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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW1  
1. Australia has maintained its relatively open trade regime since its last Review.  At the same 
time, despite certain policy changes, it has conti nued to provide general a nd industry-specific support 
in different forms to the same sectors.  A number of activities, including cargo liner shipping, and 
essential infrastructure facilities (some of which are natural monopolies), such as electricity networks, 
rail tracks, natural gas pipelines, water, communications , port terminals, airports , and post, continue to 
benefit from special regimes or exemptions that r estrict competition.  The fact that some sectors 
continued to be protected or otherwise assisted more  than others constitutes a potential impediment to 
efficient re-allocation of resources in the economy as a whole.2  As a result, no major improvement in 
multi-factor productivity, and thus  international competitiveness was achieved during the period 
under review.   
2. Despite its relatively small contribution to GDP (2.3%), Australia's market- and 
export-oriented agriculture remains of fundamental importance.  Sectoral policy developments have 
focused largely on drought relief, water and land ma nagement, biodiversity, and climate change.  The 
average level of applied MFN tariff protection for th e sector (excluding forestry) remained stable and 
negligible, at 1.4 %, compared with 4.2% for ma nufacturing.  Some sensitive items (e.g. cheese, 
certain vegetables, certain oils and fats) continue  to receive tariff protection and tariff-rate quotas 
affect certain types of cheese.  The strict qua rantine and inspection regime, based on rigorous 
science-based import-risk assessment (but not cost-b enefit analysis) and proportionate to Australia's 
appropriate level of protection (ALOP), remains in place.  Exports and/or production of certain 
commodities (e.g. certain dairy, grain, horticulture , livestock, and wines/grapes) continue to be 
subject to levies earmarked mainly for R&D.  Si ngle-desk arrangements continue to affect rice 
exports;  similar statutory arrangements for grai ns, wheat, and sugar were dismantled during the 
review period, although entities operating them remain  in place.  A new bilateral agreement on wine 
trade was signed with the EU.  Despite a wide range of assistance programmes, the sector's overall 
level of support, as measured by different indicators, has remained low, equivalent to 0.1% of GDP, 
and the majority of this assistance was delivered  in the form of non-trade distorting (Green Box) 
budgetary outlays rather than tax incentives;  both product-specific and non-product specific AMS 
were within Australia's de minimis  WTO commitments.  Since 2009, no industry-specific support has 
been in place for the dairy sector.  Budgetary assi stance to commerial fisheries has dropped gradually 
and become increasingly focused on R&D;  a policy has been put in place to address the profitability 
and sustainability of Australian fisheries as well as illegal fishing.   
3. Mining, which operates in a competitive market environment with no apparent 
industry-specific restrictions on foreign investment and little government support  compared with other 
sectors, remains critical to Australia's economic pe rformance despite the pr onounced decline in its 
multi-factor productivity.  Mining accounts for much of  the improvement in Australia's terms of trade. 
4. Despite reforms aimed at creating a nationwide en ergy market and strengthening price signals 
vis-à-vis consumers, Australia's electricity generation, tr ansmission, and distribution remain subject to 
geographical segmentation;  generation capacity is  largely government-owned or controlled and 
ceilings on retail electricity rates remain in place.  A National Strategy on Energy Efficiency is being 
                                                      
 1 This Chapter refers to several indicators used  by the Productivity Commission (Chapter II) for 
assessing support provided to different economic activities.  For details on the definition, methodology, and 
scope of these indicators see Productivity Commission (2010b). 
 2 The authorities indicated that assistance could target market and information failures and therefore 
enhance resource allocation. Australia WT/TPR/S/244 
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implemented and renewable power generation has b een the focus of government policy and assistance 
to the sector.  Some state governments provided subs idies at the retail level to reduce the price of 
unleaded petrol and diesel;  domestic producers of etha nol and biodiesel used in transport also receive 
a government subsidy.  
5. Manufacturing policy has been focused largely on enhanced opportunities for innovation as a 
means of, inter alia,  improving productivity and thus intern ational competitiveness in order to reap 
benefits from rapid economic expansion in overseas ma rkets.  The average applied MFN tariff rate on 
industrial products has declined slightly as a result of  unilateral tariff cuts in certain textiles, clothing, 
and footwear goods, and motor vehicles and parts/components.  Budgetary assistance for 
manufacturing as a share to GDP is estimated to have  remained steady at 0.1%, albeit an increase in 
value terms; the textiles, clothing, footwear and leather industries, as well as motor vehicles and parts activities continued to benefit from particularly high effective rates of protection, i.e. more than 
double the manufacturing sector's average and the highest of all goods industries.  Some programmes for the automotive sector have been compleme nted with elements reflecting a persistent 
interventionist approach to the sector's adjustmen t;  in particular, certain features of the New Car 
Plan's Automotive Transformation Scheme c ould raise some WTO-related concerns.   
6. Services continued to be the largest and fast est growing sector of the economy.  Budgetary 
assistance to the sector, mainly through tax expend itures, rose considerably and was equivalent to 
0.28% of GDP in 2008/09, compared with 0.1% in other sectors.  Australia's GATS and bilateral RTA 
commitments remain unchanged;  its RTAs genera lly provide for greater commitments on trade in 
services than those under the GATS.  Financial servic es reforms (e.g. prudential rules, Basel II) have 
been pursued in several areas and policies to mitigate the impact of the global financial crisis allowed 
Australia's banks to cope well with the financial turmoil.  Action is being undertaken to remove 
impediments to Australia's position as a financial services centre in the Asia Pacific region.  In telecommunications, the formerly government-owned Telstra has been able to retain considerable 
market power, an issue of concern in several ar eas including broadband services; efforts to address 
these issues are under way.  Support to domestic  advertisement and film producers has been 
maintained through local-content requirements in  television broadcasting as well as film production 
funding.  Since 2008, efforts have been made towa rds the development of a long-term coordinated 
approach to national infrastructure planning and in vestment, and to identify priority infrastructure 
projects aimed at coping with a variety of shortc omings in freight handling and co-ordination of 
responsibilities between the federal government the stat es and territories, and the private sector in this 
area.  A new comprehensive policy framework h as been established for the development of the 
aviation industry at all levels.  A new strategy an d additional support have been provided to promote 
innovation, infrastructure development, and growth in the tourism sector.  
(2) A
GRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES  
(i) Features 
7. Australia's agriculture sector is one of th e most market-oriented among OECD countries.3  
Despite their relatively small contribution to GDP, and the impact of severe drought and exchange 
rate appreciation in recent years (section (2)(ii )), agricultural production and trade remain of 
fundamental importance to Australia, a competitive net agricultural exporter.4  The sector has 
important linkages with other activities.  Between  2006/07 and 2009/10, it accounted for a relatively 
                                                      
 3 OECD (2010a). 
 4 The competitiveness of agriculture livestock and fi sheries exports ha s been affected by the recent 
appreciation of the national currency (Australian Department of Foreign Affairs and Trade online information.  Viewed at:  http://www.dfat.gov. au/trade/negotiations/trade_in_agriculture.html [3 August 2010]). WT/TPR/S/244 Trade Policy Review 
Page 86 
 
 
stable 2.3%-2.4% of GDP (including fisheries) (Table I.2) and provided work to around 3.3% of the 
employed population.5  The major agricultural commodities (ra nked by gross value) remain:  cattle 
and calves, wheat, milk, and sheep and lambs.6  Australia exports around 60% (in volume) or 67% (in 
gross value) of its total agricultural production.7  The sector's share in total exports continued its 
decline in 2009 to 15.3% (down from 16.1% in 2007), as a result of the increa se in the share of the 
resources sector and of the appr eciation of the national currency.8  The major agricultural exports in 
gross value terms remain wheat, meat, wi ne, dairy products, wool, and raw sugar.9 
8. Almost 93% of Australia's food supply is pr oduced domestically;  food imports consisting 
largely of processed food items (e.g. processed fruit, vegetables, oil and fat, starchy roots, fish and 
seafood) contribute to 7.5% of the tota l value of domestic retail food sales.10  Increased agricultural 
output has been almost entirely a result of productiv ity improvements.  Nevertheless, average annual 
multi-factor productivity (MFP) growth in agri culture, forestry and fishing fell from 3.4% 
(1998/99-2003/04) to minus 1.4% (2003/04-2007/08)11;  this was largely the direct outcome of severe 
drought as output contracted faster than employment .  While some recovery is expected as drought 
conditions ease, the necessity of water policy ch anges and the potential consequences of climate 
change, may slow the recovery in agricultural prod uctivity growth and this may have flow-on effects 
throughout the economy.12  Higher productivity growth will be  required to maintain the sector's 
international competitiveness and farm viability. 
(ii) Main developments 
9. Agricultural producers in Australia, which is pre dominantly export-oriented, rely mainly on 
world market signals to make production decisions.13  The sector's relatively high productivity and 
thus international competitiveness, as well as e nvironmental performance remain key priorities for 
current policies.  A range of instruments is implemented to address issues related to water, land management, biodiversity, and ad aptation to climate change.   
10. A major policy development during the review pe riod was the implementation in July 2008 of 
the Caring for our Country initiative, a set of programmes for funding improvements in the 
environmental management of natural resources.
14  The package supports communities, farmers, and 
other land managers to protect the environment and produce food and fibre in a sustainable manner.  
Caring for our Country replaced or incorporated  programmes under the National Heritage Trust, 
National Landcare Program, Environmental Stewar dship Program, and the Working on Country 
programs, which ended in June 2008.  
                                                      
 5 As of November 2008, 317,730 people were directly employed on farms – 90,000 down on 
pre-drought levels;  agriculture support s the jobs of 1.6 million people, in farming and related industries such as 
processing, packaging, transport, food retailing, accommodation, cafes and restaurants (National Farmers' Federation, 2009). 
 
6 Australian Bureau of Statistics online informati on.  Viewed at:  http://www.abs.gov.au/ausstats/ 
abs@.nsf/mf/7501.0 [3 August 2010]. 
 7 National Farmers' Federation (2009). 
 8 UNSD Comtrade Database. 
 9 DFAT STARS database, based on ABS Cat No 5368.0, August 2010 data. 
 10 National Farmers' Federation (2009). 
 11 Drought induced a fall of some 18% in the sector's value added in 2006-07, with MFP growth 
dropping to -19.4% that year (Productivity Commission, 2009c;  and Productivity Commission, 2008a). 
 12 Nossal and Gooday (2009). 
 13 OECD (2010a). 
 14 OECD (2010a). Australia WT/TPR/S/244 
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11. Drought policy has shifted from natural disaster management to a recognition that drought is 
a normal feature of Australia's climatic variability.15  During the review period, Australia has 
embarked on a comprehensive national review of dr ought policy.  In response to this review, the 
authorities are conducting a $A 23 million pilot of drought reform measures in parts of Western 
Australia;  these measures are designed to move from a crisis management approach to risk 
management.  These pilot reform measures will be reviewed in 2011.   
12. During the period under review, regulatory cha nges were made to wheat export marketing 
arrangements, fisheries legislation, agricultura l and veterinary chemicals, and the domestic 
implementation of the Australia – European Comm unity (EC) Wine Agreement (see below).  Major 
institutional changes were made to the Australian Fisheries Management Authority, the Australian 
Pesticides and Veterinary Medicines Authority and the Wheat Export Authority (now known as Wheat Exports Australia).  The De partment of Agriculture, Fisheries, and Forestry (DAFF) is 
responsible for the developmen t and implementation of sectoral policies and programmes.  
13. Australia's bilateral and plurilateral agriculture agreements cover a range of agricultural trade 
issues including: exchange of scientific informatio n, protocols for live anim al trade, agricultural 
cooperation, dialogue on trade policy, mutual rec ognition, trade facilitation, and specific bilateral 
trade issues.   
14. In 2008/09, Australia provided 94,912 tonnes (158,592 wheat equivalent tonnes) of food aid 
valued at $A 102 million to least developed c ountries and net food-importing developing countries 
(up from 132,687 tonnes, 216,726 wheat equivalent tonnes in 2007/08);  at the same time, 
$A 98.5 million was provided for pr ogrammes helping these countries to  develop their food security 
($A 253.4 million in 2007/08).
16  All Australian food aid is provided on fully grant terms.  
(a) Border measures 
15. During the review period, Australia's average le vel of applied tariff protection for the sector 
(excluding forestry) remained stable and negligible  at 1.4 % (Table III.1).  While most products are 
duty free, some sensitive items, su ch as cheese (which is subject to a specific duty), and certain 
vegetables (mushrooms), nuts, fruit, oils and fats (s ubject to a 5% rate), continue to receive some 
tariff protection.  Australia has maintained tariff-ra te quotas for certain types of cheese in line with its 
WTO market access commitments and preferential arrangements (section (iii)(c), Chapter III).  
Imports of all agricultural (and food) products remain  subject to a strict quarantine and safety regime;  
domestically produced and imported food products must  meet the requirements of the Food Standards 
Code of the FSANZ. 
16. Exports and/or production of certain dairy, grai n, horticulture, livestock, and wines/grapes 
commodities remain subject to levies.17  Rice is the sole item subject to single-desk arrangements 
exempt from competition policy provisions.  As of  2008, the marketing of bulk wheat exports was 
effectively deregulated (section (2)(iii)(b)).  On  24 October 2009, the Government of Western 
Australia deregulated the export of barley, canola, and lupins.18  The Queensland Sugar Limited 
(QSL) authorization to negotiate commercial expor t contractual arrangements with milling companies 
                                                      
 15 This and other programmes discussed below (section on domestic support) were notified through 
WTO document G/AG/N/AUS/77,  13 July 2010 (Productivity Commission, 2009). 
 16 WTO document G/AG/N/AUS/75, 8 December 2009.   
 17 See DAFF online information.  Viewed at:  http://www.daff.gov.au/agriculture-food/levies/ 
other_levies. 
 18 Prior to 23 October 2009, Grain Pool Pty Ltd held the main export licence to export bulk barley, 
lupins, and canola from the State of Western Australia.   WT/TPR/S/244 Trade Policy Review 
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and cooperatives expired on 30 Sept ember 2009 (section (2)(iii)(a)).  In 2009, Australia notified that it 
provided no export subsidies for dairy products for the period 2001/02-2007/08, or for pears from 
2004 to 2007.19  A new agreement on wine trade, including new rules for the protection and use of 
geographical indications, wine making technique and labelling requirements entered into force 
between the EU and Australia in September 2010, replacing their 1994 agreement.20   
(b) Domestic support measures   
17. Agriculture is estimated to have received 22% of total budgetary assistance (i.e. outlays plus 
tax concessions) made available to all sectors of the economy in 2008/09;  this assistance represents 0.1% of GDP (Table IV.1).
21  Domestic support for agriculture  remains the second lowest amongst 
OECD countries;  in 2009 Australia's producer suppor t estimate (PSE) was estimated at just 3% of 
gross farm receipts or just over one seventh of the OECD average, thus making Australian farmers 
among the most efficient and therefore most self-sufficient in the world.22  According to OECD 
estimates, between 2007 and 2009 Australia's total s upport (TSE) to agriculture dropped from 0.3% to 
0.1% of GDP, the lowest among all OECD countries.23  In 2008/09, grain, sheep, and beef cattle 
farming, as well as horticulture and fruit grow ing were among the activities benefiting from the 
highest effective rates of (combined) assist ance in the primary production (Table AIV.1).24  Domestic 
producer and consumer prices have remained roughl y aligned with world prices;  Australia's OECD 
Nominal Protection Coefficient (NPC) has been 1.00 since 2001.25 
18. The sector has continued to receive assistance from a wide range of programmes, mainly in 
the form of budgetary outlays (Table IV.1), partic ularly drought-related suppor t, although this type of 
support declined in 2008/09.  Budget financed progr ammes are used mainly fo r structural adjustment, 
rural research (with matching contributions from industry) and for natural resources and 
environmental management.26  Expenditure on research and deve lopment is co-financed by funds 
collected through industry levies, supplemented by funding from the Commonwealth budget.  Estimated support for general services increased from 38.8% of TSE in 20 07 to 46.8% in 2009
27;  
most of the general services support was for R&D,  directed mainly towards the Commonwealth 
                                                      
 19 Australia has export subsidy commitments for butter and butter oil, cheese, skim milk powder and 
other milk products (financial year basis) and pears (calendar year basis) (WTO document G/AG/N/AUS/72,  
24 March 2009). 
 20 The agreement, inter alia,  provides for EU recognition of an additional 16 Australian winemaking 
techniques, simpler arrangements for the approval of future winemaking techniques, simplified labelling requirements for Australian wine sold in the EU, and revi sed rules for the protection for Australia's and the EU's 
112 registered geographical indicators.  Australian produc ers will not use more than 2,500 European names such 
as 'champagne', 'port', 'sherry', 'cha blis', 'burgundy', and 'tokay'.  The authorities provided $A 500,000 to help 
affected fortified Australian wine producers to rebrand their products (MAFF online information.  Viewed 
at:  http://www.maff.gov.au/media/media_releases/2008/d ecember/european_deal_improves_trade_access_for_ 
australian_wines [3 August 2010], and http://www.daf f.gov.au/agriculture-food/hort-wine/wine-policy 
[10 November 2010];  and OECD, 2009a). 
 
