Australia WT/TPR/S/178/Rev.1 
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IV. TRADE POLICIES BY SECTOR 
(1) OVERVIEW  
1. In order to aid transparency and facilitate an alysis of the potential impact of government 
assistance on the allocation of resources between  sectors, the Productivity Commission publishes 
annual estimates of several key types of assistance, us ing, for example, effective rates of assistance 
(ERAs).1  Among the main forms of assistance captured by  ERAs are:  tariff protection;  budgetary 
assistance2;  and agricultural pricing and regulation.  According to estimates for 2003/04, the latest 
year for which indicators are available, the ERA was virtually zero for mining, which accounts for 
around half of merchandise exports and is one of the major driving forces behind Australia's recent 
strong economic growth.  The ERAs for primary production (including agriculture) and 
manufacturing were low, at only 4.1% and 4.5%, respectively.3  However, these averages mask a 
significant variation in rates within sectors.  At th e high end are textiles, clothing and footwear (TCF) 
and motor vehicles and parts (MVP), with rates of 24.2% and 10.6%, respectively, although these 
may have fallen as a result of Australia's unilatera l reduction in the tariffs for these sectors in 2005.  
At 12%, the ERA of the dairy industry is also rela tively high, albeit significantly lower than prior to 
its deregulation in 2000.4  For technical reasons, no estimates of ERAs were available for services. 
2. The services sector dominates Australia's economy, accounting for nearly two thirds of GDP 
and roughly three quarters of employment in 2004/ 05.  During the period under review, government 
assistance to services has been increasing, mainly ow ing to measures to encourage investment, R&D, 
and exports.  The legislative and institutional fra meworks for financial services have changed little 
since the previous Review, although stricter prude ntial regulations were announced in 2006 to bring 
them into line with international practices.  The regulators of the telecommunications and 
broadcasting sectors, the Australian Communi cations Authority (ACA) and the Australian 
Broadcasting Authority (ABA), were merged to  form the Australian Communications and Media 
Authority (ACMA) from 1 July 2005.  It was also announced that foreign ownership restrictions on 
media would be removed from 2007.   
3. Australia's merchant fleet has shrunk, refl ecting its greater reliance on foreign-flagged 
vessels.  However, the demand for transport is e xpected to almost double over the next 20 years.  
Moreover, it seems that despite the recent globa l boom in mining commodities and the associated 
increase in demand, exports have been constrained by the lack of transport facilities, particularly coal 
ports in some parts of Australia.  In response, an  Export and Infrastructure Taskforce was established 
to identify infrastructure bottlenecks.  The taskforc e found evidence of capacity constraints at most of 
Australia's bulk ports for coal and iron ore, bu t no infrastructure crisis.  Instead, the regulatory 
framework was identified as the greatest impediment to  the development of Australia’s infrastructure.  
Accordingly, the Council of Australian Governme nts (COAG) has since agreed to a range of 
initiatives to improve planning for ports and associ ated shipping channels and, through its new 
National Reform Agenda, measures to reform the regulatory system for infrastructure.   
                                                      
1 ERAs are a measure of the net assistance to a sector  divided by the sector's unassisted value added.  
Sectors with relatively high ERAs are, as  a result of such assistance, more lik ely to be able to attract resources 
away from those with lower rates. 
2 Budgetary assistance does not necessarily reflect subsidies provided within the meaning of the WTO 
agreements.   
3 Needless to say, the ERAs for agriculture and its subsectors do not take into account Australia's 
stringent sanitary and phytosanitary measures. 
4 Assistance to dairy farmers has been "decoupled" from dairy output and farm activity levels, thereby 
diluting its potential effects on production and thus trade. WT/TPR/S/178/Rev.1 Trade Policy Review 
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4. A few policy changes have been implemented in  relation to civil aviation during the review 
period.  In particular, since the signing of a bila teral agreement in 2003, international airlines from 
New Zealand have been accorded cabotage rights.  Although price regulation of airport services 
remains, it has been relaxed since 2002, when th e Government discontinued price notification and 
price cap arrangements for all airports, and introduced price monitoring for the seven most important.   
5. Reforms aimed at simplifying the regulatory fra mework have continued in the electricity 
sector in order to create a fully competitive national market.  As Australia has limited water resources, 
reform is being undertaken to establish a market framework for the management of water resources in 
both urban and rural areas.   
(2) AGRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES  
(i) Overview 
6. The agriculture sector (including forestry and fisheries) accounts for a relatively small portion 
of the economy, but plays a much bigger role in exports.  Between 2001/02 and 2005/06, the sector's 
share of GDP fell from 4.4% to 3.1%, and the shar e of total employment fell from 4.9% to 3.5% 
(Table I.2).5  The relative decline reflects, among other thi ngs, a fall in the relative price for food, as 
well as shifts in consumer demand towards services as  income rises.  Around two thirds of the sector's 
output was exported directly, making it the most export-oriented sector after mining.6  Agricultural 
exports increased in value from US$17.3 billion in  2002 to US$21.2 billion in 2005, accounting for 
20.1% of total merchandise exports in 2005.7  The dependence of Aust ralian farming on exports 
varies between industries8;  the major agricultural exports are wheat, wine, bovine meat, meat of 
sheep or goats, and dairy products (Table AI.1).  Imports of agricultural products increased from 
US$4.1 billion in 2002 to US$6.6 billion in 2005.  The industries with the highest import shares 
include dairy and commercial fishing;  the lowest are grains and poultry. 
7. Domestic support for agriculture remains we ll below the OECD aver age.  Tariffs on 
agricultural products remain low (averaging 1.4% in 2006), but ad valorem  equivalents (AVEs) for a 
few non- ad valorem  duties are much higher.  Despite the privatization/corporatization of some 
state-trading enterprises, state-trading arrangement s have been maintained for exports of some 
agricultural products.  In addition, Australia 's quarantine framework remains strict.   
8. Since its previous Review, Australia has been ac tive at the bilateral level in a wide range of 
agricultural related issues.9   
(ii) Regulatory framework 
9. The Department of Agriculture, Fisheries, and Forestry (DAFF) remains responsible for the 
development and implementation of  policies and programmes, to pr omote competitiveness, increase 
                                                      
5 Productivity Commission (2005e).  According to the PC, the diminishing share of agriculture "largely 
reflects positive or success-related factors and is  not a sign of systemic weakness" (p. 7). 
 6 DAFF (2005c), p. 6.  
7 The largest export market is Japan, followed by the United States, China, EC25, and the Republic of 
Korea.   
8 The wool industry currently exports around 95% of its production.  The beef, sugar, and wheat 
industries export around 65-75% of production, and the sheep meat, wine and dairy industries around 50-60%.  
(Productivity Commission, 2005e.) 
9 Arrangements include MOUs on, inter alia , quarantine and SPS measures, trade facilitation, and 
technical cooperation issues, and the enhancement of agricultural cooperation. Australia WT/TPR/S/178/Rev.1 
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profitability, and ensure the sustainability of the sector.  Institutional reforms made during the period 
under review include state trading arrangements for exports of agricultural pr oducts, which now cover 
fewer products:  bulk wheat and in some states, bulk barley, lupines, canola, and rice (Chapter III(3)(iii)).  In particular, the Australian Dairy Corporation was priv atized and became Dairy 
Australia in July 2003. 
10. In addition, Australia's SPS framework has been  improved;  Biosecurity Australia (BA) was 
established in December 2004 under the Financia l Management and Accoun tability Act 1997 (the 
FMA Act), "to further boost the independence of  operations and ensure appropriate financial 
autonomy".
10  BA was initially an entity separated fr om the Australian Quarantine and Inspection 
Service (AQIS) in October 2000;  it is now fina ncially separated from DAFF.  Since becoming an 
independent prescribed agency, its functions in clude providing science-based quarantine assessments 
and policy advice concerning imports of animals and plants.  It also participates in international 
standard setting organizations11, and capacity-building activities for Australia's neighbouring 
countries.  In October 2006, the Australian Govern ment announced a reform package to make import 
risk analyses (IRAs) more transpar ent, efficient, timely, and pred ictable, to be implemented from 
early 2007 (Chapter III(2)(vii)(b)).   
(iii) Assistance 
11. Various methods have been used to measur e domestic support to agriculture.  Australia 
notifies the WTO of its subsidy programmes fo r agriculture, which include industry-specific 
programmes to dairy and sugar industries (Table  AIII.3).  The Productivity Commission provides 
information on total budgetary assistance to agricultu re at the sub-sector level.  Budgetary assistance 
to agriculture remains low (0.11% of GDP in 2004/05 ), and is concentrated in grain, sheep, and beef 
cattle farming (Table IV.1);  however, the total budgetary assistance does not include that provided 
under the Dairy Industry Adjustment Programme, nor the Sugar Industry Reform Programme.   
12. If measured by actual use of the Aggregate Measurement of Support (AMS), support has 
declined in recent years.  Product-specific AMS-re lated expenditure has been used for milk, wheat, 
and sugar (section (v) below).12  In 2004/05, spending on Green Box measures was dominated by 
general services (including research and marketing (60.1%)), environmental programmes (18%), and 
payments for relief from natural disasters (14%);  this  type of spending totalled $A 1.8 billion, nearly 
nine times higher than current total AMS (Table AIV.1). 
13. Total support to agriculture, as measured by the OECD using total support estimate (TSE), 
has declined.  However, the composition of the TSE has changed:  the share of support to producers, 
as measured by the producer support estimate ( PSE), to total support fell from 77.0% in 2002 to 
73.5% in 2005, while the corresponding share of s upport to general services (the general service 
support estimate (GSSE)) increased from 30.6% in 2002 to 34.8% in 2005.13  In particular, the PSE 
averaged 5% between 2002 and 2005, much lower than the OECD average of 30%.14 
                                                      
