將食品分類為優先或非優先。此外，由於政府已擴大
 對銷售價值低於 1000 美元的進口產品的企業徵收商品及服務稅，因此小企
業現在將首當其沖地承擔商品及服務稅。零售價之上的商品及服務稅會提高
最終產品的價格，這會對產品的銷售產生負面影響。
The last element to address in the PESTEL analysis of Australia is the legal landscape
of the country. In order to ensure fair trading for both businesses and consumers,
Australia has fair trading laws, competition laws, and consumer laws. The Fair Work
Act 2009 is the primary piece of legislation that governs employment in the country.
Likewise, privacy laws deal with how businesses handle the personal information of
their customers.

Political factors
-Extremely favorable Economic Freedom ranking
-High tax burden
- Worsening corruption
- Deteriorating government finances

Economical factors
        - Inflation to outpace global average
        - Fall in FDI intensity
        - Large dependence on extractive industries
Social
        - Growing and affluent population
        - Rising life expectancy (healthy living, exercise)
        - Large middle class
        - Urbanization to continue apace 

Technological
        - Steady forecast rise in internet use
        - Mobile subscriptions will continue to grow
        - Further investment planned in digital infrastructure       
- Greater use of AI in commercial activities 

Legal
-The Competition and Consumer Act
-Intellectual property protection
  -Food labeling law
 
Environmental
-Pollution (mining, manufacturing, and utilities)
-Climate change issue
Reference
https://www-portal-euromonitor-com.ezproxy.bsb-education.com/portal/analysis/
tab/?stateId=uv3p5h#/content-main
https://howandwhat.net/pestel-analysis-australia/
https://crowjack.com/pestle-analysis/australia