21 Productivity Commission (2010b). 
 22 The PSE decreased from 4% in 2008, mainly due to reduced budgetary payments (OECD, 2010a;  
and National Farmers' Federation, 2009). 
 23 OECD (2010a). 
 24 Assistance for grain, sheep, and beef cattle farming was delivered almost entirely through 
non-industry-specific measures, and in particular to t hose set for exceptional circumstances (interest rate 
subsidy, relief payments) (Productivity Commission, 2010b).  
25 The NPC is the ratio between the average price paid /received at farm gate and the border price at 
farm gate (OECD, 2009a). 
 26 OECD (2009a). 
 27 OECD (2010a). Australia WT/TPR/S/244 
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Scientific and Industrial Research Organisation (CSIRO).28  Off-road diesel fuel, used in agricultural 
production, qualifies for rebates on excise taxes, as part  of a scheme of rebates for diesel fuel used in a 
number of industry sectors, including primary production activities.29  In 2008/09, spending in the 
form of an exceptional circumstances interest ra te subsidy accounted for 27.4% of total budgetary 
assistance, or twice the amount of total support in the form of tax expenditures.30   
Table IV.1 
Budgetary assistance to primary industry, 2005-09 
(% and $A million)  
  2005/06 2006/07 2007/08 2008/09 
Share in total budgetary assistance (%)     
Dairy cattle farming 9.5 11.3 13.3 7.4 
Grain, sheep and beef cattle  farming 41.5 42.8 46.3 55.3 
Horticulture and fruit growing 9.3 7.0 5.9 10.7 
Other crop growing 16.2 10.7 8.2 4.1 
Other livestock farming 2.1 1.8 1.7 1.8 
Fisheries 5.8 16.2 8.9 5.8 
Forestry and logging 5.3 2.2 1.4 -4.2 
Other primary productiona 1.8 1.4 1.4 1.4 
Unallocated primary productionb 8.5 6.7 12.9 17.7 
Total outlays ($A million) 1,097.5 1,554.9 1,878.1 1,440.0 
Total tax expenditures ($A million) 299.1 201.8 292.2 228.8 
Total budgetary assistance ($A million) 1,396.6 1,756.6 2,170.2 1,668.8 
Share of total budgetary assistance to GDP (%) 0.14 0.16 0.18 0.13 
a Other primary production includes "services to agricultu re" (including hunting & trapping) and "poultry farming". 
b Unallocated includes general programmes wh ere details of beneficiaries are unknown. 
Source : Productivity Commission (2010), Trade & Assistance Review 2008-2009 , 22 June, Canberra.  Viewed at:  
http://www.pc.gov.au/__data/assets/pdf_f ile/0007/98998/tar0809.pdf [23 August 2010].  
19. In addition to the Caring for our Country package (see above)31, during the review period 
Australia has implemented a new exit grant packag e for the Murray-Darling Basin, which has been 
affected by drought and climate change.32  As from 2008/09, a four-year $A 130 million Australia's 
Farming Future (AFF) initiative has been implem ented, comprising national programmes to help 
primary industries adapt and adjust to the impact  of a changing global clim ate and manage greenhouse 
pollution.  The initiative includes a $A 46.2 milli on Climate Change Research Program (June 2009), 
and programmes on soil carbon ($A 22 million), n itrous oxide ($A 10.8 million), and reducing 
                                                      
 28 In February 2010, a $A 70 million CSIRO Sustainable Agriculture Flagship Initiative was launched 
to raise productivity and reduce carbon emissions intensity across Australia's agricultural and forestry sectors (Productivity Commission, 2010b). 
 
29 OECD (2009a). 
 30 Productivity Commission (2010b). 
 31 Caring for our Country is an integrated package promoting:  a business approach to investment; 
clearly articulated outcomes and priorities;  and improved accountability.  An initial investment of $A 2.25 billion for the first five years (1 July 2008-30 June  2013), is to be focused on six national priority areas:  
(i) the national reserve system, (ii) biodiversity and natu ral icons, (iii) coastal envir onments and critical aquatic 
habitats, (iv) sustainable farm practi ces, (v) natural resource management in remote and northern Australia, and 
(vi) community skills, knowledge and engagement (OECD, 2009a). 
 
32 Programmes to assist farmers to manage the im pact of climate change, including re-establishment 
support to those who choose to leave farming, should also improve the long-term financial health of the sector (OECD, 2009a). WT/TPR/S/244 Trade Policy Review 
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livestock emissions ($A 28.7 million).33  An emissions "cap-and-trade" Carbon Pollution Reduction 
Scheme (CPRS), currently under consideration,  would raise tax expenditures in the sector 
progressively, due to the exemption of agriculture  and deforestation from CPRS coverage;  this 
exemption is due to practical considerations in accounting for the sector's diffuse emission sources.34  
As from 2007, the authorities have been investing $A  12.9 billion in a ten-year Water for the Future 
initiative to secure the long-term water supply to both rural and urban areas; several programmes 
under this initiative relate to the use of irrigation water in agriculture, includi ng water use efficiency 
on farms, purchase of water entitlements from farmers to  preserve the environment, and grants to exit 
from irrigation-based rural production. 
20. In 2008/09, current total AMS dropped to zero;   trade-distorting domestic support product-
specific AMS-related expenditure h as been used mainly for milk a nd to a much lesser extent for 
sugar, wheat, and cattle;  both pr oduct- and non-product specific AMS were within Australia's 
de minimis  commitments.35  Green-box type support accounted for about 93.4% of total support 
notified to the WTO.   
(iii) Selected subsectors 
(a) Sugar  
21. Sugar remains a leading farm export commodity.  Australia is a low-cost sugar producer and 
the world's third largest exporter of raw sugar;  it exports around 80% of its total production.  Sugar 
producers are directly dependent on developments in the raw sugar world market;  therefore, 
international competitiveness is of outmost importance.36  The sugar industry remains a major feature 
of many towns, particularly in Queensland,  which produces around 95% of total raw sugar.  
Following the 2006 deregulation and the expiry of the QSL exemption from the TPA on 20 September 2009, sugar trade is no longer subject  to statutory arrangements (section (2)(ii)(a)).
37  
Despite a zero import duty on cane sugar, tariff protection for other sweeteners, such as maple sugar, fructose, and syrups thereof, are relatively high, at rates of 4% or 5%.  The cane-growing industry has 
benefited from specific and non-specific industry suppor t (sections (2)(ii)(a) and (b)).  The five-year 
Sugar Industry Reform Program  (SIRP) was completed in 2009 with total expenditure of 
$A 334.7 million.  The SIRP has resulted in:  a reduction in long-term costs through improved 
production practices, transport, and technology;  improved efficiency and production through 
improvements to infrastructure;  and strengthened industry networks and mo re effective long-term 
mill business planning.  The levy on domestic sugar sal es, including imported sugar, to partly fund the 
SIRP, was abolished in November 2006 to off set rising input costs for sugar refiners.
38  B e t w e e n  
2004/05 and 2008/09, estimated budgetary assistance for the SIRP fell from $A 129.4 million to $A 4.5 million;  a similar type of assistance for R& D through to the Sugar Research and Development 
Corporation increased from an estimated $A 3.8 million to $A 6.1 million.
39  According to OECD 
                                                      
 33 For more information on the Australia's Farming Future programme see DAFF online information.  
Viewed at:  http://www.daff.gov.au/climatechange/austra lias-farming-future;  and OECD (2009a) and (2010a). 
 34 The Treasury (2010e). 
 35 WTO documents G/AG/N/AUS/73, 13 July 2009, and G/AG/N/AUS/76, 13 July 2010. 
 36 Since 2006, Australia has remained involved in a quadripartite sugar-monitoring mechanism 
involving Australia, Thailand, Brazil, and the EU, following the panel recommendations of the WTO Dispute 
Settlement Body implementation with respect to the EU sugar subsidies case.  WTO online information.  
Viewed at:  http://www.wto.org/englis h/tratop_e/dispu_e/cases_e/ds265_e.htm.  In February 2010, they 
expressed concern about the decision by the EU to expand its out-of-quota sugar exports by 500,000 tonnes. 
 37 WTO document G/STR/N/13/ AUS, 13 September 2010. 
 38 OECD (2007). 
 39 Productivity Commission (2010b). Australia WT/TPR/S/244 
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estimates, between 2007 and 2009 the producer Single Commodity Transfers (SCT) for sugar dropped 
from $A 5 million to zero.40   
(b) Wheat 
22. Australia is a small producer of wheat (i.e. av erage 3% of world production);  it exports 70% 
of its crop and contributes 12% to the world wheat trade.41  Wheat is the most significant crop grown 
in terms of area sown, volume of grain produced, and value.  Production remains highly concentrated.  
Half of wheat growers account for less than 10% of production, and 10% of growers account for 
almost half of the industry's production.  Border protection and domestic s upport have been virtually 
nil during the review period;  between 2006/07 and 2008/09, the sole industry-specific support 
measures were the "unallocated" Tasmanian wheat freight subsidy42, amounting to $A 1.8 million for 
the entire period, as well as a $A 2 million Wheat Export Authority Supplementation in 2007/08.43  In 
2008, the authorities deregulated the marketing of bulk wheat exports by removing the long-standing 
single-desk regime (i.e. the sole exporter ri ghts) operated by AWB (International) Limited 
(section (2)(ii)(a)).  Wheat Exports Australia (WEA), a government agency within DAFF, was 
established under the Wheat Export Marketing Act 2008 to administer the Wheat Export 
Accreditation Scheme 2008 for bulk wheat exporters.  As from July 2008, traders seeking to export 
bulk wheat require accreditation from WEA, which assesses the 'fit and proper' standing of the applicant.  Bulk handling companies that also opera te port terminals are required to pass an additional 
access test, which guarantees fair and transparent port access to rival exporters;  by 30 June 2010, 
28 exporters were accredited.
44  Foreign companies may apply for accreditation provided it is through 
an Australian subsidiary and hence subject to Australian law.45  The scheme, aided by an assistance 
package of  $A 9.4 million, has facilitated a sm ooth transition from a highly regulated market to 
deregulation as the exporting of bulk  wheat has opened up to competition.46  Deregulation has spurred 
productivity and innovation in Au stralia's bulk wheat export industry. Competition has already 
resulted in greater demand for Australian wheat, de velopment of new products and services, extension 
of existing international markets, and the opening  up of new overseas markets for Australian wheat.47 
(c) Dairy 
23. Australia's position in the world dairy market  remains unchanged since its last TPR;  it 
accounts for around 2% of world milk production, a nd ranks fourth (behind New Zealand, the EU, 
and the United States) in world da iry trade, with an 11% share.48  The volume of dairy exports varies 
depending on raw milk production;  in recent years,  production has been stable or declining and about 
55% of raw milk production has been consumed domestically with the remaining 45% exported.49  
During and following the termination of the nine-y ear Dairy Industry Adjustment Package (DIAP) 
                                                      
 40 The SCT is the annual monetary value of gross transfers from consumers and taxpayers to 
agricultural producers, measured at the farm-gate level, arising from policies linked to the production of a single 
commodity such that the producer must produce the designated commodity in order to receive the payment 
(OECD, 2010a). 
 41 Productivity Commission (2010c). 
 42 The term "unallocated" refers to programmes where details of beneficiaries cannot be readily 
identified. 
 43 Productivity Commission (2010b). 
 44 Wheat Exports Australia (2009). 
 45 APEC (2009). 
 46 Productivity Commission (2010c). 
 47 Wheat Exports Australia (2009). 
 48 Dairy Australia online information.  Viewed at:  http://www.dairyaustralia.com.au/Our-Dairy-
Industry/Industry-Statistic s/Export-Summary.aspx. 
 49 Dairy Australia (2010).  WT/TPR/S/244 Trade Policy Review 
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(2000-09),50 multi-factor productivity rose as a result of a reduction in dairy farm numbers, 
investment in R&D, and an increase in milk yi elds per cow.  Moreover, the domestic retail and 
wholesale markets have become more concentrated, changing the price dynamics between farmers, processors, and retailers.
51  Tariff protection remains at zero for dairy items, except for a 4% tariff on 
dairy spreads, and a specific duty rate coupled  with a TRQ for five cheese and curd items 
(Chapter III).  Since 2009, no industry-specific support has been in place for the dairy sector.  In response to concerns over reductions in farm gate prices in the more concentrated production pattern, 
and Tasmanian dairy farmers' a lleged suffering from abuses of mark et power, the Senate Economics 
Reference Committee launched an inquiry into competition and pricing in the Australian dairy 
industry;  its May 2010 report addressed perceived deficiencies in national competition policy, the 
role of the ACCC, and the provisions of the TPA.  In November 2010, the authorities were 
considering the Committee's recommendations.  
(iv) Forestry 
24. Timber harvesting occurs mainly in about 26% of Australia's 149.4 million hectares of forest 
area, and less than 1% of native production forest is harvested each year.
52  Australia's 2020 Vision 
aims to treble the 1996 area under forest plantation by 2020 through the development of appropriate 
structures, and by providing better information to maintain foreign and local investor confidence in 
the plantation sector.53  Private ownership of plantations in creased from about 30% in 1990 to more 
than 64% in 2008.54  Australia has traditionally had a deficit in the trade of forest and wood products, 
mostly on paper products and saw n wood, which prompted the authorities to consider how the sector's 
international competitiveness could be improved.  In  May 2008, a three-year $A 20 million Preparing 
Australia's Forestry Industry for th e Future package was launched.  As  part of the package, Australia 
committed $A 9 million to a Forest Industries De velopment Fund, a grant programme encouraging 
increased investment in activities designed to add va lue to forest resources.  These include new uses 
for wood, new wood processing initiatives, and increased employment in the sector.55  Grants under 
the Fund represent a maximum of 30% of total project costs and generally no more than $A 500,000.  
Furthermore, as part of the forestry industry package, a $A 5 million Forest Industries Climate 
Change Research Fund was established in August 2009 o ffering grants of up to $A 500,000 to support 
innovative forestry research projects focusing on clim ate change adaptation and mitigation, along with 
the development of sustainable bio-energy initia tives.  On 6 November 2009, the National Climate 
Change and Commercial Forestry Action Plan 2009-12 identified knowledge gaps and proposed 
actions to assist forest industries to respond to climate change.56  Legislation was before the 
Parliament in November 2010 making it an offen ce to import any products of illegally harvested 
timber, as well as a code of conduct requiring supp liers who first place timber into the Australian 
market to carry out proper tests to ensure wood en tering the country is legal.  These measures will be 
supported by the use of a trade description to give  consumers confidence that they are purchasing 
legal wood.   
25. A licence is required for exports of 2 tonnes or more of woodchips intended for further 
processing following export, and for sandalw ood (from Queensland and Western Australia).57  
Material from plantations covered by an approve d code of practice (ex cept from Queensland and 
                                                      
 50 For details about the DIAP see WTO document WT/TPR/S/178/Rev.1, 1 May 2007. 
 51 The Senate (2010). 
 52 Bureau of Rural Sciences (2010) and (2007). 
 53 Plantations 2020 (2002). 
 54 DAFF online information.  Viewed at:  http://www.daff.gov.au/forestry. 
 55 DAFF online information.  Viewed at:  http://www.daff.gov.au/forestry.   
 56 Department of Agriculture, Fisheries and Forestry (2009). 
 57 DAFF online information.  Viewed at:  http://www.daff.gov.au/forestry.   Australia WT/TPR/S/244 
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Northern Territory) or from the ten areas c overed by regional forest agreements (RFAs)58 are exempt 
from export licence requirements;  exports of hard  wood woodchips from native forest areas outside 
RFA regions are prohibited. 
26. Between 2006/07 and 2008/09, the effective rate of (combined) assistance (Table AIV.1) to 
forestry and logging p assed from 5.1% to -2.4%;59  this negative rate reflects the reversal in the 
estimate for the accelerated write-offs on forestry -managed investments fro m positive assistance in 
2007/08 (the acceleration stage) to increased taxati on (the pay-back stage).  This is due to the 
harvesting of products from the forestry managed inv estment schemes, which results in tax being paid 
on these products.   
(v) Fisheries   
27. Fisheries and aquaculture60 remain Australia's fifth largest rural industry, consisting primarily 
of low-volume high-value species for export.  This is despite the negative effects of a number of 
important variables, like rising fuel prices, the appreciation of the Australian dollar, and increased competition in the domestic market from low-value imports.
61  Australia has been a net exporter of 
fisheries products in value terms but a net importe r in volume terms as it exports mostly high-value 
products.  The recent appreciation of the Australi an dollar increased the cost of landed Australian 
exports of fisheries products, and has closed the ga p between imports and expor ts in value terms;  
since 2007/8, Australia has been a net importer of fisheries products in value terms. 
28. All components of the Securing our Fishing Futu re (SOFF) package, including business exit 
assistance, business advice assistance, assistance fo r skippers and crew, onshore business assistance, 
fishing community assistance and the Australian Fishery Management Authority (AFMA) Levy 
Subsidy, were completed by 30 June 2010.62  The SOFF package delivered 144 projects, which 
allowed the industry to better adjust, adapt, redeve lop, restructure, improve processes, introduce new 
product lines, and generally move fo rward following the buyback of fishing concessions.  Adjustment 
assistance has been used only in special circumstan ces on a case-by-case basis (e.g. 100% buy-back of 
Torres Strait finfish entitlements) to facilitate  the introduction of new fisheries management 
arrangements.  From 2007/08 to  2009/10, $A 48.549 million w as appropriated to the SOFF 
programme for the 144 approved projects and the buyback  of fishing concessions.  As a result of these 
developments, between 2006/07 and 2008/09 budgetary assistance to commerial fisheries gradually 
dropped and became increasingly focused on R&D (Table IV.1).63  In November 2007, the authorities 
committed $A 17 million over four years in an expanded research programme to support the 
expansion of the research conducted by DAFF.64   
                                                      
 58 For details on the RFAs see WTO document WT/TPR/S/178/Rev.1, 1 May 2007. 
 59 Productivity Commission (2010b). 
 60 Aquaculture now accounts for approximately one third of the gross value of Australia's fisheries 
production;  this is largely due to the ongoing adoption of innovative and sustainable farming practices as well 
as increased marketing in overseas markets.  According to  OECD, its continuing growth is likely to provide the 
major impetus for medium to long-term growth in the value of Australia's seafood production (OECD, 2010e). 
 61 OECD (2010e). 
 62 From 2006/07 to 2008/09, the authorities provided a total of $A 15 million to subsidize the AFMA's 
fisheries management fees for those remaining in the industry;  a further $A 6 million was granted for science, 
compliance, and data collection to improve the management of Commonwealth fisheries (DAFF online information.  Viewed at:  http://www.daff.gov.au/fis heries/domestic/fishingfuture;  and WTO document 
WT/TPR/S/178/Rev.1, 1 May 2007). 
 