10 DAFF (2005a), p. 436.   
11 These organizations include the World Organi sation for Animal Health (OIE), the Codex 
Alimentarius Commission (Codex), and the bodies established under the International Plant Protection 
Convention (IPPC). 
12 WTO document G/AG/N/AUS/61, 19 April 2006. 
13 Total support (TSE) is the sum of support to producers (PSE), the support to general services 
(GSSE), and the transfer from tax payers to consumers (one sub-item under the consumer support estimate 
(CSE));  the latter is negative for Australia, which suggests consumers are implicitly taxed. 
14 OECD dataset.  Available at:  http://www.oecd. org/dataoecd/61/5/37036159.zip [12 October 2006]. WT/TPR/S/178/Rev.1 Trade Policy Review 
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Table IV.1 
Budgetary assistance to agriculture, 2002-05 
 2002/03 2003/04 2004/05a 
Share in total budgetary assistance (%)    
Horticulture and fruit growing 13.0 12.5 13.5 
Grain, sheep and beef cattle farmingb 53.7 44.8 36.4 
Dairy cattle farmingc 7.1 6.2 5.1 
Poultry farming 0.4 0.9 1.4 
Other livestock farming 3.3 2.7 2.3 
Other crop growingd 5.9 11.8 18.1 
Services to agriculture (includi ng hunting and trapping) 1.3 1.2 1.1 
Forestry and logging 2.6 3.7 4.1 
Commercial fishinge 5.9 6.7 7.9 
Unallocated primary production 6.8 9.6 10.1 
Total outlays ($A million) 502.1 626.3 704.5 
Total tax expenditure ($A million) 693.0 451.0 275.4 
Total budgetary assistance ($A million) 1,195.1 1,077.3 980.0 
Share of total budgetary assistance to GDP (%) 0.15 0.13 0.11 
a Estimates are derived primarily from Au stralian Government budget pa pers, departmental annual reports and Treasury's 2005 
TES.   
b  Excludes assistance derived from NSW st atutory marketing arrangements for rice, wh ich the PC categorizes as "agricultural 
pricing and regulatory assistance" rather th an budgetary assistance.  The PC estimate s that assistance derived from the rice 
marketing arrangements totalle d around $A 3 million in 2004/05. 
c  Does not include funding provided under the Australian Govern ment's Dairy Industry Adjustment  Package.  The PC estimates 
that the package provided dairy farmers remaining in the industry with assistan ce totalling around $A 144 million in 2004/05. 
d  Does not include funding of $A 17. 6 million and $A 9.1 million in 2002/03 and 200 3/04, respectively, provided under the 
Australian Government's 2002 Sugar I ndustry Reform Program (SIRP).   
e  Commercial fishing combines the previously repor ted marine fishing and aquaculture industry groupings. 
Source:  Productivity Commission (2006e), Table A1.  
14. An important part of assistance is drought relief.   The drought in 2002/03 caused an estimated 
70% reduction in the net value of farm produc tion and reduced GDP growth by around 1%.15  The 
drought in 2006 caused a 20% fall in farm output, which is predicted to reduce GDP growth by half a 
percentage point.16  The ongoing severity and extent of th e drought has resulted in the Government 
providing over $A 1.1 billion in direct assistance from July 2001 to June 2006, with a further $A 1.2 billion envisaged between  2006/07 and 2007/08.  Drought re lief has been provided mainly 
through an Exceptional Circumstances (EC) progr amme, under which farmers and small businesses 
receive income support and business assistance once an EC declaration is made by a state government 
and approved by the Minister for Agriculture, Fisheries and Forestry.
17  However, a drought review 
panel established in October 2003 found that, although income support is highly valued by recipients and considered to be "necessary" during a drought, the wide range of available drought assistance 
measures and their associated eligibility re quirements may be confusing for farmers.
18  A  
comprehensive reform process is under way to impr ove the efficiency and effectiveness of the 
                                                      
15 Truss (Minister for Agriculture, Fisheries and Forestry) (2004). 
16 RBA online information.  Viewed at:  h ttp://www.rba.gov.au/PublicationsAndResearch/ 
StatementsOnMonetaryPolicy/statement_on_monetary_1106.html  [24 November 2006]. 
17 Applications for EC declarations must demonstr ate that the event (wheth er a drought or other 
specified occurrence):  is rare (a one in 20 to 25 year event);  has resulted in a severe downturn in farm incomes 
over a prolonged period (greater than 12 month);  affects a significant number of farmers in a region or industry;  
and was not predictable or part of a process of stru ctural adjustment.  Once an area has received an EC 
declaration, support provided under the EC programme is generally available for a period of up to two years.  
18 Drought Review Panel (2004). Australia WT/TPR/S/178/Rev.1 
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assistance provided during drought, and to shift the fo cus of drought policy to drought preparation and 
management. 
(iv) Border measures 
15. The simple average MFN tariff for agricultural products remains low, at 1.4% (1.5% for 
WTO agricultural products);  most agricultural products are imported duty-free.  However, the 
ad valorem  equivalents (AVEs) for a few non- ad valorem  duties are relatively high (the average AVE 
for specific rates (cheese and curd) are 23.8% in 2006) (Chapter III(2)(ii)).19  Tariff quotas apply to 
most types of cheese and curd imports (Chapter III(2)(ii)(a)). 
16. Levies and charges have been maintained to fund activities such as:  R&D;  marketing;  
residue testing;  plant and animal health progra mmes;  and exports of wheat under the Wheat Export 
Authority (WEA).20  The Levies Revenue Service (LRS) based in the DAFF is responsible for 
collecting and paying out more than 60 different levies and charges imposed on a range of rural 
commodities and products, such as grains, horticultura l products, livestock, farmed prawns, forest and 
wood products, and wine (Table AIV.2).   
17. Some products, including meat, livestock, rice, wi ne and wine products, a nd sugar, are subject 
to export restrictions or licensing requirements (C hapter III(3)(ii)).  The Australian Livestock Export 
(Merino) Orders prohibit the export of all merino ge netic material out of Australia;  this prohibition 
does not apply to exports to New Zealand.21 
(v) Reforms in selected sectors 
(a) Dairy  
18. In terms of farm-gate value, 50% of domes tically produced milk in 2004/05 was exported, 
mainly in the form of manufactured products, such  as butter, cheese, and milk powder.  Australia 
accounts for around 2% of world milk production, a nd ranks third (behind New Zealand and the EC) 
in world dairy trade, with a 13% share.   
19. Prior to 2000, the dairy industry received assistance through a combination of price and 
regulatory controls, valued at around $A 450 million in  1999/2000.  In July 2000, these arrangements 
were terminated as part of the deregulation pro cess, and a federal Dairy Industry Adjustment Package 
(DIAP) was introduced to help farmers to adjust.22  The DIAP, funded through a levy of 11 cents per 
litre on all milk products marketed as  a beverage and sold to a retaile r, covers a period of eight years 
from July 2000. 
                                                      
19 Specific duties are levied on some cheese and curd products, and alte rnate duties are levied on some 
fruit juices.   
20 DAFF online information.  Viewed  at:  http://w ww.affa.gov.au/content/le vies/about_levies.cfm  
[13 June 2006]. 
21 According to the authorities, the Australian wool industry has made substantial investment in 
improving the quality of merino wool over the years and this is a crucial element in the competitiveness of the 
industry (WTO, 1998).  According to Australia's APEC IAP, the livestock  industry has i ndicated in recent 
consultations that it does not support any change to these restrictions (APEC, 2004).  
22 Various funds have been provided under the package.  Payments are administered to dairy farmers 
by the Dairy Adjustment Authority (DAA), which was established under the Dairy Industry Adjustment Act 
2000.  Eligibility for payment is based on market milk deliveries during 1998/99, and is paid quarterly over eight years from 2000/01. WT/TPR/S/178/Rev.1 Trade Policy Review 
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20. The DIAP consists of:  a dairy structural adjustment programme (DSAP), a supplementary 
dairy assistance (SDA) programme, and a dairy ex it programme (DEP) (and the later farm help 
re-establishment grant (FHRG)).23  A diary regional assistance programme (DRAP), until terminated 
in August 2004, provided funds to projects that cr eated employment opportun ities in dairy-dependent 
communities adversely affected by deregulation. 
21. Under the DSAP, direct assistance of $A 1.63 bill ion is available to eligible dairy farmers 
until 2008.  Producers with an existing DSAP en titlement can apply for assistance under the SDA, 
under which $A 120 million is allocated to farmers w ho have been severely affected by deregulation.  
Up to June 2002, producers with a DSAP/SDA enti tlement had the option of applying for assistance 
under the exit programme (DEP), which provided an optional tax-free exit payment of up to 
$A 45,000 for eligible dairy producers wishing to  leave the industry.  S ubsequently, the DEP was 
extended to become a farm help re-establishment grant (FHRG), under which tax-free payments of up 
to $A 50,000, and access to farm help advice and tr aining (worth up to $A 5,500), are provided by the 
Government.  As dairy farmers have been exiting the industry, the amount of these grants has been 
falling, and the effective rate of assistance to dair y cattle farming declined, from 16.2% in 2002/03, to 
12% in 2003/04.24 
(b) Sugar25 
22. The sugar industry has been subject to a numbe r of reforms and assistance packages since the 
mid-1990s.  Following the Sugar Industry (Cane Growers) Assistance P ackage in 2000, the 
Government commenced the Sugar Industry Reform  Programme (SIRP) in September 2002, with up 
to $A 120 million in assistance.  The programme w as funded partly by a levy of 3 cents per kg on 
domestic sugar sales.  In April 2004, uncompleted elements of the SIRP 2002 (with total funding of 
$A 26.7 million) were incorporated into some new initiatives under the SIRP 2004, which provided 
funding of up to $A 444 million, over a period of four years.  The programme includes mainly a $A 146 million one-off sustainability grant for cane growers and millers;  in addition, up to $A 75 million is provided towards regional and co mmunity projects to assist the medium- and 
longer-term restructuring of the sugar industry, as we ll as up to $A 40 million in restructuring grants 
to help growers improve productivity.
26  However, the world price indicator for raw sugar in 2004/05 
increased by more than 30% from the previous y ear, and was expected to rise a further 16% in 
2005/06.  Partly due to the price increase, less than half of sugar farmers w ho received income support 
have taken the chance to develop an appr opriate business or farm management plan.27  The authorities 
consider it too early to determine the full effect of the reform programme, as some of the key elements 
have not been completed, and ot hers need time to take effect. 
(c) Wheat28 
23. Assistance to the wheat industry is low, and ma inly takes the form of the Tasmanian Wheat 
Freight Subsidy.  Following the deregulation of Australia's wheat market, the Tasmanian Wheat 
                                                      
23 Dairy Adjustment Authority online information.  Viewed at:  http://www.daa.gov.au/package.html 
[15 June 2006].   
24 Productivity Commission (2004).  
25 At the farm-gate level, 76% of domestic produced sugarcane in 1999/2000 was exported as raw and 
refined sugar (DFAT, 2005c, p. 63). 
26 Productivity Commission (2006e), p. 3.13. 
27 Productivity Commission (2006e), p. 3.13, "The limited evidence of reform (including a lower-than-
expected uptake of re-establishment grants which were ava ilable to assist farmers to exit the industry) may have 
been caused partly by changes in market conditions". 
28 At the farm-gate level, 70% of wheat produced  in Australia in  2004/05 was exported.   Australia WT/TPR/S/178/Rev.1 
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Freight Subsidy was introduced in 1989 to alleviat e sea freight costs of shipping bulk wheat to 
Tasmania from mainland Australia.  Under the sc heme, shippers of bulk wheat receive rebates 
proportional to the total tonnage shipped in a given financial year.  Subject to an annual appropriation 
by Parliament, up to $A 1.05 million is available for 2006/07 for shippers claiming assistance.  On 
7 September 2006, the Government announced that th e subsidy will be maintained;  the Productivity 
Commission is currently conducting a public inquir y to examine the effec tiveness of the scheme. 
24. Although the domestic wheat market has been deregulated, exports of bulk wheat remain 
subject to state trading under single-desk arrangement s.  In July 1999, the statutory Australian Wheat 
Board ceased operation, with its marketing and fina ncing functions transferred to the AWB Ltd, a 
grower-owned and controlled company.29  Since corporatization in 1999, AWB (International) Ltd, a 
subsidiary of AWB Ltd, has been granted the so le right under the Wheat Marketing Act 1989 to 
export bulk wheat without a permit from the Wheat Export Authority (WEA).  The WEA, a statutory authority, is responsible for monitoring and repor ting on AWB (International) Ltd, and for managing 
the export of wheat in containers and bags.  The WEA is funded through a levy on wheat exports 
(Table AIV.2).  The PC has recommended the single desk export arrangement be reviewed as one of 
the priority areas under the National Competition Policy (NCP).
30 
(vi) Forestry 
25. Timber harvesting occurs mainly in about 7% of  Australia's forest area, and less than 1% of 
native production forest is harvested each year.  Th e forestry industry contributed to around 1% of 
GDP and employed more than 83,600 people in 2004 /05, accounting for 0.85% of total employment.  
In recent years, exports of forest products have  been stable, and overall Australia remains a net 
importer of forestry products.31   
26. Australia's forestry industry is guided by the National Forest Policy Statement (NFPS) 1992.  
A key element of the NFPS is the regional forest agreements (RFAs), which are 20-year plans for the 
conservation and sustainable management of Austra lia's native forests, by providing certainty for 
forest-based industries and forest-dependent commun ities.  Currently, there are ten RFAs in four 
states:  New South Wales, Tasmania, Victoria, and Western Australia. 
27. Licences issued by DAFF are required for exports  of over 2 tonnes of:  woodchips and wood 
in the round with a cross-sectional area of 225 cm2 or greater, intended for further processing;  and 
sandalwood sourced from Queensland and Western Aust ralia.  Exports of na tive hardwood woodchips 
are prohibited, unless they are sourced from a region covered by an RFA, or are exported under a 
restricted shipment licence (which allows the expor t of such woodchips in one shipment from a region 
not yet covered by an RFA).  Exports of plantati on-sourced material, including both native and exotic 
species, are not subject to any Commonwealth export controls, provided they meet environmental and 
heritage protection requirements set up under state codes of practice.  Queensland is the only state that 
has not submitted its code of practice to the Commonwealth Government.   
28. Measured by the effective rate of assistance (ERA), forestry receives a relatively high level of 
assistance compared with other agricultural indus tries, 5.3% in 2003/04 (4.1% on average for the 
primary industry).32  However, current forestry assistance pr ogrammes are concentrated in one state, 
                                                      
29 The AWB Ltd was allegedly involved in the Unite d Nations Oil for Food scandal.  Viewed at:  
http://www.unoilforfoodinquiry. gov.au [24 November 2006]. 
30 Productivity Commission (2005c). 
31 DAFF online information.  Viewed at:  http://www.daff.gov.au/forestry. 
32 Productivity Commission (2004).  The PC report also  stated that the around 5% effective rate of 
assistance "plays a relatively minor role in the forestry  industry compared with other government measures.  WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 80 
 
 
Tasmania.33  All other programmes, such as the Eden Re gional Adjustment Package, and the forest 
industry structural adjustment programme (NSW  and Victoria), have been terminated.  
(vii) Fisheries 
29. There has been little change in the fisheries legislation or policy framework during the review 
period.  Management of fisheries, both comme rcial and recreational, is shared between the 
Commonwealth and state governments.  The Commonw ealth is responsible for the management of 
fisheries outside the three nautical mile territorial waters, while the states are responsible for all other 
waters adjacent.34   
30. At the Commonwealth level, management of th e industry is undertaken by the Australian 
Fisheries Management Authority (AFMA), which is a statutory authority established under the 
Fisheries Administration Act 1991, and funded jointly by industry and the Commonwealth Government.  The Minister of Agriculture, Fisher ies and Forestry and the DAFF are responsible for 
the development of fisheries policy.  
31. For certain types of fisheries, statutory fishing rights (SFRs) are required and granted by the 
AFMA.
35  In particular, as defined in the Fisheries Management Act 1991, foreign-flagged vessels 
cannot obtain SFRs.  SFRs for Austra lian vessels can be tr ansferred or leased (but not to foreign-
flagged vessels).  Commonwealth fishing permits, which allow commercial fishing for Commonwealth managed species, and are transferable, cannot be granted to foreign-flagged vessels.   
32. Currently, there are about 9,000 commercial fi shing boats operating in Australia.  The 
industry employs around 21,000 people in catching and harvesting, 4,000 in processing, and another 
6,000 in the aquaculture sector.  In recent years there has been growing concern about overfishing in 
Commonwealth-managed fisheries.  Accordingly, in November 2005 the Government announced the 
"Securing Fishing Future" package, with a fund of $A 220 million;  the package is aimed at reducing 
the high level of overcapacity in fisheries that are overfished, or at significant risk of overfishing in 
the future.
36  Also, the AFMA announced substantial reducti ons in total allowable catch levels in a 
number of fisheries, applicable from 2006.   
                                                                                                                                                                     