63 Productivity Commission (2010b). 
 64 OECD (2010e). WT/TPR/S/244 Trade Policy Review 
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29. To address the issue of profitability and sustaina bility, Australia has taken steps to change the 
operating environment of Commonwealth fisheries.  In 2007, it adopted a Harvest Strategy Policy 
aimed at stopping overfishing, allowing overfished stoc ks to recover, and promoting the longer term 
profitability of the fishing industry.65  In 2009, 12 stocks were overfished and 10 were classified as 
subject to overfishing.66  AFMA implemented additional management measures intended to halt 
overfishing and bring about recovery of overfished  stocks;  the number of stocks assessed as not 
subject to overfishing increased from 12 in 2004 to 73 in 2009.  In line with  the National Fisheries 
Compliance Strategy 2005-201067, enforcement was strengthened through, inter alia,  the Fisheries 
Legislation Amendment, passed on 24 June 2008, wh ich reinforced the powers of border protection 
officers to apprehend ships involved in illegal fishin g.  It also extended new offences for Australian 
citizens if involved in and/or supporting illegal fish ing in Australian jurisdictional waters in areas 
governed by an international agreement, and on the high seas.  Vessel monitoring systems, which 
provide real-time position reporting of boats, b ecame mandatory on all Commonwealth licensed 
fishing vessels in 2007.  The Government has con tinued its fight against illegal, unreported, and 
unregulated (IUU) fishing in various global and re gional initiatives, including the development of the 
FAO-supported United Nations Port State Measures Ag reement to Prevent, Deter and Eliminate IUU 
Fishing, the Regional Plan of Action to Promot e Responsible Fishing Practices Including Combating 
IUU Fishing in the South East Asia Region, and in ternational guidelines for the management of deep 
sea fisheries on the high seas.68  Despite significant enforcement pa trolling, illegal foreign fishing 
vessels remain a threat to sust ainable fisheries management in Australian waters.  The overall 
reduction in apprehensions of illegal vessels is a result of surveillance, apprehensions, vessel 
forfeiture, prosecutions, and detention as well as th e public information campaign in eastern Indonesia 
about the severe consequences of illegal fishi ng and the importance of sustainable fisheries 
management practices.69  
(3) MINING AND ENERGY  
(i) Mining 
30. Australia remains one of the top five producer s and exporters of most of the world's key 
minerals.70  In 2009/10, mining accounted for 8.4% of GDP and 1.6% of total employment 
(Table I.2), and 57.2% (51.7% in 2007) of total me rchandise exports (Table AI.2).  It follows that 
labour productivity is roughly five times the level in the rest of the economy, presumably due in large part to its high capital intensity.  However, the sector's average MFP growth rate dropped to minus 
4.8% (2003/04-2007/08), the lowest of all sectors of the economy.
71  According to the Productivity 
                                                      
 65 Department of Agriculture, Fisheries and Forestry (2007);  and OECD (2010e). 
 66 Wilson et al (2010). 
 67 Fisheries management costs increased significantly from $A 29 million in 2002/03 to 
$A 43.5 million in 2006/07, largely due to major efforts to control foreign fisheries compliance (OECD, 2010e).  
68 Australia and Indonesia developed, the Regional Plan of Action to Promote Responsible Fishing 
Practices including Combating Illegal, Unreported and Unregulated (IUU) Fishing (RPOA), agreed by ten other 
South-East Asian countries in 2007.  Australia has taken a strong stand in WTO discussions concerning the 
contribution of fisheries subsidies to overcapacity a nd overfishing, and trade distortions (OECD, 2010e). 
 69 During 2008/09, 27 interceptions occurred compared with 156 in 2007/08, although sightings 
"above" the Provisional Fisheries Surveillance and Enforcement Line and just north of the Australian Exclusive 
Economic Zone remain high (Australian Customs and Border Protection Service, 2009). 
 70 For example, Australia is the world's leading producer of bauxite, alumina, rutile, and tantalum as 
well as the largest exporter of alumina, metallurgical co al, iron ore, and lead (Minerals Council of Australia, 
2010). 
 71 Higher prices make it economic to mine resources with lower mineral yields.  High prices have also 
stimulated investment in existing and greenfield sites.   Mining was marked by declining resource quality and Australia WT/TPR/S/244 
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Commission, this drop was the consequence of the combined effects of depletion of in-situ  mineral 
resource deposits (particularly in relation to coal  mining and oil and gas extraction) and the export 
prices boom, which led to lags between capital expenditures and corresponding increases in mining 
output.72  In recent years, the strong price increase in mining products has made it profitable to extract 
minerals that are more difficult and costly to produce.73  The sector is critical to Australia's economic 
performance, and over the next five years it is forecast  to realise the full benefit of recent high levels 
of investment.74  A 30% Mineral Resources Rent Tax for iron ore and coal as well as an extension of 
the Petroleum Resource Rent Tax of 40% will be in place by July 201275;  mining-related taxes 
contributed about 18% of the revenue from corporate income tax during 2008-09.76  Mineral and 
petroleum resources are owned either by the Co mmonwealth, or state, or territory governments.77 
31. The mining sector continues to operate in a competitive market environment with no 
industry-specific restrictions on foreign investment , although, as for all sectors, prior approval or 
notification is required for investment above certa in thresholds (Chapter II).  Mining receives 
relatively little budgetary assistance, equivalent to 5% (2008/09) of the total available to all sectors of 
the economy;  nevertheless, from 2006/07 to 20 08/09 it rose by 36.4% to $A 420.1 million.78  
Between 2006/07 and 2008/09, the estimated effectiv e rate of (combined) assistance from tariff and 
budgetary assistance for mining remained negligible (0.1%) (Table AIV.1, Chapter III).  Budgetary 
assistance is almost evenly allocated between budget  outlays and taxation concessions;  virtually all 
industry-specific budgetary assistance was deliver ed through the National Low Emissions Coal 
Initiative, with minimal amounts channelled through the Renewable Energy Development Initiative.  
R&D-related tax concessions represented 68.9% of total budgetary assistance to mining in 2008/09. 
(ii) Energy 
32. Australia is richly endowed with natural ener gy resources (uranium, coal, natural gas);  it 
produces about 2.4% of world energy and is a major supplier to world markets.79  Coal plays a much 
larger role in Australia's primary fuel mix than in many other OECD countries and world energy 
                                                                                                                                                                     
large capital investment that has not yet translated into output (Productivity Commission, 2009c, Table 2.2, and 
2008a). 
 72 MFP is a function of labour and capital costs.  Acco rding to the authorities, due to higher labour rates 
compared with some of their key competitors, Aust ralian mines gain a competitive advantage through high 
capital intensity.  With both MFP inputs being high, it is likely that Australia will appear high in comparison to 
some of its competitors.  The authorities indicated that this is due to the stage of the investment cycle and capital 
lag rather than the result of government intervention.  
73 The main driver for improved terms of trade is increased demand for raw materials in key export 
destinations such as China, which has driven up prices  in key commodities, e.g. iron ore.  Australia has a 
competitive advantage due to the quality of its natural resources, and its proximity to those markets.  However, in recent months, whilst the terms of trade for estab lished mining commodities and commodities that are harder 
to mine (e.g. rare earths) have improved due to higher prices, the appreciating Australian dollar has cancelled 
out some of the gains from price increase (OECD, 2008). 
 
74 Department of Resources, Energy and Tourism online information.  Viewed at:  
http://www.ret.gov.au/resource s/mining/Pages/Mining.aspx. 
 75 Output-based royalties are levied for most mining projects, either in the form of specific royalties 
(flat rate per unit of production) or on an ad valorem basis (levied as a percentage of the value of production). 
The Commonwealth's Petroleum Resource Rent Tax, a profit-based royalty applied to petroleum produced in offshore areas, is the main exception (OECD, 2008). 
 
76 Businessweek online information "Rudd Makes Australian Mining Tax Mainstay of Election 
Platform", 2 May 2010.  Viewed at:  http://www.bu sinessweek.com/news/2010-05-02/rudd-makes-australian-
mining-tax-mainstay-of-election-pl atform.html  [16 August2010]. 
 77 See WTO document WT/TPR/S/178/Rev.1, 1 May 2007. 
 78 Productivity Commission (2010b). 
 79 Geoscience Australia and ABARE (2010). WT/TPR/S/244 Trade Policy Review 
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markets, reflecting its large, low-cost resources lo cated near demand centres and close to the eastern 
seaboard.80  Factors expected to affect Australia's energy market include the expanded Renewable 
Energy Target (section (a) below), the rate of  economic and population growth, energy prices 
evolution, and costs and developments in alterna tive energy technologies.  Domestic use of nuclear 
power is not envisaged in the near future.  As a result of, inter alia,  large increases in capital and 
labour inputs coupled with significantly reduced ou tput growth, the average MFP growth rate for 
electricity, gas, and water supply activities droppe d to -4.2% (2003/04-2007/08), the second lowest 
after that of mining81;  separate data on MFP for electricity and gas are not available.    
(a) Electricity 
33. The majority of Australia's electricity is pr oduced from coal, which accounted for 76.3% of 
total electricity generation in 2007/08, followed by ga s (15.9%) and hydro-power (4.5%);  as a result, 
carbon dioxide emissions per unit of output  are high by international standards.82  Despite progress 
with reforms aimed at creating a nationwide energy market and strengthening price signals vis-à-vis 
consumers, Australia's electricity generation, tr ansmission, and distribution remain subject to 
geographical segmentation in two major blocks, th e six southern and eastern Australia jurisdictions83;  
and Western Australia and the Northern Territory.  Of the 52 major firms in the Australian electricity 
market 11 are entirely foreign-owned, and a further 8 are either joint ventures with foreign-owned 
companies or partly foreign-owned, with  foreign ownership ranging from 37% to 91%.84  
Southern and eastern Australia  
34. During the review period, the Australian Energy Regulator (AER) of all electricity networks 
and covered gas pipelines in southern and eastern Aust ralia completed its first determinations for the 
electricity distribution sector, and its first access arrangement reviews in gas distribution (section (b) below).
85  A new body, the Australian Energy Market Operator (AEMO), began operations on 
1 July 2009 as the single electricity and gas market operator in southern and eastern Australia only.86  
It is also coordinating high level national tran smission planning and will report on investment 
opportunities in electricity and natural gas.87   
35. The National Electricity Market (NEM) is a w holesale market through which generators and 
retailers trade electricity in the six jurisdictions of  eastern and southern Australia;  these jurisdictions 
are physically linked by an interconnected transmissi on network.  The electricity produced by major 
generators in the NEM is sold into a gross pool ma rket through a central dispatch process managed by 
the AEMO.  Across the NEM, around two thirds of generation capacity is government owned or 
                                                      
 80 In 2007/08, the Australian primary energy consumption mix consisted of black and brown coal 
(40%), petroleum products (34%), natural gas (22%), and renewables (5%) (Department of Resources, Energy 
and Tourism, 2010). 
 81 Higher prices make it economical to mine resources  with lower mineral yields.  High prices have 
also stimulated investment in existing and greenfield sites.  Mining was marked by declining resource quality 
and large capital investment that has not yet translated into output (Productivity Commission, 2009c and 2008a). 
 82 Department of Resources, Energy and Tourism (2010);  and OECD (2008). 
 83 These jurisdictions are:  Queen sland, New South Wales, the Australian Capital Territory (ACT), 
Victoria, South Australia, and Tasmania.    
84 Energy Supply Association of Australia (2010), pp. 74-6. 
 85 The AER's first access review for gas distribu tion set the prices and other access terms and 
conditions for covered networks in NSW (Country Energy) and the ACT (ActewAGL).  The final determinations can be accessed online (www.aer.gov.au).  The AER has also  begun its next schedule of gas 
distribution access reviews for Queensland and South Australia. 
 
86 The AEMO replaced the National Electricity Ma rket Management Company Limited (NEMMCO). 
 87 Australian Energy Regulator (2009). Australia WT/TPR/S/244 
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controlled.  At present, the NEM has around 270 regi stered generators, 6 state-based transmission 
networks (linked by crossborder interconnectors)88, and 13 major distribution networks that 
collectively supply electricity to end-use customer s.  The NEM is the largest interconnected power 
system in the world.   
Western Australia and th e Northern Territory  
36. Western Australia and the Northern Territory have their own electricity generators.  In 
Western Australia 39% of generating capacity is state-owned.89  In the small Northern Territory 
market the industry is dominated by the state-owned corporation Power and Water.90  Their electricity 
markets are not interconnected with the NEM.  W estern Australia has operated a wholesale electricity 
market since 2006, but there is no wholesale ma rket competition in the Northern Territory.91  
Western Australia's electricity market retains a re latively concentrated ownership structure, with 
state-owned utilities being prominent across the s upply chain, especially in the South Western 
Interconnected System92;  therefore, full retail competition does not exist in the jurisdiction.  The 
Economic Regulation Authority (ERA), which is the AE R equivalent for the region, considers that the 
absence of a clear timetable for full retail cont estability may deter new entries in retail and 
generation.93  The Office of Energy commenced a review in 2008 of the costs and benefits of 
introducing full retail contestability.  The Western Au stralian authorities expected that new entries 
and the phasing out of vesting contracts, which im pose on the generations companies an obligation to 
produce a specific quantity of electricity at a speci fied price, would reduce the market share of 
state-owned corporations over time.   
Other issues 
37. Since 2006/07, industry-specific budgetary assistance to the entire electricity, gas, and water 
supply, which in 2008/09 accounted  for 51.9% of total assistance to  the sector, has increased and has 
been delivered mainly through programmes su ch as the Remote Renewable Power Generation 
Programme.94  In 2007, the authorities decided to expand the previous Mandatory Renewable Energy 
Target (MRET) to ensure that the equivalent of 20%  of Australia's projected electricity supply comes 
                                                      
 88 Electricity transmission networks are capital intensive and incur declining marginal costs as output 
increases.  This gives rise to a natural monopoly industry structure;  networks are regulated to manage the risk 
of monopoly pricing (Australia n Energy Regulator, 2009). 
 89 Figures supplied by the Office of Energy (Western Australia). 
 90 Australian Energy Regulator (2009). 
 91 Given the scale of the Northern Territory mark et, a wholesale electricity  spot market was not 
considered feasible.  The Territory uses a 'bilateral contracting' system whereby generators are responsible for dispatching the power their customers require.  The industry is dominated by a government-owned corporation, 
Power and Water, which owns the transmission and distribution networks.  Power and Water is also the 
monopoly retail provider and gene rator.  In addition, it is responsible fo r power system control.  Six independent 
power producers in the resource and processing sector generate their own requirements and also generate 
electricity under contract wi th Power and Water (Australian Energy Regulator, 2009). 
 
92 In the South West Interconnected System (SWIS),  Western Australia's principal electricity system, 
the state-owned Western Power owns the bulk of transmission and distribution systems.  Another state-owned 
utility, Verve Energy, owns about two thirds of generation capacity.  The balance is privately owned and mainly dedicated to resource projects.  In co ntrast to the NEM, which is a gross pool where the sale of all wholesale 
electricity occurs in a spot market an d participants may also enter formal hedge contracts to manage spot market 
risk, energy in the SWIS is traded mainly through b ilateral contracts outside the pool (Australian Energy 
Regulator, 2009). 
 
93 The ERA has described the current arrangements in generation and retail as leading to a "quasi 
bilateral monopoly market structure" (Australian Energy Regulator, 2009).  
94 Productivity Commission (2010b). WT/TPR/S/244 Trade Policy Review 
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from renewable sources by 2020.95  From 1 January 2010, a nationa l Renewable Energy Target (RET) 
scheme has been in place bringing both the MRETs and existing state-based targets into a single 
national scheme.96  Legislation passed in June 2010 and in  force from 1 January 2011 is to enhance 
the RET scheme by separating it into two parts:  the Large-scale Renewable Energy Target (LRET) 
and the Small-scale Renewable Energy Scheme;  this scheme will cease in 2030.  As from 
October 2009, the Australian Centre for Renewabl e Energy (ACRE) has managed funding of more 
than $A 560 million drawn from previous pr ogrammes plus $A150 million for new measures.97  
ACRE will also develop and implement a funding st rategy, including a venture capital mechanism.  
38. Australia's electricity prices remain low compared with most other OECD countries, 
reflecting, inter alia,  its abundant and low-cost coal supplies.98  Since the beginning of 2008, the 
difference/spread in the growth rate of hou sehold (higher) and business prices has been more 
significant.  Price regulation is maintained in all Australian states and territories other than Victoria, 
and tariffs are set by individual state and territo ry regulators according to varying methodologies.  
Therefore, the tariffs applying to a customer class in one jurisdiction are not comparable to those in 
another.  Ceilings on retail electricity rates remain  in place.  In 2007, the COAG decided to authorize 
the lifting the ceilings applied to low-volume consum ers in states where there is effective competition 
in the retail market;  in response, the State of Vi ctoria phased out price regulation for small energy 
customers as from 1 January 2009.  Electricity pri ces have risen faster in New South Wales, where 
there is still a public monopoly, than in other stat es in eastern and south-eastern Australia since the 
creation of the NEM.99   
39. In July 2009, the Council of Australian Gove rnments (COAG) agreed to a National Strategy 
on Energy Efficiency aimed at developing a nationa lly consistent approach to energy efficiency 
policy, reducing red tape, and helping businesses and households invest in modern cost-cutting 
technologies.100  The strategy involves:  phasing out ineffi cient electric hot water systems (as from 
2010);  legislation for appliance energy ratings and labels;  mandating all new homes to achieve 
energy rating standards from 2011 (from 2010 for comme rcial buildings) onwards;  and accelerating 
the phasing out of inefficient lighting, incl uding a ban on incandescent light bulbs since 
November 2009.  
40. According to a 2008 OECD survey, implementati on of a competitive domestic energy market 
needs to be accelerated, with companies still under government control privatized and the ceiling on 
electricity retail prices removed.101  Stronger efforts should be devoted to obtain full retail 
contestability by, inter alia,  abolishing existing retail price regulati on, improving grid interconnection, 
intensifying competition in electricity gene ration, and resolving outstanding regulatory 
inconsistencies arising from the co-existence of stat e and national regulators in the electricity and gas 
sectors.  The National Electricity Law and the National Electricity Rules have been amended to transfer economic regulation of electricity distri bution to a national framework.  In November 2010, 
                                                     
 
 95 OECD (2008). 
 96 Renewable energy target schemes have been in place since 2001 and create a market for additional 
renewable energy deployment using a mechanism of tradeable renewable energy certificates, which should limit 
the distortions and increased costs of emission inherent to promoting the use of renewable energy (Office of Best Practice Regulation, 2009). 
 