The key government measures affec ting forestry relate to resource  management issues, such as the pricing of  
forests, and the use of quotas to control the harvesting rates to protect the resource stock.  The assistance 
implications of these measures, whether positive or negative, were not captured in the Productivity Commission's estimates."   
33 The programmes are:  Tasmanian forestry industry development programme, Tasmanian country 
sawmills assistance programme, and Tasmanian softwood industry development programme. 
34 The Offshore Constitutional Settlement (OCS) allows the Commonwealth and state governments to 
change this management arrangement. 
35 These fisheries include southern bluefin tuna, northern prawn, Bass Strait central zone scallop, Heard 
Island and McDonald Islands, and southern and eastern scalefish, and shark (DAFF on line information.  Viewed 
at:  http://www.afma.gov.au/industry/licensing/permits/default.htm [6 October 2006]). 
36 DAFF (2006).  In addition to $A 150 million for a one-off fishing business buyout, the package 
includes $A 70 million to, inter alia , offset the impact of reduced fishing activity on onshore businesses directly 
linked to the fishing industry, establish a fishing communities programme to generate new employment opportunities, and cover the AFMA's management cost. Australia WT/TPR/S/178/Rev.1 
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(3) MINING , ELECTRICITY , AND WATER  
(i) Mining 
33. Australia has an abundant supply of natural r esources and is a major exporter of mining and 
quarrying products.  The mining sect or has been one of the major driving forces behind Australia's 
recent economic growth.  In 2005/06, mining and quarrying accounted for 7.5% of GDP, up from 
5.3% of GDP in 2001/02.  In 2005, the sector ac counted for 48.4% of total merchandise exports (up 
from 40% in 2002) (Chart I.1).  Owing to the gl obal boom in mining commodities, Australia's terms 
of trade have increased by around 30% over the past three years.  Business investment, especially in 
mining and related infrastructure, has been growing at double-digit rates. 
34. Mineral and petroleum resources are owned either by the Commonwealth or state and 
territory governments.  The Commonwealth and state governments have separate roles and 
responsibilities.  While the Commonwealth Governme nt sets up national policy, state and territory 
governments manage and allocate mineral and petrol eum property rights, have primary responsibility 
for land administration, regulate environmental or occupational-health and safety-related issues, and 
collect royalties on the minerals produced.37  Commercial exploration a nd development is undertaken 
by the private sector.   
35. The mining sector operates in a competitive market.38  There are no sector-specific 
restrictions on foreign investment, although, as fo r all sectors, prior approval or notification is 
required for investment above certain thresholds  (Table II.2).  The sector receives very little 
government assistance;  in 2004/05, mining recei ved 5% of total budgetary assistance, while 
manufacturing and services received 42% and 30%, r espectively.  Although mineral imports can enter 
Australia under several tariff concession schemes, such  as the Enhanced Project By-Law Scheme, the 
Tariff Concession scheme, and the Tradex scheme, ta riffs are already low, indicating a low level of 
tariff assistance:  the effective rate of assistance (ERA) for mining was virtually zero in 2003/04.39   
36. However, despite the strong global demand for mining commodities, exports have been 
allegedly held back by infrastructure bottlenecks, par ticularly reflected in the queuing of ships at some 
coal ports.  To respond, the Government establis hed an Exports and Infrastructure Taskforce in 
March 2005, to identify any infrastructure bottleneck s (physical or regulatory) that may impede 
exports.  The Taskforce issued its report in Ma y 2005, and concluded that there were capacity 
constraints at certain bulk ports in some parts of the country, but no infrastructure crisis, and that the 
greatest impediment to the development of Austra lia's infrastructure was the regulatory framework.  
Responding to the Taskforce's conclusions, the C OAG agreed, in principle, to a "simple and 
consistent national system of regul ation for ports and export-related infrastructure" as a key part of its 
new National Reform Agenda (section (5)(vi)(a)).40   
(ii) Electricity 
37. The National Electricity Market (NEM) was es tablished in 1998 to break down barriers to 
inter- and intra-state competition, including dism antling state-owned monopolies and implementing a 
third-party access regime for transmission and distribu tion.  As a result, a wholesale market has been 
                                                      
37 Onshore minerals royalties are collected by the states and the Northern Territory governments.  
There is no common royalty regime, and a mix of specific, ad valorem,  and profit-based royalties applies, 
averaging at 3.5% of the gross value of mineral production.   
38 Banks (2003). 
39 Productivity Commission (2006e).   
40 COAG (2006).  WT/TPR/S/178/Rev.1 Trade Policy Review 
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established for electricity supply to retailers and end-users in New South Wales, Queensland, South 
Australia, Tasmania, Victoria, a nd the Australian Capital Territory41;  it is managed by the National 
Electricity Market Management Company Limited (NEMMCO).  Electricity prices remain low by international standards at bot h retail and wholesale levels. 
38. Currently, all market participants must regi ster with the NEMMCO.  Service providers 
intending to operate in the NEM are subject to the Electricity Rules, as well as state and territory 
licensing requirements.  Foreign and domestic servi ce providers are subject to the same licensing 
requirements;  foreign providers are re quired to have an Australian outlet.
42   
39. While the NEMMCO is responsible for managing th e dispatch of electricity from generators, 
transmission and distribution used to be handled by a network of service providers, which, until 
recently, had been regulated by various federal and state regulatory bodies.  The COAG conducted a 
review of the electricity market in 2002 and iden tified various deficiencies, including confused 
governance arrangements, insufficient competition in electricity generation, overlaps in regulatory 
responsibility, and inflexible electricity price signals for residential customers.43  Consequently, 
continued reform is required to address these concerns and to meet increasing demand for 
electricity.44 
40. To simplify the regulatory framework for the tr ansmission and distribution of electricity, on 
1 July 2005, the Australian Energy Regulator (AER ) became responsible for market surveillance and 
regulation enforcement.  During its first two y ears of operation, the AER will gradually replace 
13 electricity regulators and 8 gas regulators.  It is anticipated that by the end of 2010, the AER will 
be the sole regulator.  A Memorandum of Understanding was signed between the AER and 
NEMMCO, to establish cooperation and liaison.  The AER is required to monitor and enforce 
compliance by NEMMCO with its obligations under th e National Electricity Law and Rules, and the 
NEMMCO functions as the operator and administrator of  the wholesale electricity market.  On 1 July 
2005, an Australian Energy Market Commission (AEMC) also commenced operation.45  An MOU 
was signed between the AER, the AEMC, and th e ACCC.  Under the MOU, the ACCC retains 
responsibility as regulator of competition matters, in cluding price surveillance of electricity.  The 
AEMC develops the National Electricity Rules un der the new National Electricity Law, which was 
amended in June 2005.   
(iii) Water 
41. Australia has limited water resources;  manageme nt and the administration of water pricing is 
the responsibility of state and territory governments.   Structural reforms have been conducted for 
more than a decade to establish a system where wate r users pay the full cost of the infrastructure and 
services provided.   
                                                      
41 Tasmania joined the NEM in May 2005.  Service providers in the Northern Territory and Western 
Australia are not subject to the requirements of the NEM. 
42 A foreign provider must be registered as a co mpany with the Australian Securities and Investment 
Commission, and have acquired an Australian business number (ABN) through the Australian Taxation Office. 
43 COAG (2002). 
44 It is estimated by the Australian Bureau of Agricultural and Resource Economics that by 2030, 
electricity generation will need to grow by 73%, and gas demand will more than double. 
45 The AEMC is part of a reform package proposed by the Ministerial Council on Energy (MCE).  The 
package was endorsed by the COAG in 2004.  As part  of the package, both the Commonwealth and states 
governments signed an Australian Energy Market Agreement (AEMA) in June 2004 (see Appendix A of COAG (2006) for the MCE reform agenda). Australia WT/TPR/S/178/Rev.1 
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42. In 1994, the COAG agreed on a strategic fra mework for water reform, to improve the 
efficiency and effectiveness of Australia' s water supply and wastewater industries.46  Progress thus far 
appears to have been concentrated in urban areas, where, for example, consumption-based pricing had 
been introduced to discourage wast eful water use, and full cost recovery by water service providers 
has been largely achieved;  this could help to en sure appropriate investment in infrastructure.  
Institutions have also been established in urban areas to encourage efficiency in water provision.47 
43. It seems water has not been managed efficiently, particularly in rural areas.48  Three quarters 
of Australian water is used for irrigation, of whic h, between 20% and 40% is lost due to leakage and 
evaporation from open channels.49  Accordingly, in June 2004 a National Water Initiative (NWI) was 
agreed between the Commonwealth and New South Wa les, Queensland, South Australia, Victoria, the 
Australian Capital Territory, and the Northern Te rritory;  Tasmania signed up to the NWI in 
June 2005, and Western Australia in 2006.  This inter-government agreement sets the national water 
reform agenda for the next ten years and beyond. 
44. The NWI intends to put in place a market framework for the management of water resources 
in urban and rural areas.  For example, state govern ments agreed to establish water market and trading 
arrangements to facilitate the operation of efficien t water markets and intra- and inter-state water 
trading, and to minimize transaction costs on water trade.50  The NWI also intends to establish a price 
mechanism, which could address the scarcity  of water and environmental externalities.51  As water is 
the property of the states and territories, the NWI al so includes a commitment to  return all currently 
over-allocated and over-used river and ground water syst ems to environmentally sustainable levels of 
extraction.  In addition, a National Water Commissi on was established to facilitate the reform process 
under the NWI.  An Australian Water Fund was se t up in 2005, with funding of $A 2 billion over 
five years to ensure that investment  is consistent with the NWI.   
(4) MANUFACTURING  
45. During the period under review, the share of manufacturing in GDP and employment fell, 
from 12.1% and 11.8%, respectively in 2001/02, to 11.0% and 10.6%, respectively in 2005/06 
(Table I.2).  Manufacturing's share in total me rchandise exports and imports also declined, from 
23.9% and 82.9% in 2002, to 20.5% and 79.9%, respectively, in 2005 (Chart I.1).  Within manufacturing, there is significant variation in performance between activities;  in particular, 
activities related to natural resources and being R& D intensive have been growing more rapidly, 
while textiles, clothing, and footwear (TCF) production fell.   
46. Despite its declining share in GDP and to tal employment, manufacturing remains an 
important sector, and continues to receive the largest portion of budgetary assistance (39.4% in 2004/05)
52, of which, 37.4% was allocated to the motor vehicle industry, and 11% to the TCF industry 
(Table IV.2).  Assistance provided to manufacturing is  not necessarily reflective of a desire to protect 
local industry53;  for example, assistance for R&D is in tended to compensate for under-investment in 
private R&D activities owing to market failure.  
                                                      
46 National Water Commission (2006). 
47 OECD (2005b). 
48 OECD (2006b). 
49 OECD (2006b). 
50 Productivity Commission (2006c). 
51 Currently, water is supplied to agriculture much more cheaply than to households. 
52 Productivity Commission (2006e), Table 2.1. 
53 Productivity Commission (2003d), p. 211. WT/TPR/S/178/Rev.1 Trade Policy Review 
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47. Border protection for manufacturing was reduced in 2005, and the average applied tariff in 
manufacturing (based on two-digit ISIC industry)  fell from 4.8% in 2002 to 4.1% in 2006 
(Chart III.2).54  However, the low average tends to c onceal some high tariff rates, such as the 
compound duty applied to used or second-hand vehicles.  
Table IV.2 
Budgetary assistance to manufacturing, 2002-05 
  2002/03 2003/04 2004/05 
Share in total budgetary assistance (%)    
Food, beverages, and tobacco 4.2 5.6 6.1 
Textiles, clothing, footwear , and leather 11.2 10.6 11.1 
Wood and paper products 2.8 2.8 2.8 
Printing, publishing, and recorded media 1.4 1.8 1.2 
Petroleum, coal, chemicals, and associated products 11.3 9.1 7.6 
Non-metallic mineral products 0.6 0.6 0.7 
Metal product manufacturing 8.6 9.4 7.8 
Motor vehicles and parts 37.2 36.7 37.4 
Other transport equipment 2.3 2.0 1.4 
Other machinery and equipment 8.6 7.2 7.9 
Other manufacturing 3.1 6.8 6.8 
Unallocated manufacturing 8.8 7.7 9.2 
Total outlays ($A million) 781.9 852.9 769.5 
Total tax expenditures ($A million) 1,077.8 1,063.5 1,023.0 
Total budgetary assistance ($A million) 1,859.8 1,916.4 1,792.5 
Share of total budgetary assistance in GDP (%) 0.2 0.2 0.2 
Note: Figures may not add to total due to rounding. 
Source:  Productivity Commission (2006e),  Trade & Assistance Review 2004/05 , Annual Report Series 2004/05, April, 
Canberra, Table A.3.  
(i) Textiles, clothing, and footwear 
48. The effective rate of assistance (ERA) for the textiles, clothing, and footwear (TCF) industry 
was 24.2% in 2003/04, when the overall ERA for the manufacturing sector was 4.5%.55  Assistance 
has been provided through, for example, tariff pr otection, as well as significant budgetary assistance.  
The authorities state that assistance to the TCF industry is transitional, aimed at facilitating the 
industry to adjust to the reduced tariffs. 
49. In 1997, the TCF industry reached an agreement with the Government, so that tariffs on TCF 
products would be kept at the 2000 level until 2005.  On 1 January  2005, Australia unilaterally 
reduced its tariffs on TCF products:  the simple av erage applied MFN tariff (based on ISIC two-digit 
level) declined from 12.0% in 2002,  to 8.7% in 2005.  No furthe r tariff reduction will occur until 2010 
and 2015.  Despite the reduction, the tariff is still much higher than the overall MFN average (4.1%).   
                                                      
54 Productivity Commission (2003d), p. 150.  According to the PC, it is difficult to tell the net effect of 
reduced border protection on affected industries.  On th e one hand, tariff reductions may reduce profitability of a 
specific industry (at least in the short run).  On the other hand, reduced tariff protection may lead firms to 
eliminate inefficient practices, or reduce costs if they use the imports as business inputs. 
55 Productivity Commission (2004), Table 2.4. Australia WT/TPR/S/178/Rev.1 
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50. The TCF industry has continued to decline56;  accounting for around 0.3% of GDP, 
employment in the industry fell from 64,000 in 2002 to 54,000 in 2006.  To enable the industry to adjust to tariff reduction and the subsequently increased import competition, as well as technological 
change and shifts in household e xpenditure, government assistance has been provided, mainly through 
a strategic investment programme (SIP) introduced  in 2000, and a post-2005 assistance package (of 
which the SIP is now a part).  Assistance is also  provided through an expanded overseas assembly 
provisions scheme, specific TCF policy by-l aws, and market access initiatives.  
51. The TCF SIP programme was applied be tween 2000/01 and 2004/05.  Capped at 
$A 700 million, government grants under the SIP were provided to eligible firms, based on 
investment, R&D related expenditure, or value-adde d activities;  each firm's total benefit under the 
scheme in any given year was limited to 5% of thei r sales of eligible products in the previous year.
57  
The grants were managed by AusIndustry.  Grants may also be provided to purchase state-of-the-art 
second-hand plant and equipment for restructuring by  firms in TCF dependent communities, or for 
ancillary activities relating to restructuri ng initiatives in TCF dependent communities. 
52. The SIP programme, however, had several feat ures that could undermine its capacity to 
encourage investment by firms to promote their international competitiveness.58  The complexity of 
the scheme also imposed compliance costs on firms.  Partly reflecting these concerns and the tariff 
reduction in 2005, as well as recommendations by the Productivity Commission, the Government 
announced a TCF post-2005 assistance package in Nove mber 2003.  The package mainly contains a 
TCF post-2005 (SIP) scheme, under wh ich $A 575 million is provided ove r a ten-year period for new 
TCF plant/building expenditure, as well as for R&D and product development.  It also enables firms 
to receive grants higher than the previous maximu m of 5% of their total eligible revenue.  The 
package also contains a TCF small business progra mme, a TCF structural adjustment programme, and 
a product diversification scheme, all coveri ng a period of ten years from 1 July 2005.59  The product 
diversification scheme does not provide grants to el igible firms;  instead, duty credits are allocated 
and may be used to offset the duty at the time of importation.60  
53. The expanded overseas assembly provisions scheme (EOAP) allows importers of TCF 
products assembled from mainly Australian fabric and/ or leather to pay tariffs on the cost of the 
overseas processing and content only.  By encourag ing the lower skilled, labour-intensive assembly 
                                                      
56 Over the decade to 1999/00, the sector's turnover contracted by 16% and employment by 37%.  
During the same period, productivity as measured by  turnover per employee incr eased by almost 48%.  
Productivity Commission (2003c).   
57 Of the total $A 700 million, $A 22 million had been used for the Regional Assistance Programme.  
Thus, the remaining $A 678 million was available for distribution.   
58 For example, firms did not need to increase their expenditure levels to receive a SIP grant.  Also, 
firms made their application for support after their sp ending had taken place;  thus, uncertainties about the 
outcome of the application at the time of making spending decisions could discourage or delay some investment.  
In addition, there was a minimum spending threshold under the programme, which indicated that small 
businesses were excluded from this support. 
59 WTO document G/SCM/N/123/AUS/Rev.1, 23 September 2005.  Under the TCF small business 
programme (capped at $A 25 million, and $A 50,000 for individual projects), grants are provided to improve the business climate for small firms.  The TCF structural adju stment programme is targeted at supporting industry 
consolidation and labour market adjustment.  Under the programme, $A 50 million is available to:  assist 
employees who have to look for alternative employment;  improve competitiveness of firms;  and assist communities to adjust to TCF industry consolidation.   
60 AusIndustry Product Diversification Scheme, Terms and Conditions.  Viewed at:  
http://www.industry.g ov.au/assets/documents/itrinternet/PDS TermsConditionsvr2for webNovember2005200601
04103911.pdf  [26 September 2006]. WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 86 
 
 
activities to move abroad, the EOAP intends to promote the higher value-added production in 
Australia.61  The EOAP scheme was extended to 2010. 
54. Most TCF products are not eligible for duty concessions under the tariff concession system 
(TCS) (Chapter III(2)(ii)(b)).62  However, around 20 policy by-laws enable specified TCF goods 
(mainly blended cotton and blended synthetic lightwe ight fabrics) to be imported duty free.  Unlike 
the TCS system, under which imports may enter Au stralia duty free if no substitutable goods were 
being produced domestically when a tariff con cession order was made, the policy by-laws grant 
duty-free entry to imports even if there was domestic production of these goods.  TCF products may also enter Australia duty free, if they originate in LDCs, Forum Island countries, Papua New Guinea, 
New Zealand, or Singapore (Table III.2). 
(ii) Automotive 
55. The automotive industry accounted for 5.7% of the total value added in manufacturing and 
about 0.6% of GDP in 2005.
63  Employment, concentrated in South Australia and Victoria, was over 
81,000 persons in November 2005, accounting for around 7% of employment in manufacturing and 
0.8% of total employment.  These figures suggest th at the automotive industry's labour productivity is 
about 25% lower than in the remainder of the econom y, which indicates that labour productivity in the 
economy as a whole could be increased by shifting resources from this industry to other sectors.64  
With over one third of domestically made vehicles e xported, the industry is one of Australia's largest 
exporters.  At the same time, around 75% of vehicles so ld in Australia are imported.  It is also highly 
open to foreign investment, with all four vehi cle manufacturers in Australia subsidiaries of 
multinational corporations.65   
56. Nonetheless, the automotive industry receives the largest portion of budgetary assistance in 
the manufacturing sector. The ERA for PMV reached 10.6% in 2003/04, comp ared with 4.5% for 
manufacturing as a whole. The simple average applied MFN tariff on motor vehicles, if based on ISIC four-digit industry, fell from 18.8% to 17.2% in 2005;  like the TCF industry, the tariff is still 
much higher than the MFN average for the manufactur ing sector, and is not expected to be reduced 
until 2010.  The authorities indicate that Australia's effective vehicle tariff, based on actual trade data 
and incorporating bilateral tariff preferen ces and Tradex allowances, is 6.9%.   
57. Used or second-hand vehicles (eight tariff lines) are subject to a compound rate of 10% (15% 
in 2002) plus $A 12,000 per unit, the average ad valorem  equivalent (AVE) of which is 206.8% in 
2006 (Chapter III(2)(ii)(a)).  The $A 12,000 does not  need to be paid for used "specialist and 
enthusiast" vehicles imported under a registered au tomotive workshop (RAW) scheme:  with approval 
from the Department of Transport and Regiona l Services (DOTARS), a RAW may import up to 
                                                     