97 Productivity Commission (2010b). 
 98 For example, in 2008, average Australian electric ity prices were below those in most European 
countries (Department of Resources, Energy and Tourism, 2010). 
 99 OECD (2008). 
 100 Productivity Commission (2010b). 
 101 OECD (2008). Australia WT/TPR/S/244 
 Page 99 
 
 
they were to be further amended to transfer non-price national retail, a nd non-economic distribution 
regulation from the states and territories into a new National Energy Customer Framework.  
(b) Gas 
41. During the period under review, changes were  made to the rule-making powers of the 
Australian Energy Market Commission (AEMC) on three occasions.102  In addition to AER's role as 
the regulator for pipelines outside Western Australia since 2008103, new Gas Law and Gas Rules for 
the gas transmission sector commenced on 1 July 20 08 in all jurisdictions except Western Australia, 
which was expected to implement the pipeline access provisions of these regulations in the second 
half of 2009.  As of January 2009, 91% of Aust ralia's demonstrated conventional gas resource was 
located off the north-west coast;  the eastern gas market is the largest consumer of natural gas, 
accounting for 57% of Australian gas consumption, followed by the Western Australia and Northern 
Territory markets.104  Wholesale gas is mostly sold under c onfidential, long-term contracts of up to 
20 years, argued as being essential to the financing of new projects;  the trend in recent years has been towards shorter term supply, but most contracts still run for at least 5 years.  
(c) Petrol 
42. According to the ACCC, movements in the pri ce of petrol in Australia are overwhelmingly 
determined by international market prices.  Although the industry is concentrated at the refining and 
wholesale levels, the level of concentration need not give rise to concerns about the state of 
competition.  Nevertheless, the operation of th e buy–sell arrangements and the low potential for 
large-scale independent imports have a bearing on the functioning of competition.
105  Price 
competition remains active at the retail level alt hough some cases were brought to the ACCC.  The 
pre-tax component of Australian gasoline prices re mains among the lowest in the OECD and the 
tax-inclusive gasoline price is the fifth lowest , following Mexico, the United States, Canada, and 
New Zealand.106   
43. Although most state government fuel subsidies to consumers were a bolished (New South 
Wales, Queensland, Victoria, Northern Territory, Tasmania), some state governments continue to 
provide subsidies at the retail level to reduce th e price of unleaded petrol and diesel paid by 
consumers (Queensland, New South Wales,  South Australia, Northern Territory).107  The petroleum 
subsidy scheme in South Australia, which provides s ubsidies of up to 3.3 cents per litre for diesel and 
unleaded petrol purchased in "regional areas", was to be abolished as of 1 January 2011.108  Since 
                                                      
 102 On 1 July 2008, they were expanded to include economic regulation of gas transmission and 
distribution services, access to natural gas pipeline services , and other elements of broader natural gas markets.  
On 1 July 2009, the AEMC powers were expanded to gas retail functions in certain jurisdictions.  On 
1 January 2010, when Western Australia became a participating jurisdiction in the National Gas Law, the role of 
the AEMC was expanded to include elements of the na tural gas market in Western Australia, such as the 
economic regulation of natural gas pipeline services. 
 103 The ERA remains the regulator of covered pipe lines in Western Australia (Australian Energy 
Regulator, 2009). 
 104 The Eastern gas market compri ses Queensland, New South Wales, Australian Capital Territory, 
Victoria, South Australia, and Tasmania (Geoscience Australia and ABARE, 2010).  
105 The refiner-marketers accounted for about 93% of the petrol imported into Australia in 2007/08;  
this high share is because the refiner-marketers contro l most terminals capable of receiving imports.  Imports 
account for around 18% of unl eaded petrol sold in Australia, with most sourced from Singapore (ACCC, 2008). 
 106 Department of Resources, Energy and Tourism (2010). 
 107 ACCC (2009c). 
 108 For details about this measure see South Australia State Budget Papers 2010/11.  Viewed at:  
http://www.treasury.sa.gov.au/dtf/budget/publications_a nd_downloads/current_budget.jsp [10 November 2010]. WT/TPR/S/244 Trade Policy Review 
Page 100 
 
 
September 2002, grants have been available to produ cers of fuel ethanol used in transport, under the 
Commonwealth Government's Ethanol Production Gran t Program;  the government subsidy is equal 
to the fuel excise of 38.14 cents per litre;  this m eans that E10 petrol is effectively excise free for the 
ethanol component (which is 10%).109  As from 1 July 2011, excise will be phased in for all 
alternative fuels, including gaseous fuels, on an energy-content basis, with a further 50% discount.  
The Fuel Tax Credit Scheme, which applies to  diesel fuel and fuel oil, was extended  from 1 July 2008 
to include petrol for a number of end users, incl uding agriculture, fishing, forestry, mining, marine 
transport, rail transport, nursing and medical emer gency vehicles.  Since 1 July 2008, eligibility for 
Fuel Tax Credits was also expanded to include diesel  and petrol used for other activities, machinery, 
plant and equipment in a range of industries incl uding construction, manufacturing, wholesale/retail, 
property management and landscaping.  
(4) MANUFACTURING  
44. Manufacturing accounted for 9.3% of GDP and employment (10.3% and 9.9%, respectively 
in 2006/07) (Table I.2), and for 14.9% of total merchandise exports (about 6.1% of which machinery 
and transport equipment), down from 18.8% in 2006/07.110  Average annual MFP growth fell to -0.8% 
over 2003/04-2007/08 (from 1.8% in 1998/99-2003/04).111  The authorities indicated that lower 
growth in output (in terms of gross value added), combined with increased growth in both labour and 
capital have contributed to the overall decline in MFP growth in the sector; however, the underlying 
factors that have driven the decline remain unclear. 
45. During the period under review, Australia's po licy objective has been largely focused on 
business innovation and growth as a means of improvi ng MFP and thereby strengt hening international 
competitiveness and reaping benefits from rapi d economic growth in overseas markets.  A 
$A 3.1 billion package, Powering ideas:   An Innovation Agenda for the 21st Century, introduced in 
May 2009, provides an ambitious and comprehens ive policy framework for the development of 
Australia's innovation system over ten years;  "future industries" such as nanotechnology, biotechnology, and information technology, received a substantial share of a $A 1.1 billion Super 
Science initiative in the 2009/10 Budget.
112  Nevertheless, changes to the assistance provided to 
certain activities, e.g.  to the automotive industry, do not appear to have fully taken on board the new 
realities (sections (i) and (ii) below).113   
46. Manufacturing activities continue to receive the largest part of assistance from a wide range 
of policy instruments aimed at funding innovation and venture capital as well as supporting specific 
industries;  in 2008/09, the sector accounted for 91.7% of the estimated net combined assistance made 
available to all sectors of the economy.114  In 2008/09, manufacturing r eceived 78.7% of its estimated 
net combined assistance ($A 8.3 billion) mainly th rough import tariffs protecting motor vehicles and 
                                                      
 109 ACCC (2009c). 
 110 Reportedly, the main cause of the decline in manufacturing employment is the shift of consumption 
towards services, which means that th ere is less demand for manufactured goods relative to services.  At the 
same time it is claimed that the high level of productivity growth in manufacturing relative to services means 
that manufacturers can meet demand with fewer worker s (Centre for International Economics, 2009;  and 
UNSD Comtrade database). 
 111 The authorities indicated that these figures have been updated since the Productivity Commission's 
report was published;  revised figure s were due by early December 2010.  According to the ABS Experimental 
Estimates of Industry Multifactor Productivity (ABS cat no 5260.0.55.002), MFP in manufacturing declined on 
average 0.9% per year in the 2003/04-2007/08 productivity cycle and increased at an average rate of 1.7% per 
year in 1998/99-2003/04 (Productivity Commission, 2009c, Table 2.2). 
 112 Department of Innovation, Industry, Science and Research (2009a). 
 113 OECD (2010d). 
 114 Productivity Commission (2010b), Table 2.5. Australia WT/TPR/S/244 
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parts activities, metal product manufacturing, and food,  beverages and tobacco activities, thus raising 
costs to consumers and to industries that use manufactured and other inputs subject to tariffs.115  The 
sector's estimated effective rate of (combined)  assistance has been around 4.6% since 2004/05 
(Table AIV.1);  the textiles, clothing, footwear and leather, and motor vehicles and parts activities 
continued to benefit from particularly high effectiv e rates, i.e. more than double the manufacturing 
sector's average in 2008/09 and the highest of all goods industries of the economy.116   
47. Australia's average applied MFN tariff on industr ial products has declined slightly since its 
last Review (Table III.1) as a result of unilateral ta riff cuts in certain textiles, clothing, and footwear 
goods, and motor vehicles and parts components;  furthe r unilateral tariff cuts are expected in 2015.  
According to Productivity Commission estimates, mo st tariff assistance on outputs remains directed 
towards the manufacturing sector, and in particular  food, beverages and tobacco ($A 1.6 billion), 
metal product manufacturing ($A 1.9 billion), and motor vehicles and parts ($A 1.5 billion) activities.
117   
48. Budgetary assistance for manufacturing is estim ated to have risen slightly to about 
$A 1.8 billion;  however, its share to GDP remained relatively stable at around 0.1% (Table IV.2).  
This assistance was mostly delivered in form of tax concessions (58.9%) and to a lesser extent by 
means of outlays.118  Despite a drop, the motor vehicles and parts industries have remained the main 
recipient of budgetary assistance (Table IV.2).  In 2008/09, support target ed at small businesses 
accounted for about 21% of budgetary assistance, and was dominated by capital gains tax concessions.
119  Arrangements that may have assistance implications but are not part of these 
estimates include the effects of government purch asing preferences and local-content arrangements 
affecting, inter alia,  manufacturing activities.  As for sectors discussed elsewhere in this report, the 
extent of domestic support provided by state or territory governments cannot be fully appraised. 
Table IV.2 
Budgetary assistance to manufacturing, 2005-09 
(% and $A million)  
  2005/06 2006/07 2007/08 2008/09 
Share in total budgetary assistance (%)     
Food, beverages, and t obacco 7.5 6.6 6.4 7.0 
Textiles, clothing, and f ootwear 9.7 7.9 7.5 7.3 
Wood & paper products  2.7 2.6 4.1 4.7 
Printing, publishing, and media 0.7 0.6 1.2 0.7 
Petroleum, coal, and chemicals 7.9 9.2 10.7 10.9 
Non-metallic mineral pr oducts 1.1 1.2 1.4 1.3 
Metal product manufacturing  10.0 12.0 10.9 9.4 
Motor vehicles and parts 35.2 37.0 33.6 32.5 
Other transport equipment  2.2 1.6 1.8 2.2 
Other machinery and equipment 10.4 10.3 10.5 11.1 
Table IV.2 (cont'd) 
                                                      
 115 The net combined assistance is defined as the net tariff assistance plus budgetary outlays and tax 
concessions. 
 116 The effective rate of combined assistance is measured as the dollar value of assistance as a 
proportion of (unassisted) value added.  The calculations of combined assistance compri se budgetary, tariff, and 
regulatory assistance (Productivity Commission, 2010b, Table 2.6). 
 117 Productivity Commission (2010b) , Table 2.2. 
 118 Productivity Commission (2010b), Table 2.3. 
 119 Productivity Commission (2010b). WT/TPR/S/244 Trade Policy Review 
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  2005/06 2006/07 2007/08 2008/09 
Other manufacturing 2.8 2.2 2.8 1.6 
Unallocated manufacturinga 9.8 8.9 9.0 11.2 
Total outlays ($A million) 800.5 721.0 759.5 723.8 
Total tax expenditures ($A million) 848.3 956.6 1,023.4 1,041.7 
Total budgetary assistance ($A million) 1,648.9 1,677.5 1,782.9 1,765.6 
Share of total budgetary assistance to GDP (%) 0.16 0.15 0.15 0.14 
a Unallocated includes general programmes where details of beneficiaries are unknown.  
Source : Productivity Commission (2010), Trade & Assistance Review 2008-2009 , 22 June, Canberra.  Viewed at:  
http://www.pc.gov.au/__data/assets/pdf_f ile/0007/98998/tar0809.pdf [23 August 2010]. 
(i) Automotive 
49. Despite its progressively declining contri bution to total merchandise exports value120, and its 
relatively high degree of concentration121, the automotive industry, the major recipient of government 
assistance across sectors remains a relatively important part of the Australian economy.122  In 
2007/08, the industry's output was $A 6.2 billion or 5.8% of manufacturing output;  the automotive industry represents 4.8% of manufacturing employmen t.  While the sector has enjoyed strong growth 
in export volume terms since 2006 (except in 2009), its share of the domestic market continued to fall 
steadily from 19% in 2007 to 15.7% in 2009 (147,680 units) despite wide-ranging industry-specific support at Commonwealth and state level;  this de velopment was in line with a 34.8% production cut 
for the same period.   
50. The authorities consider Australia as one of  the most open and competitive automotive 
markets in the world.  During the review period, the market was further liberalized as a result of 
unilateral tariff cuts.  By 2010, Australia claimed to  apply the third-lowest applied MFN tariffs for 
new vehicles amongst the world's major automotive-producing economies.
123  Nevertheless, the 
average applied MFN tariff for the industry remains significantly higher than th e average rate for the 
manufacturing sector;  used vehicles remain subject to a high compound tariff rate (whose AVE is as 
much as 302.4%).124  The luxury tax (LCT) on cars over a certain price is seen to effectively 
discriminate against foreign-made vehicles of th is type, which usually have higher prices than 
domestically produced luxury vehicles and are estimat ed to provide 97% of the revenue from this 
                                                      
 120 In value terms, the share of th e automotive sector contracted from  2.7% to 1.3% of total exports 
between 2007 and 2009 (UNSD Comtrade database). 
 121 The industry, consisting of 3 car manufacturers (Ford, Holden, Toyota) and approximately 
190 component, tooling, design and engineering firms, is largely based in Victoria and South Australia, with a 
small share of activity in New South Wales.  It now employs over 50,000 people directly, compared with 
81,000 in 2005 (Department of Innovation, Industry, Science and Research online information, "Outlook for the Automotive Manufacturing Industry F act Sheet".  Viewed at:  http:// www.innovation.gov.au/Section/About 
DIISR/FactSheets/Pages/OutlookfortheAutomotiveManufacturingIndustryFactSheet.aspx [12 August 2010]). 
 
122 Department of Innovation, Industry, Science and Research online information, "Outlook for the 
Automotive Manufacturing Industry F act Sheet".  Viewed at:  http:// www.innovation.gov.au/Section/About 
DIISR/FactSheets/Pages/OutlookfortheAutomotiveManufacturingIndustryFactSheet.aspx [12 August 2010];  and Department of Innovation, Industry, Science and Research (2009b). 
 
123 Automotive Review Secretariat (2008). 
 124 According to the authorities, the rarely applied non- ad valorem  component of the duty on imported 
used cars is not an industry protection measure, but was introduced to reinforce Australia's vehicle emission and 
safety standards by limiting the full volume importation of vehicles near the end of their useful life and the 
consequent environmental impact of th eir disposal.  They also consider th at Australia's balanced approach to 
used-vehicle imports is less restrictive than economies that prohibit imports of used cars. Australia WT/TPR/S/244 
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tax.125  The authorities are not of this view as the LCT applies to both domestic and foreign cars.  
Government procurement of motor vehicles re mains exempt from the Mandatory Procurement 
Procedures of the Commonwealth Procurement Guidelines.  
51. In addition to benefits arising from the gene ral stimulus tax measures provided to businesses 
since 2009126, several industry-specific programmes are ongoing.  New programmes remain focused 
on innovation and development of more environmentally friendly pr oducts, while older programmes 
have been complemented with additional elements re flecting a persistent interventionist approach to 
the sector's adjustment.127  Since November 2008, the $A 5.8 billion New Car Plan for a Greener 
Future has assisted the industry to prepare for a low-carbon future and to further orientate to global 
markets and supply chains.  The Plan consists of:  $A 3.4 billion to the industry Automotive 
Transformation Scheme (ATS) from 2011 to 2020/21128;  an expanded $A 900 million Green Car 
Innovation Fund of over ten years;  $A 79.6 million worth of changes to the Automotive 
Competitiveness and Investment Scheme (ACIS) ensuring a smooth transition to the ATS129;  an 
$A 116.3 million Automotive Industry Structural Adjustment Programme promoting adjustment 
through mergers and consolidation in the com ponents sector, and facilitating labour market 
adjustment;  a $A 20 million Automotive Supply Chain Programme since 2009/10 to help suppliers 
improve their capabilities and their integration in  complex national and global supply chains;  
$A 6.3 million of support for an enhanced Auto motive Market Access Programme from 2009/10;  and 
a Liquefied Petrol Gas (LPG) Vehicle Scheme E nhancement.  The production support provided by the 
ATS has already raised WTO-consistency concerns domestically130;  the authorities indicated that all 
                                                      