 
61 To qualify for the scheme, an importer of the assembled goods must also be the exporter of the fabric 
and/or leather used in the assembly;  there cannot be any transfer of ownership of the materials or the assembled 
goods between the time of export from, and import into, Australia;  and the value of non-Australian fabric 
and/or leather must be no greater than 20% of the total material value used to assemble the product.   
62 A few TCF products, such as specialist footwear , incontinence pants, and rubber gloves, may be 
imported duty free under the TCS.   
63 APEC online information, Automotive Dialogue, Automotive Profile – Australia.  Viewed at:  
http://www.apec.org/apec/business_re sources/industry_dialogues/automotive_dialogue.html#top.  
64 The authorities disagree with the argument here on automotive industry labour productivity, and 
suggest that this requires more detailed analysis of, inter alia , definitional issues. 
65 The automotive industry compri ses four vehicle manufacturers:  Ford, Holden, Mitsubishi, and 
Toyota.  There are also more than 230 component, tool, design and engineering firms, many of which are also subsidiaries of MNCs (DITR online information). Australia WT/TPR/S/178/Rev.1 
 Page 87 
 
 
130 vehicles per category every year of used vehi cles that meet safety and emission standards.66  The 
authorities state that, since the commencement of  the RAW scheme in April 2002, the tariff on 
second-hand vehicles has not been applied.  This, no netheless, suggests that the tariff is prohibitive on 
imports of used vehicles other than "specialist and enthusiast" ones.   
58. All imported new vehicles, as well as domestica lly produced vehicles, must be approved by 
the DOTARS, under a full volume scheme, or a low volume scheme.  Under the full volume scheme, 
the vehicle manufacturer is allowed to conduct comp liance tests on a representative vehicle or batch 
of vehicles, to examine the vehicles' compliance wi th the Australian Design Rules (ADRs).  Vehicles 
meeting ADR type requirements ca n be imported in unlimited numb ers, and both the imported and 
domestically produced vehicles can be sold on the domestic market.  The low volume scheme, 
specified for new "specialist and enthusiast" vehicles, allows the import or sale of new vehicles without destructive or expensive tests.  Instead, up to 25 or 100 vehicles (depending on the vehicle category) may be imported or sold, provided that evidence can be shown that they comply with related ADRs.   
59. On 13 May 2005, the Government tightened policy requiring imports of vehicles built before 
1989 to comply with safety and emission standards before importation.
67 
60. The Automotive Competitiveness and Investment Scheme (ACIS) was introduced in 2001.  
With a view to complementing tariff reductions by  promoting firms' competitiveness, the ACIS is 
available for eligible participants in the form of qua rterly duty credits, which can be used to discharge 
customs duty on subsequent eligible automotive imports, or sold or transferred.68  No participant may 
receive benefits exceeding 5% of their annual sales in the preceding year.69  
61. Changes have been made to the ACIS scheme since its adoption in 2001.  In December 2002, 
the Government announced the extension of ACIS to  2015.  Thus, the scheme now has three stages:  
in the first stage (2001-05), assistance was capped at $A  2 billion;  the cap is to be maintained for the 
                                                      
66 The authorities state that a registered automotive workshop is entitled to plate and supply up to 
100 vehicles per year in each vehicle category.  An additional 30 vehicles (i.e. total 130) can be imported in a 
12-month period to allow for handling and processing, as well as any vehicles that are not suitable for plating 
(such as vehicles damaged or cannot be shown to meet the relevant requirements).  Other categories of used 
passenger motor vehicles that are not s ubject to the $12,000 duty are:  used passenger motor vehicle imported by 
an Australian citizen or permanent resident who has owned and used the vehicle overseas;  vehicles for 
evaluation and research, or type-test purposes;  and vehicles for motor racing. 
67 Before May 2005, vehicles 15 or more years old could be imported without being subject to safety 
and emission requirements;  this exem ption was in place to allow imports of  classic and historic cars (DOTARS 
media release, 13 May 2005). 
68 Eligibility criteria are:  for motor vehicle produ cers, an annual output of at least 30,000 motor 
vehicles or 30,000 engines;  for component producers, production of at least $A 500,000 of one kind of 
automotive component annually for use as original equipment in at least 30,000 motor vehicles or 
30,000 engines, or production of at least $A 500,000 of total original equipment components annually, where 
this represents at least 50% of the producer's total pr oduction value;  for automotive machine tool producers, 
production of at least $A 500,000 of automotive tools annually, where at least 50% of that production is used to 
produce original equipment;  for automotive service pr oviders, at least $A 500,000 of automotive services 
annually, where at least 50% of total services relate to th e production of motor vehicles or original equipment.   
69 Qualifying motor vehicle producers may claim an import duty credit equal to 25% of the value of 
production of motor vehicles, engines, and engine compon ents, multiplied by the relevant tariff rate, and 10% of 
the value of new investment in plant and equipment.   Producers of automotive components and automotive 
machine tools, and providers of automotive services ma y claim an import duty credit equal to 25% of the value 
of new investment in plant and equipment, and 45% of the value of investment in R&D.  Where motor vehicle 
producers also produce automotive components (other than engines and engine components), tools, or provide automotive services to a third party, a 25% investment incentive and a 45% R&D incentive may be provided.   WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 88 
 
 
second stage (2006-10), but reduced to $A 1 billion in the third stage (2011-15).  The second stage 
also includes an $A 150 million motor vehicle pr oducer R&D scheme.  In  addition to the capped 
assistance, motor vehicle producers are also able to  claim uncapped assistance in the form of duty 
credits (to be terminated in 2015), equal to 15% of the production value for Australian and New 
Zealand markets multiplied by the relevant tariff rate.  
62. Procurement of motor vehicles is exempted from Mandatory Procurement Procedures of the 
Commonwealth Procurement Guidelines (Chapter I II(2)(viii)).  The Commonwealth "vehicle fleet 
arrangements" provide that vehicles purchased by gove rnment agencies must be made in Australia by 
producers that satisfy the eligibility criteria under the ACIS.  Imported vehicles with an engine 
capacity of less than 2,000cc may be purchased if marketed by automobile companies with a local 
presence.70  As government fleet purchases accounted for 21.7% of domestic demand for locally 
produced vehicles in 2005, they appear to be an important source of assistance to the domestic automotive industry.   
63. Australia continues to provide assistance in the form of direct financial support to automotive 
producers.  For example, a one-off grant of $A 50 million was provided to Ford Motors in 
March 2006.  The luxury car tax (LCT), levied at 25% on the GST-exclusive value that exceeds a 
threshold, is also a source of assistance to local producers.
71  Although the authorities state that the 
LCT applies to both imported and domestically pro duced motor vehicles, 97% of LCT revenue came 
from imported luxury vehicles in 2004, suggesting that the LCT tends to discriminate against 
imported luxury cars, which  usually have higher prices than domestically produced luxury vehicles, 
partly as a result of relatively high tariffs (Chapter III(2)(iii)).72  
(iii) Pharmaceuticals 
64. The pharmaceutical industry is one of the most R&D intensive industries in Australia.  It is 
also an integral part of the global industry, as a significant part of pharmaceutical activities in 
Australia is undertaken by subsidiaries of multinational corporations.   
65. A purchasing agreement for drugs, the Pharmaceutic al Benefits Scheme (PBS), covers around 
75% of all pharmaceuticals prescribed in Australia (outside hospitals).73  Under the PBS, the 
Government negotiates prices of drugs with  suppliers based on recommendations by the 
Pharmaceutical Benefits Pricing Authority (PBPA).  Based on the agreed price, the PBPA negotiates a 
retail price with retailers.  As the Government is the monopsony buyer, domestic prices for drugs are 
often low by international standards.74  According to claims by many pharmaceutical suppliers, this 
low price has affected the development of Australia's pharmaceutical industry.75 
66. Responding to these concerns, the Governme nt provided industry assistance through the 
Pharmaceutical Industry Invest ment Programme (PIIP), in order to partially compensate 
pharmaceutical firms by paying higher prices on certain  products supplied under the PBS.  The PIIP's 
funding was set at $A 300 million over five years (from July 1999 to June 2004).   
                                                      
70 Productivity Commission (2002a). 
71 Productivity Commission (2002b).   
72 The authorities maintain that the LCT does not discriminate against imported vehicles, as it applies at 
the same rate to both Australian-made and imported vehicles, and the majority of vehicles are valued below the 
LCT threshold.  
73 Productivity Commission (2001).  The authorities state that the PBS covers 93% of all 
pharmaceuticals prescribed in Australia.  
74 Productivity Commission (2001). 
75 Productivity Commission (2003a).  Australia WT/TPR/S/178/Rev.1 
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67. However, an evaluation of the PIIP scheme by the Productivity Commission in 2003 
concluded that, first, the rationale for providing  assistance to the pharmaceutical industry based on 
price suppression was much less convincing than claimed by many pharmaceutical enterprises76;  and 
second, the cost of the programme exceeded the be nefits it generated, a lthough the R&D component 
had a positive net effect.77  In addition, a foreign enterpri se was not eligible for the R&D tax 
concession if the intellectual property (IP) was not Au stralian-owned, which contradicted the rationale 
for promoting R&D for its spillover effects in Australia.78 
68. Thus, when the PIIP scheme expired in 2004, the Government introdu ced a Pharmaceuticals 
Partnerships Programme (P3), aimed at increasing expenditures on high quality pharmaceutical R&D:  
$A 150 million is to be provided over five years (b etween July 2004 and June 2009).  In addition, IP 
can now be owned offshore.  Under the programme, once a grant is awarded, the company can obtain 
30% or 50% of its annual increase in eligible R& D expenditure above its base level expenditure.79  
However, the overall grant obtained under the P3 is capped at $A 10 million. 
(5) SERVICES  
(i) Overview 
69. The services sector dominates the Australian economy.   In 2005/06, it accounted for 68.9% of 
GDP and 75.0% of total employment (Table I.2).  Real estate and business, wholesale and retail trade, ownership of dwellings, and trans port, storage, and communications services have been the leading 
services activities, in terms of their shares in GD P;  other important activities were finance and 
insurance, health, and community services. 
70. In 2004, Australia's exports of services account ed for 1.1% of world services exports, and 
imports accounted for 1.2% of world services imports .  Trade in services is an important component 
of Australia's total trade, with services exports accounting for 21.4% of total exports in 2005/06.  
Australia's services trade continued to grow in 200 5/06:  exports rose by 5.7%, mainly driven by 
travel;  and imports rose by 4.6%, as strong domestic demand in connection with continued favourable exchange rates for Australians trave lling abroad resulted in growth in imports of 
transportation and travel services.  Services trade recorded a surplus of $A 828 million, up from a 
surplus of $A 380 million in 2004/05. 
71. The estimated level of support provided to th e services sector through direct financial 
assistance, tax expenditures, and funding to public-sector institutions has been increasing 
(Table AIV.3);  budgetary outlays aimed at enc ouraging investment, R&D, and exports have been 
allocated mainly to property and business services,  finance and insurance, cultural and recreational 
                                                     
 
76 The reasons are:  although low price tends to reduce profit, this could be partly offset by increased 
sales, which reflect the subsidies provided to consumers when purchasing drugs listed on the PBS.  In addition, 
empirical evidence suggests that low price does not seem to be relate d to low pharmaceutical activities. 
77 Productivity Commission (2003a).   
78 Productivity Commission (2003a).   
79 To obtain the grant, any pharmaceutical company that has unde rtaken R&D activities during the past 
three years, and proposes to increase its  R&D expenditure for the following year s, can apply to participate in the 
programme.  When applying for the grant, companies need to provide details of all expenditure on eligible 
pharmaceuticals R&D activities in Australia  or overseas, or both, for the thr ee years prior to the application.  
The average of the three years' R& D expenditure is defined as the base level.  The P3 programme has 
three rounds;  round 3 (1 July 2007 to 30 June 2009) was launched in August 2006.  In rounds 1 and 2, grants 
were provided as 30% of the additional R&D expenditure above the base level.  In addition, in both round 1 and 
2, grants were capped at $A 100,000 per year;  this cap is to be increased to $A 200,000 per year in round 3, which also provides 50% of the additional R&D expe nditure above the base level to eligible firms. WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 90 
 
 
services, and communication services, accounting fo r 21%, 16%, 14.3%, and 10.7% of total 
budgetary assistance, respectively. 
(ii) Commitments under the General Ag reement on Trade in Services 
72. Australia's Schedule of Specific Commitments under the General Agreement on Trade in 
Services has remained unchanged since 2002.  Its existing GATS commitments cover most services 
sectors, with the exception of audiovisual, posta l-courier and rail transport services.  Australia 
submitted a revised services offer in May 2005, wh ich proposes improvements to its existing schedule 
of commitments in areas such as mode 4, professional services, telecommunications, environmental services, transportation and logistics services.
80  Australia considers its active participation in the 
GATS negotiations important in delivering e xport opportunities for its service providers.81  
73. During the period under review, Australia made  two communications to the WTO Working 
Party on Domestic Regulation, covering professi onal regulations, as well as development of 
disciplines on domestic regulations for the legal and engineering sectors.82  Australia is also a very 
active participant in the negotiations, and has s ubmitted various communications to the Special 
Session of the Council for Trade in Services.83 
(iii) Regional agreements on services 
74. Australia's regional trade agreements (RTAs) with New Zealand, Singapore, Thailand, and 
the United States all include provisions on services (Chapter II(6)(ii)(b)).  Under the Australia–New 
Zealand Closer Economic Relations Trade Agreem ent (ANZCERTA), the negative "inscription list" 
of the Protocol on Trade in Services, aimed at ensuring national treatment, remains unchanged since 
the previous Review.84  Currently, Australia's "inscription list"  includes air services, coastal shipping, 
broadcasting and television, third-part y insurance, and certain postal services.85   
75. The Singapore–Australia Free Trade Agreement (SAFTA) and the Australia–United States 
Free Trade Agreement (AUSFTA) both use a negativ e-list approach, whereby all services are in 
principle liberalized, with reservations for non- conforming measures contained in annexes to the 
agreements.  In addition, Australia has undertaken, esp ecially in its agreement with the United States, 
commitments that go beyond not only its GATS commitm ents, but also its revised services offer, in 
areas such as financial, legal, travel agencies/tour operator services. 
76. By contrast, the Thailand–Australia Free Trade Agreement (TAFTA) takes a positive list 
approach to scheduling commitments on services.   The commitments undertaken by Australia 
tend not to go beyond GATS, except for e-commer ce, and mode 4 (movement of natural persons) 
where Australia provides, for example, for the tem porary entry of Thai contractual service suppliers 
                                                      
80 WTO document TN/S/O/AUS/Rev.1, 31 May 2005;  and DFAT online information.  Viewed at:  
http://www.dfat.gov.au/trade/wto_public_discussion_paper_090 5.html  [02/March 2006].  These offers are non-
biding, and can be amended or withdrawn any time during the negotiations. 
81 DFAT online information.  Viewed at:  ht tp://www.dfat.gov.au/trade/negotiations/services/ 
australias_ trade_in_services.html [20 June 2006]. 
82 WTO documents S/WPDR/W/28, 22 June 2004;  and S/WPDR/W/34, 6 September 2005.   
83 WTO documents TN/S/W/43, 8 June 2005, TN/S /W48, 30 June 2005, TN/S/W/50, 1 July 2005, 
TN/S/W/53, 30 September 2005. 
84DAFT online information.  Viewed at:  http ://www.dfat.gov.au/geo/new_zealand/anz_cer/anz_cer. 
html [20 June 2006]. 
85 DAFT online information.  Viewed at:  http ://www.dfat.gov.au/geo/new_zealand/anz_cer/annex_ 
990309.html [20 June 2006]. Australia WT/TPR/S/178/Rev.1 
 Page 91 
 
 
for up to three years without labour market tes ting.  Nevertheless, TAFTA provides for further 
negotiations on market access in services and invest ment three years after its entry into force. 
(iv) Financial services 
77. The contribution of financial services to GDP  was 7.8% in 2005/06, up from 7.5% in 2001/02 
(Table I.2).  Australia's financial services sector  is based on three main institutional groups:  
authorized deposit-taking institutions (ADIs), whic h include banks, building societies, and credit 
unions;  non-ADI financial intermed iaries, including money market co rporations, finance companies, 
and securitization vehicles;  and funds managers and insurers, including lif e and general insurance 
companies, superannuation and approved  deposit funds (ADFs) (Table IV.3).86  
Table IV.3 
Structure of the financial system assets, 2002-05 
(Per cent and $A billion) 
 Main 
supervisor/ 
regulator June 2002 June 2003 June 2004 June 2005 
Total ($A trillion)  2.1 2.2 2.5 2.8 
  (Per cent of total) 
Banking sector   
Reserve Bank (RBA)  2.8 3.0 3.0 3.1 
Other banks APRA 46.2 47.8 49.4 48.4 
Other authorized deposit-taking institutions 
(ADIs)      
Permanent building societies APRA 0.6 0.6 0.6 0.6 
Credit unions APRA 1.2 1.3 1.2 1.2 
Registered financial corporations (RFCs)      
Money market corporations ASIC 4.2 4.4 2.7 2.8 
Finance companies ASIC 4.3 3.6 3.0 3.1 
Life offices and superannuation funds      
Life insurance offices APRA 8.6 7.4 6.9 6.7 
Superannuation funds APRA 14.3 14.1 15.0 15.9 
Other managed fund      
Cash management trusts ASIC 1.6 1.3 1.3 1.3 
Common funds State aut horities 0.4 0.4 0.4 0.3 
Friendly societies APRA 0.3 0.2 0.2 0.2 
Public unit trusts ASIC 6.4 6.1 6.2 6.4 
Other financial institutions      
General insurance offices APRA 3.8 3.9 3.7 3.4 
Securitization vehicles ASIC 5.4 5.9 6.5 6.6 
Source: Reserve Bank of Australia (undated), Bulletin Statistical Tables, Table B.1.  Viewed at: 
http://www.rba.gov.au/Statistics/Bu lletin/B01hist.xls [19 June 2006]. 
78. The banking sector remains Australia's largest holder of financial assets;  with an increasing 
share in total financial assets, it accounts for almost ha lf of the total assets of the financial system.  In 
addition, the importance of credit unions, building societies, finance companies, and money market 
corporations has fallen during the review period;  the authorities state that these institutions grew 
strongly in earlier decades partly as a result of strict regulation in the banking sector.  
79. The institutions that supervise the financial sy stem remain the same.  The Reserve Bank of 
Australia (RBA), Australia's central bank, is res ponsible not only for monetary policy, but also for 
                                                      