 125 OECD (2010d). 
 126 According to the Federal Chamber of Automotive Industries, the business tax break had led to a 
tangible increase in business vehicle purchases throughout 2009;  overall, business car sales for 2009 were down 
just 1.2% on 2008 figures, compared with a 7.4% decr ease in total sales (Departmen t of Innovation, Industry, 
Science and Research online informati on, "Outlook for the Automotive Manu facturing Industry Fact Sheet".  
Viewed at:  http://www.innovatio n.gov.au/Section/AboutDIISR/FactSheets/Pages/OutlookfortheAutomotive 
ManufacturingIndustryFactSheet.aspx [12 August 2010]. 
 127 OECD (2010d). 
 128 ATS assistance is paid, subject to conditions, for eligible investment in plant and equipment and 
research and development, and for e ligible production for motor vehicle producers.  The authorities indicated 
that there are no local content or export performance requ irements for participants.  Assistance will be paid in 
cash rather than as duty credits to offset customs duties as under ACIS.  For more information on the ATS 
regulatory framework, implementation, and differences w ith the ACIS, see Department of Innovation, Industry, 
Science and Research online information.  Viewed at:  http://www.innovation.gov.au/Industry/ Automotive/Pages/ATSRegulationsandOrderPublicComment.aspx;  and Automotive Transformation Scheme 
Act 2009, No 93 2009, 29 September.  Viewed at:  http://www.comlaw.gov.au/ComLa w/Legislation/Act1.nsf/0/ 
DF7E217AEED4A428CA257648007447D3/$file/93-2009.doc  [15 August 2010].  
129 Expenditure by participants until 31 December 2010 may be eligible under ACIS;  as of 
1 January 2011, it may be claimed under the ATS.  ACIS Stage 2 (2006-10) funding includes a capped 
component of $A 2 billion credits ava ilable to all participants, and an unc apped component of approximately $A 
800 million credits available only to motor vehicle producer s.  The value of assistance under the ACIS takes into 
consideration the applicable production and investment rates (assistance for production at 10% of production 
value of passenger motor vehicles for domestic use and 25% for exports, plant and equipment at 25% of claims 
and R&D at 45% of claims), a three-y ear rolling average, which aims to smooth ACIS benefits over the vehicle 
model cycle, and modulation which operates to ensure th at the two billion credit fund ing cap over each five-year 
stage of the scheme is not breached.  Stage 3 of the ACIS is set for 2011-15 (Department of Innovation, 
Industry, Science and Research, 2009a). 
 130 Reportedly, concerns about the WTO consistency of the ATS under the Agreement on Subsidies and 
Countervailing Measures arise from, inter alia,  the fact that Australia aims to become one of a small group of 
countries capable of designing and building environmen tally cleaner cars, pursuing export markets for its 
assisted automotive produ cers, and providing production incentives to ou tput directed to export.  In the 1990s, 
encouraged by the Export Facilitation Scheme, exports displayed their strongest growth until the scheme was WT/TPR/S/244 Trade Policy Review 
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programmes under the scheme A New Car Plan for a Greener Future are WTO-compliant.  In 
November 2008, a $A 10.5 million expansion of  the LPG vehicle scheme doubled payments to 
purchasers of new private use vehicles that are fact ory fitted with LPG technol ogy.  Financial support 
not related to A New Car Plan for a Greener Future has been provided to, inter alia,  assist local 
communities in adjusting to announced plant closures131 or stabilize the automotive market (e.g. the 
OzCar scheme).132  
52. According to the OECD, the unilateral tari ff reductions on passenger motor vehicles are 
linked with the continued support available through the New Car Plan for a Greener Future;  this 
support, which effectively provides subsidies to the automotive industry,  risks hindering structural 
adjustment and the necessary reallocation of r esources in response to relative price changes.133  The 
authorities disagree with OECD's observations.  As a result of the November 2008 additional 
assistance provided to the automotive and car-finan ce sectors, until June 2009 Australia's total 
assistance package for the automotive sector ranked as the second largest programme in per capita 
terms among OECD countries (after Sweden);  the authorities pointed out that since then other countries have introduced au tomotive assistance measures.
134  The Productivity Commission 
considers that further reductions in assistance to the automotive industry woul d generate net benefits 
for the entire economy through improved usage of resources;  the associated contraction in automotive activity would be more than offset in the long run by gains to other industries.
135 
(ii) Textiles, clothing, and footwear (TCF) 
53. During the review period, the share of textil es and clothing in total merchandise export value 
remained stable at 0.3%.136  Its shares in GDP and employment were  0.41% and 0.42%, respectively.  
In 2009, the industry's value added was around 4.6%  of total manufacturing value added, and import 
value was almost six times more than that of expo rts;  the continued dec line in the TCF workforce 
reflects, inter alia,  the government policy objective of moving labour-intensive production 
offshore.137  
54. Compared to other industries, TCF activiti es continued to benefit from considerable 
government support as reflected by several assistance indicators discussed in this report.  Unilateral 
tariff cuts undertaken in 2010 a nd those planned for 2015 will furthe r reduce border protection to TCF 
producers;  nevertheless, these rates remain signifi cantly higher than the average applied MFN tariff 
                                                                                                                                                                     
replaced by the more WTO acceptable ACIS.  The WTO consistency of the Export Facilitation Scheme was 
examined by a WTO Panel in the Howe Leather case in 1999 (Priestley, 2009). 
 131 For example, in 2008/09, 21 grants totalling almost $A 22.9 million were granted, under the 
South Australia Innovation and Investment Fund and the Geelong Investment and Innovation Fund, to 
Mitsubishi Motors Australia Limited (Tonsley Park, Ad elaide) and Ford Australia (Victoria) to support 
job-creating and innovation-related investment proposals by these firms, which had decided to close their manufacturing operations (Department of Innovation, Industry, Science and Research, 2009a). 
 
132 With the support of the Commonwealth Government and the leading Australian banks, since 
December 2008 the OzCar scheme has helped to provide critical wholesale floorplan financing to viable car 
dealers that were financed by GE Money Motor Solutions and GMAC, prior to their withdrawal from the market 
(Department of Innovation, Industry, Science and Research online information, "Outlook for the Automotive Manufacturing Industry Fact Sheet".  Viewed a t:  http://www.innovation.gov.au/Section/AboutDIISR/ 
FactSheets/Pages/OutlookfortheAutomotiveManufacturingIndustryFactSheet.aspx [12 August 2010]). 
 
133 OECD (2008). 
 134 Productivity Commission (2009a). 
 135 Productivity Commission (2008c). 
 136 UNSD Comtrade database. 
 137 OECD (2010d). Australia WT/TPR/S/244 
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for the sector.  The industry remains characterized by a high degree of tariff escalation 
(Chapter III(2)).   
55. During the review period, the TCF Post-2005 Assistance Package, including the TCF 
Post-2005 Strategic Investment Programme Sche me 2005, and the TCF Structural Adjustment 
Programme, provided various types of assistan ce to promote high-value-added production and 
product diversification as well as to improve intern ational competitiveness.  In response to the 2008 
review of the Australian TCF Industries, a $A 401 million TCF Innovation Package was launched to 
improve the effectiveness of assistance to the se ctor's industries by reducing complexity and 
uncertainty and placing greater emphasis on innovation.138  The package, which runs from 2009/10 to 
2015/16, includes a five-year $A 30 million TCF St rategic Capability Programme (as from 2010/11) 
and a $A 112.5 million Clothing and House hold Textile Building Innovative Capability 
Programme139, and the establishment of a TCF Industr ies Innovation Council and a National TCF 
Innovation Network.  As of June 2010, other ongoi ng programmes, some of which were notified to 
the WTO, included:  the Textile, Clothing and F ootwear Corporate Wear Scheme (tax concessions, 
since 1993), the TCF Expanded Over seas Assembly Provisions Scheme (tax concessions, 1999-2010), 
TCF Product Diversification Scheme (duty credits , 2006/07-2010/11), the TCF Post-2005 Strategic 
Investment Programme Scheme (grants, 2005-11);  and the TCF Small Business Programme (grants, 
2006-16).  As from May 2009, a TCF Industries I nnovation Council has brought together business, 
unions, researchers, and government to consult on innovation and provide strategic advice.  
56. According to the OECD, the range of benefits  provided to the TCF, a very small economic 
sector, appears disproportionately expensive and economically distortive.140  Similarly to its 
automotive industry conclusions, a Productivity Co mmission’s modelling study suggests that there 
would be net gains to the overall economy from implementing a programme of reductions in 
assistance to the TCF sector;  the bulk of the benefi ts would flow from the un ilateral tariff reductions 
while the sector would decline further and the ef fects would be minor relative to other factors 
affecting the sector's viability.141  
(iii) Pharmaceuticals 
57. A significant part of the supply of pharmaceu ticals remains sourced overseas, while both 
multinational and domestic manufacturers partic ipate in the export of pharmaceuticals.142  T h e  
pharmaceuticals sector employs 40,000 people.143  The value of pharmaceuticals exports has grown 
steadily since 2007, to around $A 4.1 billion in 20 09/10, making the pharmaceuticals industry one of 
Australia's major manufacturing exporters.144  The biomedical research community has developed 
links with multinational companies and to a lesser extent with Australian companies, while most of 
the R&D done by companies in Australia is clinical trials.  Australia aims to improve the long-term 
sustainability and international competitiveness of its pharmaceuticals industry, stimulate investment, 
                                                      
 138 Commonwealth of Australia (2008);  and Department of Innovation, Industry, Science and Research 
(2009a). 
 139 The Clothing and Household Textile Building Innovative Capability Programme will commence in 
2010/11 and replace the TCF Post-2005 Scheme and the TCF Product Diversification Scheme. 
 140 OECD (2010d). 
 141 Productivity Commission (2008c). 
 142 Sweeny (2007). 
 143 ABS Cat No. 8104.0, 2006-07;  ABS Unpublished data;  IBISWorld Pharmaceuticals Product 
Manufacturing in Australia 2010 ;  IBISWorld Pharmaceutical Wholesaling in Australia, 2010 ;  and DIISR 
Biotech Business Indicators 2008 . 
 144 ABS Cat No. 5368.0, Table 12a, Standard International Trade Classification, 2005-2010 
International Trade in Goods and Services.  WT/TPR/S/244 Trade Policy Review 
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and develop Australia as a regional centre for R& D, manufacturing, and export.  Recommendations 
by a 2008 Pharmaceuticals Industry Strategy Grou p report were focused on attracting investment, 
increased clinical trials, and specialized manufacturing activity.145  Following these recommendations, 
legislation including the possible introduction of an  R&D Tax Credit was before the Parliament in 
October 2010.146  No industry-specific support seems to be in place at Commonwealth level, but the 
generous general R&D incentives are of major assi stance;  the Pharmaceuticals Partnerships 
Programme was terminated in June 2009.  
58. Australia has maintained its long-standing Ph armaceutical Benefits Scheme (PBS), under 
which most prescription pharmaceuticals are subsidized in order to be sold at an affordable price.  If a 
medicine is unsuccessful in obtainin g a listing on the PBS, it may still be sold at a higher price on the 
private market although this is often not a commercial proposition in Australia.147  As of 1 June 2010, 
the PBS covered 756 drug substances (generic drugs), available in 1,886 forms and strengths (items) 
and marketed as 3,675 different drug products (brand s).  The amount of the subsidy varies depending 
on the price of the drug.  Government expenditure  on the PBS doubled from $A 4.3 billion in 2000/01 
to $A 8.4 billion in 2009/10;  105 separate firms (2009/10) were listed as suppl iers to the PBS while 
only 10 accounted for almost 66.4% of the value of to tal sales made to the PBS;  14.4% of total sales 
were attributed to Pfizer.148 
(5) SERVICES  
(i) Features 
59. Services continue to be the largest and fastest  growing sector of the Australian economy.  The 
share of services (including construction, energy, elect ricity, and water supply) in GDP remains stable 
at about 80% (Table I.2);  the sector's share in to tal employment rose slightly from 85.4% in 2006/07 
to 86% in 2009/10.  Finance and insurance, wholesal e and retail trade, and ownership of dwellings 
have been by far the leading activities in GDP term s;  other important activities were construction, 
professional, scientific and technical services, health care and social assistance, and transport, storage 
and communications services.  During the review  period, virtually all services industries with 
measurable MFP149 attained positive productivity growth rates through innovative use of new 
technology, while the rates in all goods' sect ors were negative.  More specifically, the 
communications and the finance and insurance sect ors' average MFP growth rates (2003/04-2007/08) 
rose to 3% and 2.2%, respectively.150  Future productivity growth in the sector is likely to be boosted 
by a focus on improved technical progress rather than on capital deepening.151 
60. While not always producing a direct export, the performance of the services sectors remains a 
key component of the country's overall export competitiveness.152  Australia is the world's 22nd largest 
                                                      
 145 Department of Innovation, Indu stry, Science and Research (2009a) ;  and Pharmaceuticals Industry 
Strategy Group (2008).  
146 Department of Innovation, Indu stry, Science and Research (2009a) ;  and Pharmaceuticals Industry 
Strategy Group (2008). 
 147 Sweeny (2007). 
 148 Department of Innovation, Industry, Science and Research online information, "Australian 
Pharmaceuticals Industry Fact Sheet ".  Viewed at:  h ttp://www.innovatio n.gov.au/Section/AboutDIISR/ 
FactSheets/Pages/AustralianPharmaceuticalsIndu stryFactSheet.aspx [12 August 2010]. 
 149 There is a difficulty in measuring productivity grow th accurately in many se rvices industries where 
outputs are not necessarily expressed in increasing volumes but may be seen in improved quality (Parliament of 
the Commonwealth of Australia, 2010). 
 150 Productivity Commission (2009c). 
 151 Parliament of the Commonwealth of Australia (2010). 
 152 Department of Innovation, Industry, Science and Research (2009c). Australia WT/TPR/S/244 
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exporter and importer of services (2009).153  Trade in services remains an important component of 
Australia's foreign trade;  in 2009/10, exports of  commercial services represented about 21% of total 
exports of goods and services (Table I.3).  Since 2007/08, services trade has recorded continuous deficits as a result of strong growth in travel e xpenses and a significant fall in transport earnings.  
Between 2006/07 and 2009/10,  exports (credits, receipts) of non -factor services, consisting mainly of 
education-related travel, professional services, and transport, rose by 14.8% to $A 52.8 billion, 
equivalent to some 26% of merchandise exports.  In 2009/10, imports (debits, payments), consisting 
largely of travel and transportation, were about $A 53.5 billion.  In 2008/09, the United States, the 
United Kingdom, and Singapore were Australia's largest individual two-way services trading 
partners.
154  
(ii) Domestic support 
61. In 2008-09, the services sector was estimated to have received around 45% of estimated 
budgetary assistance available to all sectors of  the economy, up from around 27% in 2007/08, and 
equivalent to 0.28% of GDP;  between 2006/07 and 2008/09, total budgetary assistance to the services 
industry increased by 43.9%, to almost $A 3.5 bil lion, delivered mainly through tax expenditures 
(Table IV.3).  These increases were due mainly to the introduction of various small business tax 
concessions, a large proportion of which primarily  benefit the services sector.  In 2008/09, 
industry-specific assistance accounted for 13.2% of total budgetary assistance to the services industry.  
Property and business services, and finance and insura nce were the second and third largest recipient 
industries of budgetary assistance ($A 744 million and $A 613 million, respectively) available to all 
sectors of the economy155;  assistance to these activities was de livered mainly through small business 
capital gains tax concession measures, the offshor e banking unit tax concession programme, and R&D 
tax concessions.  Arrangements that may have assistance implications, but are not part of these estimates include:  the effects of local-content arrangements as they affect, inter alia,  broadcasting 
(section (vi)(b), and Chapter III);  regulatory rest rictions on competition (e.g. pharmacy, air services, 
importation of books, media, broadcasting);  a nd government programmes affecting mainly the 
provision of health, education, and community services.
156 
Table IV.3 
Budgetary assistance to the services industry, 2005-09 
(% and $A million) 
  2005/06 2006/07 2007/08 2008/09 
Share in total budgetary assistance (%)     
Electricity, gas, and water supply 5.2 3.4 2.7 2.7 
Construction 3.8 5.4 5.1 6.2 
Wholesale trade 5.7 5.3 5.4 6.4 
Retail trade 5.1 9.9 9.9 11.3 
Accommodations, cafés, and restaurants 5.1 3.7 3.9 4.8 
Transport and storage 5.4 4.3 3.7 4.0 
Communication 7.1 7.0 5.2 4.5 
Finance and insurance 13.2 15.0 16.8 17.7 
Table IV.3 (cont'd) 
                                                      
 153 WTO trade profiles online.  Viewed at:  http://stat.wto.org/CountryProfile/WSDBCountry 
PFView.aspx?Language=E&Country=AU.  
154 For more detailed statistics on Australia's trade in  services see Department of Foreign Affairs and 
Trade (2010b). 
 155 Productivity Commission (2010b). 
 156 Productivity Commission (2010b). WT/TPR/S/244 Trade Policy Review 
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  2005/06 2006/07 2007/08 2008/09 
Property and business 19.5 19.1 18.5 21.5 
Government administrations and defence 0.8 0.9 0.6 0.9 
Education 1.2 1.0 0.8 0.9 
Health and community 7.4 8.2 6.4 6.5 
Culture and recreation 9.8 8.0 14.5 5.6 
Personal and other services 1.9 2.1 2.2 2.5 
Unallocated servicesa 8.7 6.8 4.3 4.6 
Total outlays ($A million) 938.1 1,084.0 1,390.7 1,181.2 
Total tax expenditures ($A million) 1,020.7 1,324.9 2,008.4 2,285.7 
Total budgetary assistance ($A million) 1,958.8 2,408.9 3,399.1 3,466.9 
Share of total budgetary assistance to GDP (%) 0.20 0.22 0.29 0.28 
a Unallocated includes general programmes wh ere details of beneficiaries are unknown. 
Source : Productivity Commission (2010), Trade & Assistance Review 2008-2009 , Tables A.2 and A.7, 22 June, Canberra.  
Viewed at:  http://www.pc.gov .au/__data/assets/pdf_file/0007/98998 /tar0809.pdf [26 August 2010]. 
(iii) Commitments under the General Ag reement on Trade in Services 
62. Australia's commitments under the GATS remain unchanged.157  Its comprehensive Schedule 
of Specific Commitments, covers most services  sectors, with the exception of audiovisual, 
postal-courier, and rail transport services.  Apart from a revised services offer submitted in May 2005, 
no new offer has been tabled within the context of  the current GATS negotiations.  During the review 
period,  Australia participated in two sets of ne gotiations with the EU under GATS Article XXI, 
relating to EU schedule modifications;  those rela ting to 13 new EU Member States were concluded 
while those concerning the accession of two more c ountries (Bulgaria and Romania) were initiated in 
2007 but have yet to be concluded.158  Australia also made submissions to the review meetings of the 
GATS Annex on Air Transport.159  
(iv) Regional and bilateral agreements on services 
63. Australia's regional trade agreements (RTAs) with ASEAN (and New Zealand), and FTAs 
with Chile, New Zealand, Singapore, Thailand, an d the United States include provisions on services 
(Chapter II(6)(ii)).160  Some FTAs use negative-list appro ach to scheduling services commitments 
(e.g. the FTA with the United States), while others use positive-list modalities (e.g. FTA with 
Thailand).161  While the levels of commitments undertak en by Australia vary from one FTA to the 
                                                      
 157 More information on Australia's GATS commitments and latest submitted offers may be found, 
inter alia,  in WTO documents GATS/SC/6, 15 April 1994;  GATS/EL/6, 15 April 1994;  GATS/SC/6/Suppl.4, 
26 February 1998;  WT/TPR/S/104, 26 August 2002;  TN/S/O/AUS/Rev.1, 31 May 2005;  and 
WT/TPR/S/178/Rev.1, 1 May 2007. 
 158 Following the completion of the first set of these negotiations, Australian exporters of 
telecommunications, engineering, and legal services were expected to have new and more secure access to the 
EU's enlarged market (Departmen t of Foreign Affairs and Trade online information.  Viewed at:  
http://www.dfat.gov.au/trade/ negotiations/services/access_services_eu.ht ml, and http://www.df at.gov.au/trade/ 
negotiations/services/wto_article_XXI_update.html);  and WTO document S/L/370, 22 February 2010). 
 159 WTO document S/C/28, 19 November 2007. 
 160 More information on Australia's commitments un der these regional agreements are available, 
inter alia,  in WTO documents TN/S/O/AUS/Rev.1, 31 Ma y 2005, and WT/TPR/S/178/Rev.1, 1 May 2007. 
 161 Agreements that adopt a negative list approa ch (including ANZCERTA, SAFTA, and AUSFTA) 
cover a more extensive range of services than agreemen ts that adopt a positive list ap proach (such as TAFTA).  Australia WT/TPR/S/244 
 Page 109 
 
 
other, they often tend to go significantly beyond GATS commitments.162  These bilateral FTAs 
commitments are not applied on an MFN basis.  Aust ralia undertook, especially in its agreement with 
the United States, commitments th at go beyond not only its GATS commitments, but also its revised 
services offer, for example in relation to review of foreign investments, and in such sectors as 
business, audiovisual, financial, tourism, and tr ansport services.  Despite the budgetary assistance 
provided to the sector, Australia's bilateral FTAs excl ude subsidies from their application, consistent 
with the absence of specific discip lines on services subsidies in the GATS.163  Australia maintains 
services-related mutual recognition arrangements (MRAs), including one with the U.S. Securities and Exchange Commission (SEC) on U.S. and Australia n securities regulation;  an MRA was concluded 
in September 2008 between releva nt Australian and U.S. (Texan) professional bodies on engineering 
services. 
(v) Financial services 
64. The contribution of finance and insurance services to GDP dropped slightly from 11% in 
2006/07 to 10.6% in 2009/10 (Table I.2) while shares  of other sectors, e.g. mining, increased.  The 
sector employs 3.6% of the labour force, which is  indicative of labour productivity roughly three 
times the level in the rest of the economy.  Australi a's financial services sector is based on three main 
institutional groups:  authorized deposit-taking institutions (ADIs) , which include banks, building 
societies, and credit unions;  non-ADI financial inte rmediaries, including mone y market corporations, 
finance companies, and securitization vehicles;  a nd funds managers and insu rers, including life and 
general insurance companies, and superannuation an d approved deposit funds (ADFs) (Table IV.4).  
The banking sector remains Australia's largest holder of prudentially regulated financial assets with an 
increasing share in total financial assets (Table IV.4);  in June 2010, it accounted for more than half of 
the total assets of the financial system.
164  The importance of superannuation funds, public unit trusts, 
general insurance offices, and securitization vehi cles has fallen during the review period.   
65. The effects of the recent financial crisis have  been less severe on Australia's financial sector 
than in most other countries.  Australia's major banks have retained their credit ratings165;  no 
private-sector bank has failed for decades.166  According to the Productiv ity Commission, the relative 
resilience of Australia's financial sector is due, inter alia,  to the country's coordinated and centralized 
framework for the regulation of most financial en terprises, policy settings insulating Australia from 
the trends that emerged in other financia l markets (including the "four pillars" policy)167, and the 
Government's prompt response to the crisis, in cluding with guarantees of deposits and wholesale 
funding for ADIs, along with other support fo r the financial sector (section (a) below).168   
                                                                                                                                                                     
For more details on the way trade in services is dealt wi th in each of Australia's pr eferential trade agreements 
see Productivity Commission (2010a). 
 162 OECD (2010d). 
 163 WTO document S/WPGR/W/46/Add.1, 11 May 2009. 
 164 Australian Prudential Regulation Authority (APRA) regulated in stitutions account for 
approximately 80% of financial system assets (Reserve Bank of Australia, 2010a).  
165 Four of the world's nine AA-rated banks, as rated by Standard & Poor's, are Australian (Productivity 
Commission, 2009a). 
 166 The community has a presumption that failure to pay bank creditors would not be permitted by the 
authorities (IMF, 2010c). 
 167 Australia's "four pillars" policy prevents merger s between the four major banks;  these banks are 
among the world's top 12 banks, as a result of recent collapses of large banking corporations elsewhere.  
168 Productivity Commission (2009a). WT/TPR/S/244 Trade Policy Review 
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Table IV.4 
Structure of the financial system assets, June 2006-June 2010 
(% and $A billion)  
    Main supervisor/ 
regulator June 2006 June 2007 June 2008 June 2009 June 2010 
Total ($A trillion)  3.3 4.1 4.4 4.5 4.6 
   (% of total) 
Banking sector       
 Reserve Bank (RBA)  3.3 3.3 2.4 2.5 1.9 
 Other banks APRA 47.8 46.3 52.6 57.5 57.3 
Other authorized deposit-taking 
institutions (ADIs)       
 Permanent building societies APRA 0.5 0.5 0.5 0.5 0.5 
 Credit unions APRA 1.1 1.0 1.0 1.0 1.1 
Registered Financial Corporations (RFCs)       
 Money market corporations ASIC 2.4 2.6 2.8 2.1 1.4 
 Finance companies ASIC 2.9 2.9 2.9 2.7 2.2 
Life offices and superannuation funds       
 Life insurance offices APRA 5.6 5.1 4.1 3.6 3.9 
 Superannuation funds APRA 17.4 19.4 17.6 16.5 19.1 
 Other managed fund       
 Public unit trusts ASIC 7.5 7.4 6.2 5.5 5.6 
 Cash management trusts ASIC 1.2 1.2 1.1 1.0 0.8 
 Common funds State author ities 0.3 0.3 0.3 0.1 0.1 
 Friendly societies APRA 0.1 0.1 0.1 0.1 0.1 
Other financial institutions       
 General insurance offices APRA 3.3 3.4 3.0 2.8 2.8 
 Securitization vehicles ASIC 6.5 6.7 5.4 4.3 3.2 
 
Source : Reserve Bank of Australia online information.  Viewed at:  http://www.rba.gov.au/stati stics/tables/xls/b01hist.xls 
[16 December 2010]. 
66. The financial system remains supervised by th ree institutions:  the Reserve Bank of Australia 
(RBA), Australia's central bank;  the Aust ralian Prudential Regulation Authority (APRA) 
(deposit-taking institutions, general and life insu rance companies, and superannuation funds (i.e. 
pension funds))169;  and the Australian Securities and Investments Commission (ASIC) (overall 
market conduct, consumer protecti on, and competition in financial services).  The Financial Sector 
Legislation Amendment (Prudential Refinement s and Other Measures) 2010, in force since 
29 June 2010, provided the APRA with greater inv estigative and monitoring powers in its dealings 
with the regulated financial services sector, as we ll as to direct ADIs and insurers to recapitalize.170  
(a) Banking 
67. The Australian market remains dominated by  four major nation-wide full service banks 
(accounting for about 77%  of total banking assets).  At present there are 56 authorized banking 
groups, 44 of which are foreign-owned (9 subsid iary banks incorporated locally, 35 branch 
operations).  Foreign banks, which accounted for 14% of domestic banking assets in August 2010, 
have a more significant presence in merchant banki ng rather than in retail banking.  There are no 
                                                      
 169 APRA is funded largely by the industries it supervises. 
 170 Gadens Lawyers Sydney online information.  Viewed at:  http://www.nsw.gadens.com.au/ 
clientaccess/newsletters/Updates%202010/u pdate_insurance_012 910.htm#update. Australia WT/TPR/S/244 
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government-owned banks.171  Nearly half of Australian bank funding comes from wholesale 
borrowings in domestic and offshore capital markets.172  In addition, banks source over 40% of funds 
from deposits by households, businesses, and governme nt and other organizations;  the share from 
deposits has risen about 5 percentage points since mid 2007.   
68. Foreign banks operating both branches and subsidiaries may conduct banking business 
through locally incorporated subsidia ries or through branches;  in eith er case, authorization is required 
from the APRA.  Foreign banks may raise funds in  Australia by issuing debt securities offered or 
traded in parcels of not less than $A 500,000.  A lthough authorized branches of foreign banks are not 
required to maintain endowed capita l in Australia, they are not permitted to accept initial deposits of 
less than $A 250,000 from Australian resi dents and non-corporate institutions.173  This requirement is 
aimed at protecting retail depositors.  
69. Under relevant legislation, foreign investment in financial-sector companies (including banks, 
general insurers, and life insurers) remains s ubject to a 15% shareholding limit, although the 
Treasurer may approve a higher percenta ge on "national interest" grounds.174  Any proposed foreign 
takeover or acquisition of an Aust ralian bank is considered on a case-by-case basis, and must be 
approved by the APRA.  In 2008/09, 60 proposals were approved in the finance and insurance sector, 
with proposed investment of $A 10.9 billion;  39 pr oposals were approved in 2007/08 with investment 
of $A 9.2 billion.  Under the AUSFTA (Chapter II(6)(ii)), acquisition of interests by U.S. investors in financial sector companies are exempt from notification requirements. 
70. The structure and performance of the Australian finance sector is shaped by a variety of 
government policy measures, including recent global fi nancial-crisis-related measures, sector-specific 
taxation concessions, superannuation taxation concessions, and GST tr eatment of financial supplies.
175  
The Productivity Commission considers that altho ugh taxation concessions are intended to encourage 
additional activity in the sector, including relocatio n to Australia, they may reduce tax revenue from 
offshore banking activity, which would occur if "nor mal" corporate tax rates were to apply, and 
encourage the diversion of Australian labour and capital away from other activities (including other 
financial services).176  Such policies are also believed to ri sk diverting business effort into seeking 
support, and add to compliance and administrative costs.   
71. Australia's banks have coped well with the globa l financial turmoil so far, largely because of 
robust supervision and regulation, though they are e xposed to significant risks from sizable short-term 
wholesale funding.177  The key policy measures implemented to mitigate the impact of the global 
financial crisis were the Guarantee Scheme for Large Deposits and Wholesale Funding (the Guarantee 
Scheme, closed to new liabilities in March 2010), the Financial Claims Scheme (FCS) and the 
Australian Office of Financial Management's (A OFM) $A 16 billion investment in residential 
mortgage-backed securities (RMBS).  Furthermore, in 2008 an exclusion from the TPA was enacted, 
                                                      
 171 In Australia, Commonwealth-owned entities that ma y conduct financial operations are guaranteed 
by the Commonwealth Government.  Although the Commonwealth Government sold its shareholdings in the 
Commonwealth Bank of Australia (CBA) in 1996, one of the four major banks, a transitional Commonwealth 
guarantee has been provided for all the liabilities of the CBA.  The length of the guarantee depends on the 
characteristic of the liability (WTO docum ent TN/S/O/AUS/Rev.1, 31 May 2005). 
 172 Productivity Commission (2010b). 
 173 WTO document TN/S/O/AUS/Rev.1, 31 May 2005. 
 174 Legislation in this area includes the Banking Act 1959, the Financial Sector (Shareholdings) Act 
1998 (FSSA), and other provisions, including prudential requirements.    
175 For more details about government support to the finance sector see Productivity Commission 
(2010b). 
 176 The Treasury (2010b);  and Productivity Commission (2010b). 
 177 IMF (2009a). WT/TPR/S/244 Trade Policy Review 
Page 112 
 
 
allowing for distressed banking assets to be disposed of quickly, without merger-control review by the 
ACCC, where the stability of the financial system or  the interests of depositors could be jeopardized 
by delay.  This amendment has enabled the APRA to intervene quickly in light of the ongoing consolidation in the industry through mergers and acquisitions.
178  
72. The authorities are about to formulate and implement a number of measures intended to 
promote Australia's financial services sector and remove remaining obstacles to Australia becoming a 
financial services centre for the Asia Pacific, incl uding:  cutting the withholding tax on certain foreign 
distributions from managed investment trusts from 30% to a final rate of 7.5% by 2012;  changing the 
attribution rules and providing deemed capital acc ount treatment to eligible managed investment 
trusts;  repealing and replacing the Foreign Inv estment Fund provisions with a narrowly defined 
anti-avoidance rule, and modernizing the Controll ed Foreign Company rules;  transferring the 
supervision of financial markets from the Austra lian Securities Exchange (ASX) to ASIC;  the 
introduction of an Investment Manager Regime;  th e establishment of an online regulatory gateway;  
the development of an Asia Re gion Funds Passport;  and the ph ase down from 10% to 5% of the 
interest withholding tax (IWT) incurred by local subsidiaries and branches of financial institutions 
when they pay interest on borrowings from their overseas parents.179  
73. Australian banking requirements include complianc e with international prudential standards; 
the banking system remains well-capitalized.180  According to the IMF, APRA followed a rigorous 
process and adopted a more conservative approach in  implementing the Basel II framework in 2008;  
the four major banks, adopted the advanced appr oaches for assessing credit, market, and operational 
risk.181  Since 2007, several prudential standards ha ve been revised, primarily as part of the 
implementation of the Basel II framework in 2008:   in December 2009, AP RA undertook consultation 
on further revisions to the Basel II framework in Australia;  and in 2010, APRA incorporated the 
Financial Stability Board principles on compensati on into its prudential standards on governance. 
Other revisions related to governance and audit matt ers.  During the review period, banks have had 
relatively low leverage and high capital adequacy ra tios, with Tier 1 capital ratios rising from 7.2% in 
December 2007 to 9.54% in September 2010.182  Between 2003 and 2008, Australia's rate of 
non-performing bank loans to total bank loans was 0.3% , the lowest of all 23 countries reviewed by 
the IMF.183  Nevertheless, according to the IMF, non-pe rforming loans could rise further (albeit from 
a low base) for as long as unemployment increases and growth remains weak.184  Banks have 
increased provisioning against such losses, and raised  equity from private capital markets in early 
2009.  However, in late 2009, banks wound back some of their provisions as markets stabilized. 
74. Between 2006 and 2010 (June), Australia's majo r banks' interest rate spread (difference 
between interest rate received and interest rate paid) oscillated ar ound 3.3 percentage points 
                                                      
 178 The authorities indicated that this TPA exclusion applies to compulsory transfers of business under 
the Financial Sector (Business Transfer and Group Restructure) Act, and no such transfers have occurred since 
2008.  Instead mergers have taken place under the volunt ary transfer of business powers under this Act, and 
have been subject to ACCC review (IMF, 2010c;  and OECD, 2010c). 
 179 Productivity Commission (2010b). 
 180 IMF (2010c). 
 181 A 20% loss given default (LGD) floor was adopted for residential mortgages that comprise over 
half of the large banks' loans, which is higher than the Basel II 10% floor.  Higher risk weights were required for 
certain residential mortgages under the standardized a pproach.  Moreover, reduced risk weights, which are 
permissible in the Basel II framework's standardized ap proach, have not been introduced for retail lending.  
Banks' capital requirements under the advanced approaches continue to be subject to the 90% floor of the Basel I capital requirement, instead of the 80% fl oor applicable in the second year (IMF, 2009a). 
 
182 Takáts and Tumbarello (2009);  and IMF (2009a). 
 183 IMF (2009b), Statistical Appendix, Table 24. 
 184 IMF (2009a). Australia WT/TPR/S/244 
 Page 113 
 
 
(Chart IV.1) reflective of risk based pricing and competitive dynamics.  Spreads contracted during an 
intensification of competition during the credit boom.  However, they increased during the global 
financial crisis, when Australian house prices re mained robust and most credit losses resulted from 
business lending.  
0.01.02.03.04.05.06.07.08.09.010.0
January 2006
July 2006
January 2007
July 2007
January 2008
July 2008
January 2009
July 2009
January 2010
Source:     IMF, International Financial Statistics .Per centChart IV.1
Interest rate spread, January 2006 - June 2010
Lending rate
Deposit rate Interest spread
 
(b) Insurance 
75. Australia's insurance market is the world's 12th largest, with premiums for 2007 exceeding 
US$60 billion, an increase of almost 75% in ten y ears;  insurance premium income has grown, on 
average, by around 5.7% per annum since 1997 in U.S. dollar terms.185  As of June 2010, there were 
132 private and 14 public general insurers, with assets  worth $A 94.2 billion;  within this group there 
were 17 reinsurers.  Public general insurers accounted for around 23% of the sector's premium 
revenue;  these insurers, which are not subject to the Insurance Act nor regulated by APRA, remain 
regulated by state-level legislation.  The 66 fo reign-owned general insura nce firms hold around 22% 
of total insurance sector assets.  There were 32 priv ate life insurers with assets worth $A 233 billion at 
end-December 2009;  15 foreign-owned/non-resident  life insurers accounted for 11.6% of total life 
insurance assets.186  Australia has no public life insurers. 
                                                      
 185 Austrade (2009). 
 186 APRA's online list of registered life insurance companies as of 17 June 2010.  Viewed at:  
http://www.apra.gov. au/Life/Registered-Life-Insure rs.cfm?RenderForPrint=1 [2 D ecember 2010].  Non-resident 
life insurers must be subsidiaries of foreign compan ies.  Australia's GATS commitments also specify that 
sub-national guarantees may be provided by some st ate and territory insurance offices (WTO documents WT/TPR/S/244 Trade Policy Review 
Page 114 
 
 
76. Both the life and general insura nce sectors remain re latively concentrated.  In June 2009, the 
top four general insurers held 70% of premium business and 63% of the industry's assets.  In 
December 2009, the top five life insurers held a pproximately 79% of the industry's assets.  As at 
December 2007, bank-owned groups accounted for 37% of liabilities and 39% of total premiums.187   
77. With respect to general insurance, there are no restrictions on the number, size or mix of 
operations of foreign-owned subsidiaries or foreig n insurers operating in the Australian market.  
Foreign-owned subsidiaries and foreign insurers ar e subject to similar legislative and prudential 
requirements to Australian-owned and incorporated insurers.  The prime responsibility for oversight 
of the Australian operations of a foreign insurer r ests with its local management and head office.  
While a foreign insurer's home regulators will play a role in supervising the insurer, to protect the 
interests of Australian policyholders, the local opera tions of a foreign insurer are subject to APRA 
prudential supervision.  Since 1995, Australia has not  permitted foreign life insurers to operate local 
branches.  As a result foreign life insurers seek ing to establish a commercial presence in Australia 
must establish an Australian subsidiary, which must then apply to APRA for registration .  In 2004, 
under the AUSFTA, Australia agreed to  allow U.S. life insurers to a pply for registration to operate 
through branches but so far there has been no such case. 
78. All insurers must be authorized either by APRA  or, in the case of private health insurers, an 
industry-specific regulator.188  In addition, state-based licensing is required for insurers offering 
certain classes of compulsory insurance, such  as workers' compensation and third-party motor 
insurance.  Prudential regulation governs many ar eas, including the solvency and risk-management 
practices of insurance companies.  As from 1 Ju ly 2010, new prudential standards have aligned 
general insurance prudential reporting with statut ory reporting by providing a simplified reporting 
process by general insurers to APRA;  a clearer view of insurer performance;  and enhanced quality of 
discussions between APRA and individual insurers concerning their performance.189  
(vi) Communications 
(a) Telecommunications 
79. Telecoms remains among the essential infrastruct ure sectors subject to special competition 
rules;  the ACCC is the regulator that app lies these sector-specific competition rules while the 
Australian Communications and Media Authorit y (ACMA), has responsibilities for numbering, 
industry codes and standards, freque ncy management and licensing, a nd some consumer topics, such 
as controlling internet spam and universal service obligations (USO).  
80. Telstra, which was formerly owned by the Govern ment, has been able to retain considerable 
market power, despite the adoption of measures such as the unbundling of the unconditioned local 
loop services (ULLS)190, and the imposition of accounting a nd operational separation of its 
                                                                                                                                                                     
TN/S/O/AUS/Rev.1, 31 May 2005 an d TN/S/O/AUS/Rev.1, 31 May 2005;  and Life Insurance Act 1995, 
Section 16ZE). 
 187 Austrade (2009). 
 188 Austrade (2009). 
 189 For details of these changes see APRA  online information.  Viewed at:  
http://www.apra.gov.au/Policy/Propos ed-changes-to-general-insurance-prude ntial-reporting-June-2010.cfm. 
 190 Local loop unbundling (LLU or LLUB) is the regulatory process of allowing multiple 
telecommunications operators to use connections from the telephone exchange's central office to the customer's premises.  The physical wire connection between custom er and company is known as a local loop, and it is 
owned by the incumbent local exchange carrier or an independent telephone company.  To increase competition, 
other providers are granted unbundled acces s.  In some countries local loop unbundling has played a major role 
in the development of broadband markets.  The authorities indicated that there is no technical impediment to Australia WT/TPR/S/244 
 Page 115 
 
 
functions.191  According to the OECD, it remains one of the most vertically integrated providers in the 
world, with dominant positions in the fixed-line, mobile, broadband, and pay-TV segments.  Much of 
the ACCC's enforcement has been about access to Telstra's wires by other providers of digital subscriber line (DSL) data service.  Moreover, cable  TV is a less competitive alternative to DSL in 
Australia, because Telstra has a controlling share (50% ) in the largest cable TV provider (Foxtel).  
Australia's Future Fund, which provides for superann uation and pensions for Australia's civil servants, 
reduced its share of Telstra from 17% to 10.9% in August 2009, and to 10% in October 2010;  foreign 
equity limits in Telstra are still capped at 35% and up to 5% indivi dually.  Concerns remain about 
Telstra's potential to take advantage of its m onopoly power in wires, and its aggressive use of 
litigation to delay regulatory outcomes
192;  this prompted the Australian Government to introduce 
legislation in 2009 to reform the telecommunicati on regulatory regime (see below).  During the 
review period, the ACCC investigated whether Tels tra has prevented competitors or other users from 
installing equipment and interconnecting with the lo cal loop and line sharing services (LSS) at certain 
exchanges;  as from 11 July 2008, Telstra has b een required to report m onthly on queued exchanges 
and decisions on capped exchanges.  In March 2009,  the ACCC instituted proceedings against Telstra 
for inappropriately restricting the ability of other telecommunications providers to access a number of 
Telstra's exchanges for the purpose of accessi ng the unbundled local loop and line sharing193;  as a 
result in July 2010 Telstra was subject to  a pecuniary penalty of $A 18.5 million. 
81. Information media and telecommunications  services still account for 3.4% of GDP 
(Table I.2).  Despite persistent competition-rela ted concerns, Australian c onsumers seem to derive 
significant benefit from an increasing choice in communication services.194  As of June 2009, there 
were 391 fixed-line telephone service providers, 3 m obile network operators  operating one GSM and 
one 3G carrier network each, 638 Internet service  providers, 287 wireless service providers and 
47 satellite broadband providers.  As from May 20 09, when the ACCC decided not to oppose the 
merger of the Vodafone and Huthinson "3" mobile  networks in a joint venture called Vodafone 
Huthinson Australia Ltd (VHA), the mobile telephon y market shares of the three current mobile 
network operators in terms of number of subscriber s were approximately:  41% Telstra, 33% Optus, 
and 26% VHA.  The number of fixed-line standard telephone services in Australia declined as a result 
of continuing substitution of these services with othe r technologies such as 3G or Voice over Internet 
Protocol (VoIP);  4% of SMEs did not have a fixed-line telephone  service in 2008/09, and 20% of 
them were using VoIP in April 2009, up from 17% in 2008.  During 2008/09, mobile network 
coverage increased, with GSM providing coverage to  96.22% of the population and 3G networks 
covering 99.06% of the population.   The Internet is increasingly seen as a critical business 
communications channel to improve operational effe ctiveness, productivity, and market reach.  The 
value of goods and services sold  online rose from $A 57 billion in 2006/07 to $A 81 billion in 
                                                                                                                                                                     
unbundling at all locations.  While all local exchanges in Australia are subject to a requirement to unbundle 
local loops on request, access seekers have only taken ad vantage of their right to access the ULLS in over 10% 
of Telstra's local exchange s, which are generally exchanges in metropolitan areas serving large numbers of 
premises, whereas the other 90% of exchanges include ma ny small exchanges in rural, regional, and remote 
areas where it is commercially unfeasible to utilize the U LLS.  Local loop pricing principles were updated in 
November 2007, and indicative prices were set in June 2008 an d last updated in Decem ber 2009 (OECD, 2009b;  
and http://en.wikipedia.org/wiki/Local-loop_unbundling). 
 191 OECD (2010c). 
 192 United States Trade Representative (2010). 
 193 For more details about recent ACCC cas es involving Telstra see ACCC (2009). 
 194 Overall, the increase in consum er surplus (the measure of the benefits people gain from the 
consumption of goods and services) attributable to the telecommunications industry in Australia was approximately $A 957 million in 2008/09.  Number por tability allows consumers to change carriage service 
providers without changing their telephone number, thus allowing for the development of more competitive 
service offerings.  For more data and details about developments in the communications industry see Australian Communications and Media Authority (2009). WT/TPR/S/244 Trade Policy Review 
Page 116 
 
 
2007/08, while 56% of businesses were estimated to derive up to 10% of their total goods and 
services income from sales via the Internet.  
82. All telecommunications carriers are required to make a proportionate contribution based on 
their eligible revenue towards the cost of provi ding the universal service obligation (USO), which 
benefits from a subsidy;  in 2008/09, $A 145 milli on was budgeted for this subsidy.  The number of 
public payphones (part of the USO) was reduced from 45,114 in 2007/08 to 39,328 in 2008/09, 52.6% of these are operated by Telstra.
195  On 20 June 2010, the Australian Government announced that it is 
developing a new institutional, regulatory, and f unding framework for the delivery of the USO and 
other public-interest services to support the devel opment of the National Broadband Network.  The 
details of these arrangements and decisions about fu rther regulatory changes to apply in the longer 
term will be announced following publ ic consultation.  As from July  2002, a Satellite Phone Subsidy 
Scheme has been in place for people living or wo rking outside of the terrestrial mobile phone 
coverage to purchase satellite mobile phones;  in  March 2009, the subsidy increased from 60% to 85% 
of the handset cost, including the replacement  of handsets purchased more than three years 
previously.196  The scheme provides up to $A 1,000 for elig ible applicants who live in areas without 
terrestrial mobile coverage or up to $A 700 for eligible applicants who live in areas that have 
coverage, but spend more than 180 days across a two-year period in non-coverage mobile areas.   In 
2009/10, 97% of satellite phones subsidized under the scheme were supplied by two firms (Motorola, 
Thuyara).  From 2007 to 2009, over $A 4 million we re appropriated for the scheme under the Connect 
Australia set of programmes.  From 2010 to 2013, funds are being appropriated as part of the 
Government's response to the Regional Teleco mmunications Review, which also includes an 
Indigenous Communications Program ;  in 2009/10 subsidy payments  attained $A 1.2 million.  
83. In 2009, the authorities launched a wide-scale review of the regulatory regime, examining 
ways of promoting greater competition across the industry, including measures to better address problems arising from Telstra's vertical integrati on of wholesale and retail services, and the horizontal 
integration of telephone and cable networks and telecommunications and media assets.
197  In 
September 2009, the Australian Government introduced  legislation in the Parliament to reform the 
telecommunications regulatory regime, which it reintroduced in October 2010 and passed on 
29 November 2010.  The legislation contains meas ures to encourage and fa cilitate the structural 
separation of Telstra's fixed line telecommunicati ons network;  imposes strong functional separation 
on Telstra in the event that it does not structurally sep arate;  empowers the Minister to require Telstra 
to divest its cable network and its 50% interest in  Foxtel in certain circumstances;  streamlines the 
operation of the telecommunications access regi me to provide quicker outcomes and reduce 
opportunities for regulatory gaming;  enables the ACCC  to set regulated access prices up front for all 
regulated telecommunications services to improve regulatory certainty and enable quicker access;  
                                                      
 195 As part of its license conditions, Telstra is requir ed to maintain a local presence in regional, rural, 
and remote Australia;  as of June 2009, a new three-y ear local presence was approved.   USO subsidies are paid 
to Telstra each year in arrears to compensate it for lo ss-making services provided under its USO obligations.  
The amount of the subsidy is determined for each financial year by the Minister based on advice from the 
ACMA.  The payphone component of the $A 145 million subsidy is a relatively small 9.6% (Australian 
Communications and Media Authority, 2009). 
 196 Australian Communications and Media Authority (2009). 
 197 Reportedly, failure to do so could result in Telstr a being forced to divest its cable network and its 
half-share in pay television broadcaster Foxtel or face being denied the wireless spectrum it needs to evolve its 
mobile business and roll out fourth generation mobile tech nology.  Telstra has opposed the draft legislation that 
would implement structural separation within its telecommunications network.  For more information about 
Telstra's market share in all communications areas  and position taken on this and other issues see 
http://en.wikipedia.org/wiki/Telstra;  United States Trade Representative (2010);  OECD (2010c);  and 
Productivity Commission (2010b). Australia WT/TPR/S/244 
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streamlines enforcement of the prohibitions agai nst anti-competitive conduct;  and strengthens 
protections for consumers of telecommunications services. 
84. As the broadband sector is dominated by Telstra198, in April 2009,  the Australian Government 
announced the establishment of a company to build a national broadband networ k (NBN), to operate 
on a non-discriminatory wholesale-only basis.  The authorities intend to introduce legislation ensuring 
full government ownership of the NBN during the network roll-out process and that once the NBN is 
built and fully operational, any privatization would be subject to the approval of the Parliament.199  
The company will invest up to $A 43 billion over eight years to build a state-of-the-art fibre-to-the-premises telecommunications netw ork, which will serve 93% of Au stralian residential and business 
premises;  fast broadband services will be delivered to  the remaining 7% of premises to be delivered 
through wireless and satellite technologies;  the NBN network will effectively supersede Telstra's 
copper network.  The ACCC is to have strict regulatory oversight of NBN Co's wholesale-only 
access, non-discrimination and transparency obliga tions, as well as private ownership and control 
restrictions, under regulations to be made in the context of the privatization of NBN Co.
200  
85. Given the processes leading to and following the establishment of NBN Co, the Australian 
Government has not undertaken a formal cost-benefit analysis of the NBN, even though such analysis 
should arguably be the prime guide of public infrastructure decisions.201  Nevertheless, the 
Government did commission independent advisers to  conduct a detailed implem entation study, which 
included detailed modelling of the revenues and costs that could be expected from the project given 
the Government's objectives.202  On 24 November 2010, the Government released a summary of the 
business plan and committed to releasing NBN Co's  business plan, with the exception of commercial-
in-confidence material.  The Government considers that the NBN is a transformative investment in 
Australia's infrastructure for the future;  and th at its benefits, which will extend over decades across 
the economy and society and into new areas of innovati on, are such that they cannot be practically or 
usefully quantified.  However, on the basis of existing studies into the benefits of high speed broadband
203, the Government considers the benefits w ill far exceed the quantified and published 
costs. 
                                                      
 198 Telstra's domination of all platforms (except satellite, which is mainly used in remote areas) made it 
difficult to establish effective competition between the va rious types of infrastructure.  In 2008, Telstra had 
more than two-thirds of th e market and played a major role on all pl atforms for access to these services.  As 
owner of most of Australia's fixed-line local access netw ork, Telstra had a dominant position in the supply of 
wholesale level fixed-line broadband services, including the unbundled local loop.  Telstra controlled over 80% 
of the copper lines used to supply digital subscriber line (DSL) broadband.   The authorities indicated that the 
access regime requires Telstra to allow competing provide rs to access those lines (via the ULLS and LSS) on 
regulated terms, and that, by virtue of such regulatory measures competing, ISPs have a market share of retail 
DSL broadband significantly higher than 20%.  In 2008-09, Telstra had a market share of 44% in retail 
fixed-line broadband (DSL and cable), and 46% in reta il mobile broadband (ACCC, 2010b;  and OECD, 2008). 
 199 OECD (2010c). 
 200 The ACCC's role in regulating the NBN could also  extend to oversight of governance, ownership, 
and control restrictions, to ensure that  the current incentives for vertically integrated operators to favour their 
own operations do not arise in the new NBN environment (ACCC, 2009a). 
 201 The Treasury (2010f).  A similar view was expressed by the Governor of the Reserve Bank of 
Australia, in response to a question posed by a member of the Standing Committee on Economics of the House 
of Representatives on 26 November 2010. 
 202 McKinsey of Company and KPMG (2010). 
 203 UN/ITU Broadband Commission fo r Digital Development (2010). WT/TPR/S/244 Trade Policy Review 
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(b) Broadcasting, advertisement, and film production 
86. Despite the legislative goal of media viewpoint  diversity, the number of providers remains 
small and unchanged.204  There are three significant free over-the-air television broadcasters licensed 
to operate in any licence area, and the pay-TV mark et is concentrated, as Foxtel, which captures the 
majority of metropolitan area subscribers, is owned 50% by Telstra.  Australia's free-to-air 
commercial television networks remain subject to at least 55% Australian content between 6:00 a.m. 
and midnight on their main channels (with s ub-quotas for first-release Australian drama, 
documentary, and children's programme),  and 80% of Australian advertising.205  All the commercial 
and national television broadcasters that are require d to transmit the high definition television quota 
complied with this requirement.  Licence fee rebate s equivalent to 33% of licence fees payable in 
2010 and 50% in 2011 were introduced to assist comme rcial broadcasters to continue to broadcast 
high levels of Australian content production;  these rebates are temporary and not cumulative.206  
Australian commercial radio broadcasters are required to  ensure that up to 25% of all music broadcast 
between 6:00 a.m. and midnight is  performed by Australians.   
87. In August 2009, the Productivity Commission found that Australia's television anti-siphoning 
scheme imposed regulatory burdens because of the pr otracted commercial negotiations required for 
the events included on the anti-siphoning list, and recommended that the anti-siphoning list be substantially reduced.
207   
88. The Australian film-production industry continu es to receive government support in several 
ways.  During the review period, industry-specific measures involved direct funding and grants to 
Australian Government film agencies, public broad casters, and not-for-profit organizations, as well as 
indirect support via tax concessions and rebates.  Up to 30 June 2008, appr oximately $A 112 million 
was provided in direct funding to three key film agencies each year:  the Australian Film Commission 
(excluding the National Film and Sound Archive);  th e Film Finance Corporation Australia;  and Film 
Australia Ltd.  On 1 July 2008, these agenci es merged into Screen Australia, which received 
$A 102.9 million in 2008/09, $A 93.6 million in  2009/10, and $A 89.4 million in 2010/11.  The 
majority of this funding has been used for invest ment and loans for feature films, TV drama, and 
documentaries;  in 2009/10, Screen Australia was to  provide $A 86.8 million in direct support to the 
industry.  Under the 2007 Australian Screen Pr oduction Incentive (ASPI), additional financial 
incentives for the production of film, television, and other audiovisual projects in Australia are in 
place through three offsets:  the Producer Offset, th e Location Offset, and the Post, Digital and Visual 
Effects (PDV) Offset.  The Producer Offset is a ref undable tax offset (rebate) for producers of eligible 
Australian audiovisual projects and is paid through  the Australian company tax system at 40% of 
qualifying Australian production expenditure (QAPE)  incurred on a feature film and 20% of QAPE 
incurred on other types of eligible programmes.  The Location Offset offers a 15% offset on the 
                                                      
 204 OECD (2010c). 
 205 In the AUSFTA, Australia has reserved the right to intervene in the future on interactive media 
platforms to ensure Australian content is available on newer media or means of transmission.  The commitments 
on audiovisual services do not apply on an MFN basis (United States Trade Repres entative, 2010;  Australian 
Communications and Media Authority, 2009;  and OECD, 2009b). 
 206 These rebates take account of the level of licence fees in other countries as well as cost implications 
for commercial broadcasters of new technologies and commercial pressures, including the switch to digital television (Productivity Commission, 2010b). 
 
207 The anti-siphoning scheme prevents subscription television broadcasters from buying the rights to 
televise events on the anti-siphoning list before free-to-air  television broadcasters have purchased the rights.  It 
also prohibits free-to-air broadcasters from showing a listed event on their digital television multi-channels 
unless the event is simultaneously shown, or has been shown, on their main channels.  While the scheme is not 
limited to sporting events, to date non-sporting events have not been listed under the scheme (Productivity Commission, 2010b). Australia WT/TPR/S/244 
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QAPE of a large-budget non-Australian film, and the PDV Offset offers a 15% offset on the QAPE 
that relates to PDV production.  Tax rebates made under the ASPI (Producer, Location and PDV 
Offsets) peaked in 2007/08, at a total of $A 69 million. 
(vii) Transport 
89. Transport accounted for 5.2% of Australia's economy in 2009/10 (Table I.2, section (i)).  
High-performance freight infrastructure is crucial, given the size of the country, the geographic dispersion of the population and production centr es, and their remoteness from other markets.
208  The 
export-driven rapid rise in the demand for freight has put strains on infrastructure;  there is a growing 
problem of road congestion and bottlenecks persists  in certain bulk ports.  Freight handling is 
hampered by a variety of shortcomings  affecting sea freight in particular.209  Certain ports suffer from 
inadequate loading facilities, dock shortage, excessively shallow canals, and lack of adequate 
connections to rail and highway systems.  Left  unaddressed, these constraints could undermine the 
pursuit of national goals.210 
90. Due to constitutional limitations, coordinatio n of transport infrastructure development 
remains a challenge as responsibilities are shared  between the Commonwealth Government (for the 
interstate rail network, under the supervision of the Commonwealth Government-owned Australian 
Rail Track Corporation), the states and territories (for roads, intrastate railway systems and most 
ports) and the private sector (for certain railway  networks, certain ports, and a number of toll 
roads).211  In 2008, the Commonwealth Government established Infrastructure Australia, which 
developed a list of priority infrastructure projects.   A Building Australia Fund, a part of the Nation-
Building Funds package, was set up in 2008/09;  a llocations from the Fund were to be guided by 
Infrastructure Australia's national audit and infrastru cture priority list.  Clear assessment plans have 
been developed and the prioritization methodology h as been published.  Infrastructure Australia's 
detailed assessments are also supported by a series of  external and independent experts, along with 
rigorous cost-benefit ratio analyses;  the cost-ben efit ratios of the initial nine priority projects 
identified in May 2009 were all found to be  significantly above 1:1.  The Commonwealth 
Government signed National Part nership Agreements with the states and territories in 2009 to 
administer the majority of its land transport funding over the period 2008/09 to 2013/14.  The Australian Government's Nation Building Program (fo rmerly known as Auslink) is investing some 
$A 37 billion over the six-year period to 2013/14.  Funding for land transport infrastructure was 0.4% of GDP in 2008/09, 0.5% in 2009/10, and 0.3% in 2010/11.  A draft National Ports Strategy, 
including a National Freight Policy, was prepared  by Infrastructure Australia and the National 
Transport Commission, and released in May 2010.
212  
91. A number of micro-economic reforms have also been embarked upon through the COAG 
Infrastructure Working Group, to improve coordination and best practice in the way the country plans, 
finances, builds, and uses infrastructure.  For in stance, the National Pre-Qualification Scheme, in 
operation as of January 2011, is aimed at reducing barriers to competition in the construction industry 
by ensuring mutual recognition of prequalificati on status across jurisdictional boundaries.  This 
reform will increase competition in the constructi on industry, leading to re duced construction costs 
and is also expected to reduce admini strative costs for states and territories. 
                                                      
 208 OECD (2008).  
 209 OECD (2008);  and Infrastructure Australia and the National Transport Commission (2010). 
 210 Infrastructure Australia and the National Transport Commission (2010). 
 211 OECD (2008).  
 212 Infrastructure Australia and the National Transport Commission (2010). WT/TPR/S/244 Trade Policy Review 
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(a) Maritime services 
92. During the review period, the Australian mercha nt trading fleet has decreased in size, from 
96 to 77 licensed and Australian flagged vessels.213  Around 87% of Australia's total port throughput 
(volume) comprised exports;  in 2009/10, despite the impact of the global financial crisis, the total 
port throughput increased to over 900 million t onnes of goods, compared with around 875 million 
tonnes in 2008/09.214  In 2008/09, the bulks (mainly iron, and coal) accounted for 90%, containerized 
general cargo for 6.5%, and other non-containerized general cargo for 3.5% of total cargo volume.  In 
terms of trade direction, 59% of the loaded contai ners were imports, and 41%  exports.  There are over 
60 ports in Australia, but more than 95% of volume is handled in 20 ports.   
93. Liner shipping conferences are regulated by a separate section of the Trade Practices Act 
(TPA) (Chapter III), which permits shipping lines to collectively discuss freight rates, capacity levels, 
and liner scheduling.215  Despite a 2005 review by the Produc tivity Commission recommending repeal 
of this exemption from TPA provisions, the authoriti es decided to retain and amend the exemption to 
clarify its objectives;  remove discussion agreements  from its scope;  protect individual confidential 
service contracts between carriers and shippers;  and introduce a range of penalties for breaches of its 
procedural provisions.  These amendments were put  on hold pending a furthe r review proposed for 
2011/12 to enable consideration of changes in liner shipping regulation internationally, the effect of 
the global financial crisis, and competition policy reforms.  Plans were announced in August 2010 for 
introducing measures to strengthen Australia's shippi ng industry wih respect to its international 
competitors as well as other m odes of transport domestically.216  They would include a new tonnage 
tax, the implementation of existing coastal shipping principles consistent with the Navigation Act, the 
introduction of mandatory training requirements, and the establishment of an Australian International 
Shipping Register and a Maritime Workforce Deve lopment Forum.  These measures would be at a 
cost to revenue of $A 41.5 m illion and a departmental cost for implementation of $A 8 million. 
94. Australia's cabotage regime remains unchanged.  Coastal operations are carried out through a 
system of licences and permits available to both Australian and internationa l operators.  During the 
review period, foreign vessels carried approximate ly 29% of Australia's domestic cargo under the 
permit system.217  Financial assistance is provided to alleviate the costs of shipping freight between 
Tasmania and the mainland under the Tasmanian Freight Equalisation Scheme (TFES);  some 
1,430 claimants benefited from the scheme in  2007/08, 1,621 in 2008/09, and 1,666 in 2009/10. 
(b) Aviation services 
95. Over 23 million people travelled by air in Aust ralia in 2008/09;  almost half were tourists 
visiting from overseas.218  A total of 53 airlines operated intern ational passenger flights in July 2010;  
the top three, Qantas, Singapore Airlines, and Air New Zealand, accounted for 36.9% of total 
passengers to and from Australia.  The majority of scheduled air freight is carried on passenger 
aircraft.  Around 22.9% of freight traffic was a ccounted for by Australian designated airlines in 
2009/10. 
                                                      
 213 Bureau of Infrastructure, Transport and Regional Economics (2010). 
 214 Infrastructure Australia and the National Transport Commission (2010). 
 215 OECD (2010c). 
 216 ALP online information, "Stronger shipping for a stronger economy", 13 August 2010.  Viewed at:  
http://www.alp.org.au/federal-governm ent/news/stronger-shipp ing-for-a-stronge r-economy/ [6 December 2010]. 
 217 Bureau of Infrastructure, Transport and Regional Economics (various years). 
 218 Department of Infrastructure, Transport, Regional Development and Local Government (2009). Australia WT/TPR/S/244 
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96. The Air Navigation Act 1920 and Air Navigation Regulations 1947 (ANR) were amended in 
2008 and 2009 to simplify the International Airline Licenses (IAL) regulatory structure and improve the oversight of the IAL system.  These reforms introduced a simple audit scheme and allowed for IALs to be updated, suspended, and cancelled as n ecessary;  as a result, over 70 international airlines 
were re-licensed.   
97. A 2009 National Aviation Policy White Paper comb ined various strands of aviation policy 
into a single document to provide planning, regulat ory, and investment certainty for the aviation 
industry.
219  This document provides, inter alia,  a policy framework for the development of the 
aviation industry at all levels (international, domestic, regional, and ge neral aviation), including 
through skills and productivity improvements.  Under the White Paper, Australia envisages, inter alia,  
to:  move to a new generation of "open skies" agreements220;  provide opportunities for regional areas 
to attract international services;  seek fully open arrangements for dedicated cargo services to support 
Australia's air freight export industries;  and retain  the basic restriction of 49% on foreign investment 
in Australia's international airlines, but remove the additional restrictions on foreign ownership of the 
national carrier Qantas (i.e. 25% for foreign indi vidual shareholdings and 35% for total foreign 
airlines shareholdings) by amending the Qantas Sale Act 1992.221  Significant capacity increases have 
been negotiated with China and Indonesia, and in November 2010 discussions were under way for a 
proposed comprehensive air transport agreement with the EU.   
98. Although Australia does not permit cabotage in aviation services222, where demonstrable 
benefits can be gained through the granting of cabot age rights, and provided safety and other concerns 
are satisfied, the authorities may consider trading ca botage rights strategically, e.g. to help achieve a 
comprehensive open skies agreement with a major trad ing partner (e.g. the EU) or to gain reciprocal 
cabotage rights in a significant market (e.g. the United States).  Furthermore, the authorities may 
consider unilateral cabotage in some exceptional circ umstances (i.e. emergency situations);  several 
authorizations of this type were granted during th e review period.  The authorities consider that the 
expansion of seventh freedom rights223 for passenger and cargo services should also be used in a 
strategic manner and only agreed on a case-by-case "na tional interest" basis.  Australia has negotiated 
a number of air services agreements with other coun tries since 2007 and some of these countries have 
access to seventh freedom cargo rights (Bangladesh , Croatia, Czech Republic, Kenya, Pakistan, 
Sri Lanka, Turkey, United Arab Emirates, and the United States).   
99. Australia maintains a fully deregulated inters tate domestic aviation market allowing up to 
100% foreign ownership of domestic airlines, subject  to meeting Foreign Investment Review Board 
requirements.224  Assistance for regional and remote air services and airports is being improved and 
                                                      
 219 Department of Infrastructure, Transport, Regional Development and Local Government (2009). 
 220 These agreements would go further than the traditional exchange of traffic rights to include open 
capacity, beyond and intermediate rights,  safety, security, environment, competition, and investment provisions 
(Department of Infrastructure, Transport, Regional Development and Local Government, 2009). 
 221 By applying the same investment regime to all ai rlines, the authorities expect to increase Qantas's 
ability to compete for capital and to have more flexible  equity arrangements (Department of Infrastructure, 
Transport, Regional Development and Local Government, 2009). 
 222 Cabotage is the transport of goods or passengers between two points in the same country by a vessel 
or an aircraft registered in anothe r country (Department of Infrastructure,  Transport, Regional Development and 
Local Government, 2009). 
 223 The seventh freedom right is the right to carry passengers or cargo between two foreign countries 
without any continuing service to one's own country.  
224 As a result of increased compet ition from the entry of low cost airlines, such as the majority 
foreign-owned Virgin Blue, Jetstar, and the 100% Singapore-owned Tiger Airways in 2008/09, Australia's 
domestic and regional airlines carried 49.6 million passengers, up from only 16.8 million in 1988/89;  this represents average annual growth of 5.5%.  In addition,  the two largest independent regional airlines (Regional WT/TPR/S/244 Trade Policy Review 
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better targeted at those routes that are unable to sustain commercial operations.225  The Australian 
Government has consolidated the Remote Air Se rvices Subsidy (RASS) Scheme, Remote Aerodrome 
Inspection (RAI) Program, the Remote Aerodrome Sa fety Program (RASP) and the Remote Aviation 
Infrastructure Fund (RAIF) into a single programme, the Regional Aviation Access Program (RAAP).  
The funding allocation under RAAP over the four years beginning 2010/11 totals $A 61.7 million.  
Support for remote air services and aerodromes is exp ected to be better coor dinated and to provide 
greater flexibility in allocating funding based on the greatest need.  Assistance for regional and remote 
aviation has been provided through a four-year $A 14 million Payment Scheme for Airservices 
Australia Enroute Charges  since 2010.  
100. The ACCC remains in charge of monitoring the prices, costs, and profits regarding 
aeronautical and related services at Australia's five major airports (Chapter III).  Major shareholders 
of these airports are investment and fund manageme nt companies.  Most of Australia's 310 licensed 
airports are owned and operated by local governme nt organizations.  The third inquiry by the 
Productivity Commission since the privatization of Au stralia's major federal airports into airport 
economic regulation will be initiated in the near future. 
(c) Land transport  
101. Rail and road transport are complementary rather  than substitutable, and have accounted for 
similar, and steadily growing, shares of the domestic  freight market;  only a small proportion of land 
freight (10%-15%) is subject to co mpetition between road and rail.  Thus, it would be difficult to raise 
the proportion of railway freight at the expense of road freight.226  In the December 2008 Australia 
Building Fund (see above), the Government provide d the Australian Rail Track Corporation (ARTC) 
with around $A 1.2 billion in additional equity to allow it to deliver on its massive work programme 
across the National Rail Network.  An additional $A 1 billion equity injection into ARTC was 
announced in the 2010/11 Budget to fund seven new rail productivity enhancing projects on its interstate network;  in addition to significan t positive environmental impacts, these projects are 
designed to reduce transit times, provide trains with more overtaking opportunities, ensure fewer 
delays due to heat-related speed restrictions, and allow increased axle loads for heavier trains.  
Railroads remain exempt from TPA provisions;  th e ACCC's role in this sector includes assessing 
codes and undertakings about rail infrastructure a ccess, arbitrating disputes between operators and 
infrastructure providers, and analysing mergers and acquisitions.
227   
102. Regulatory reform in the transport sector is one  of the key areas identified to increase future 
transport productivity and efficiency.  The regul ation of heavy vehicles is carried out by 
nine governments, and there are seven rail regul ators across Australia;  despite past work to 
harmonize regulation across Australia, different ap proaches between states and territories are a 
considerable burden for freight a nd passenger-transport operators who operate across state borders.  In 
July 2009, the COAG agreed to implement national regulators for rail safety and heavy vehicles (and 
for maritime safety), and work is under way to im plement national laws and the new regulators by 
2013.  The COAG has also initiated a review of prici ng options for heavy vehicles to ensure the more 
efficient, productive, safe, and sustainable use of freight infrastructure.  A future pricing regime, 
which may be adopted by 2014, is aimed at recouping th e cost of wear and tear to roads more directly, 
from heavy vehicle freight movements, in order to ensure maintained access and availability of 
roadways for freight movement, in an open, tr ansparent, and economically efficient manner. 
                                                                                                                                                                     
Express, Skywest) are currently majority foreign-owned (Department of Infrastructure, Transport, Regional 
Development and Local Government, 2009). 
 225 Department of Infrastructure, Transport, Regional Development and Local Government (2009). 
 226 OECD (2008). 
 227 OECD (2010c). Australia WT/TPR/S/244 
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(viii) Tourism 
103. Tourism is Australia's largest services export and a significant and vital industry.  In 2008/09, 
it contributed over $A 33 billion to GDP, and directly employed around half a million people.228  
Domestic tourism accounts for around 75% of the industry.  
104. In addition to increasing general support measures in the form of tax expenditures, 
industry-specific support has been provided to the tourism sector.229  A TQUAL Grants Program, of 
up to $A 8.5 million in new funding, replaced th e Australian Tourism Development Program in 
April 2009.230  Under the new programme innovative tourism projects are eligible for grants of 
$A 5,000 to $A 100,000, national or  sectoral tourism initiatives are eligib le for grants of $A 25,000 to 
$A 500,000, and integrated tourism development proj ects are eligible for grants of $A 100,000 to 
$A 500,000.  At end-December 2009, 70 project s had been approved for funding, totalling 
$A 8.3 million;  an additional $A 40 million of funding is intended for TQUAL Grants from 
1 July 2011.  Tourism Australia, the government agency responsible for the international and 
domestic marketing of Australia as  a destination for leisure and business travel, receives an annual 
appropriation from the Government of about $A 130 million;  its latest priority was to promote 
domestic business travel and stimulate travel from ove rseas locations within ten hours of flying time, 
including China, Japan, Malaysia, Singapore, Ne w Zealand, and the Middle East.  As from 
December 2009, a National Long-Term Tourism Strategy has aimed to promote innovation, 
infrastructure development, and growth in the in dustry, as well as to improve industry capacity to 
meet demand and expectations created throug h marketing campaigns;  the authorities committed 
$A 2.2 million for 41 measures to fund the implementation of the Strategy over the following 
18 months.  Under the Strategy, the Tourism Qu ality Council of Australia (TQCA) has been 
established to administer the National Tourism Accreditation Framework (NTAF), an umbrella 
framework for, inter alia,  building consumer purchasing preference.  On 11 May 2010, the Australian 
Government announced funding of $A 5.5 million over  four years to support the implementation and 
operation of the NTAF. 
 
                                                      
 228 Department of Resources, Energy and Tourism (2009). 
 229 Productivity Commission (2010b). 
 230 Productivity Commission (2010b). Australia WT/TPR/S/244 
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