86 RBA (2006). WT/TPR/S/178/Rev.1 Trade Policy Review 
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maintaining financial stability and promoting the saf ety and efficiency of the payment system.  The 
Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial 
services industry. It oversees banks, credit unions , building societies, general insurance and 
reinsurance companies, life insu rance companies, friendly societies, and most members of the 
superannuation industry.87  Established on 1 July 1998, APRA is funded largely by the industries that 
it supervises.88  The Australian Securities & Investment s Commission (ASIC) assumes responsibility 
for market integrity and consumer protection acr oss the financial system, and supervises non-ADI 
financial intermediaries, public unit tr usts, and cash management trusts.   
(a) Banking 
80. Banks play a central role in the financial sy stem, and their share in total financial assets 
increased from 40% in 1985 to 48.4% in 2005.89  The expansion of banks reflects several factors, 
including deregulation of the banking sector, th e booming housing market, and the conversion of a 
number of building societies into banks. 
81. Currently, there are 53 banks operating in Australia, 14 of which are predominantly 
Australian owned;  there are no government-owned banks.90  The market is dominated by four major 
nation-wide banks, accounting for about two thirds of total banking assets.91  There are also 
39 foreign-owned banks, accounting fo r 20% of domestic banking assets.  Eleven of these operate as 
locally incorporated subsidiaries, and the remaining 28 are branches. 
82. A foreign bank is not allowed to raise deposit funds or undertake business in Australia, unless 
authorized by the APRA;  it may, however, raise f unds in Australia through issuing debt securities, on 
the condition that those securities are offered or traded in parcels of not less than $A 500,000.  
Foreign banks may operate in Australia through loca lly incorporated subsidiaries and/or authorized 
branches;  although branches are not subject to mi nimum capital requirements, they are not permitted 
to accept initial deposits of less than $A 250, 000 from Australian residents and non-corporate 
institutions.92 
83. Foreign investment in the banking sector needs to be consistent with the Banking Act 1959, 
the Financial Sector (Shareholdings) Act 1998 ( FSSA), and other provisions, including prudential 
requirements.  The FSSA specifies that financial sect or companies are subject to a 15% shareholding 
limit, although the Treasurer may approve a highe r percentage on "national interest" grounds.93  Any 
                                                      
87 On 1 July 2002, the Financial Sector (Collection of Data) Act 2001 came into effect, and repealed the 
Financial Corporations Act 1974.  Corporations that  were previously registered under the Financial 
Corporations Act are known collectively as "Registered Financial Corporations" (RFCs).  Under the Financial 
Sector (Collection of Data) Act 2001, the registra tion and categorization of these RFCs became the 
responsibility of APRA.  The change was made mainly to facilitate the collection of statistical data, not to empower APRA to supervise the activities of the RFCs (APRA online information.  Viewed at:  
http://www.apra.gov.au/rfc/  [21 June 2006]). 
88 APRA online information.  Viewed at:  h ttp://www.apra.gov.au/aboutapra/ [21 June 2006]. 
89 RBA (2006), p. 49. 
 90 In Australia, Commonwealth owned entities that may conduct financial operations are guaranteed by 
the Commonwealth Government.  Although the Commonwealth sold its shareholdings in the Commonwealth 
Bank of Australia (CBA) in 1996, a transitional Common wealth guarantee has been provided for all of the 
liabilities of the CBA.  The length of the guarantee depends on the characteristic of the liability (WTO document 
TN/S/O/AUS/Rev.1, 31 May 2005). 
91 The four largest banks are ANZ Banking Group, Commonwealth Bank of Australia, National 
Australia Bank, and Westpac Banking Corporation. 
92 WTO document TN/S/O/AUS/Rev.1, 31 May 2005. 
93 Financial Sector (Shareholdings) Act 1998, Part 2, Article 8. Australia WT/TPR/S/178/Rev.1 
 Page 93 
 
 
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.  Under the AUSFTA, acquisition of interests by U.S. investors in financial sector companies, as defined by the FSSA, are exempt from the notification requirements of 
the Foreign Acquisition and Ta keovers Act 1975 (FATA);  howev er, the FSSA and prudential 
regulations continue to apply (Table II.2). 
84. In May 2006, APRA released the revised prud ential standards and guidance notes, reflecting 
the adoption of International Financial Reporting Standards (IFRS) by authorized deposit-taking 
institutions (ADIs).  Under the revised standards, the definition of capital instruments eligible for 
Tier 1 capital from Australian accounting standards is in line with international practices.  The 
assessment of securitized  assets for capital adequacy purposes was also revised.  The revised 
prudential standards and guidance apply to all ADIs from 1 July 2006.
94 
85. The domestic interest spread among major banks  has continued to fall during the period under 
review, from 2.7 percentage points in 2002 to 2. 1 percentage points in 2005, possibly reflecting 
increased competition in the sector (Chart IV.1). 
2.02.22.42.62.83.03.23.43.63.84.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Per centChart IV.1
Major banks' domestic interest spreada, 1996-05
a
Source :Average interest rate received le ss average interest rate paid.
Information provided by th e Australian authorities.
 
                                                      
94 APRA media release on 31 May 2006.  Viewed at:  http://www.apra.gov.au/media-
releases/06_30.cfm [21 June 2006], and http://www.a pra.gov.au/ADI/ADI-Prudentia l-Standards-for-1-July-
2006.cfm [20 June 2006]. WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 94 
 
 
(b) Insurance 
86. On 30 June 2006 there were 35 life insurance companies operating in Australia, with assets 
worth $A 226.5 billion and receiving $A 40.1 bil lion in premium income for 2005/06.  The life 
insurance sector is relatively con centrated;  as at 31 December 2005, the top three groups accounted 
for 60% of total industry assets, and the top ten represented 92% of total assets.95  Foreign-owned 
companies accounted for 29% of total life insurance assets. 
87. Life insurance companies are supervised by  APRA under the Life Insurance Act 1995.  
Australia has no public life insu rers.  Superannuation business has the largest share of life insurance 
companies' assets, accounting for 89% as at 30 June  2006, and around 90% of premiums in 2005/06.  
Around 22% of all superannuation assets are held in li fe insurance policies as at 30 June 2006.   
88. As at December 2005, there were 133 private gene ral insurers in Australia, of which 112 are 
direct insurers and 21 are reinsurers.  They are prudentially supervised by APRA under the Insurance 
Act 1973.  The general insurance sector is also  highly concentrated, with the top three groups 
accounting for 45% of total industry assets, a nd the top ten representing 61% of total assets.96  There 
are also 14 public general insurers in Australia:  not subject to the Insurance Act nor regulated by 
APRA, they are regulated by state level legislation.   
89. Non-resident life insurers must be subsidiaries of foreign companies.97  Australia's GATS 
commitments also specify that sub-national guarantee s may be provided by some state and territory 
insurance offices.98 
90. APRA is strengthening its prudential requireme nts for general insurance companies, with a 
view to providing a clearer picture of reinsurance contracts.  Under the new requirements, reinsurance 
arrangements must be disclosed to APRA annually, a nd prior approval must be sought for limited risk 
transfer arrangements (financial reinsurance).  From  1 October 2006, general insurers supervised by 
the APRA must comply with the new requirements,  to provide a business plan confirming their ability 
to meet future capital requirements, and an annu al declaration of financial information by senior 
management. 
(v) Communications 
(a) Telecommunications 
91. In 2004/05, total income for the telecommunica tions services industry was $A 35.8 billion;   
the largest income sources were the provision of  basic telephony (32%), and mobile and paging 
(26%).  Telecommunications enterp rises employing more than 100 pers ons accounted for 90% of total 
employment and 94% of total income.99   
92. In 2005, the Australian Communications Author ity (ACA) was merged with the Australian 
Broadcasting Authority (ABA) to establish the Australian Communications and Media Authority 
(ACMA).  The ACMA's functions include regulati ng telecommunications and radiocommunications, 
                                                      
95 APRA online information.  Viewed at:  http ://www.apra.gov.au/Statistic s/Life-Insurance-Market-
Statistics.cfm [21 June 2006]. 
96 APRA online information.  Viewed at:  http ://www.apra.gov.au/Statistics/loader.cfm?url=/ 
commonspot/security/getfile.cfm&P ageID=12009 [3 August 2006]. 
97 WTO document TN/S/O/AUS/Rev.1, 31 May 2005, and Life Insurance Act 1995, Section 16ZE. 
98 WTO document TN/S/O/AUS/Rev.1, 31 May 2005. 
99 ABS document 8126.0, "Information and Communication Technology Australia", September 2006. Australia WT/TPR/S/178/Rev.1 
 Page 95 
 
 
providing information on  consumer issues, and issuing licences to telecommunications carriers.  
Carriers must be individually licensed.  There are no restrictions on the number of carrier licences, and any corporation, partnership corporation, or pu blic body may apply for a licence.  Conditions of a 
licence obtained under the Telecommunications Act 1997 include contributing to subsidies paid to 
universal service providers in fulfilling the univer sal service obligation, and complying with the 
telecommunications access regime and related access obligations, as applicable.
100  On 
23 September 2005, the requirement to provide an  industry development plan was discontinued.101 
93. In addition to carriers, service providers (carriage service providers, and content service 
providers) are regulated under the Telecommunications Act 1997.102  Carriage service providers must 
register with the Telecommunications Industry Om budsman (TIO) scheme, which provides a free and 
independent alternative dispute resolution scheme for small business and residential consumers of 
telecommunications services. 
94. The universal service regime consists of the uni versal service obligation (USO) and the digital 
data service obligation (DDSO).  Telstra Corporation Ltd (Telstra) is the universal service provider, 
although any other service provider can be so designated.103  Telstra receives a USO and DDSO 
subsidy, which is determined by the Communications  Minister on the advice of ACMA.  The subsidy 
is funded by a levy on all carriers, including Telstra, in proportion to their eligible 
telecommunications revenue.104   
95. Foreign ownership in the industry, apart from Tels tra, is subject to the general provisions of 
the Foreign Acquisitions and Take over Act 1975.  Foreign ownership of Telstra of up to 35% in 
aggregate, and up to 5% individually, is permitted.  Following the Telstra 3 share offer in October and 
November 2006, Commonwealth Government owne rship of Telstra was reduced from 51.8% to 
17%.105  
96. While Telstra's market share has continued to fall in the face of competition, it remains a 
major player in the sector.  In 2004/05, Telstra’ s overall market share by revenue was approximately 
75%, down 3.4 percentage points from 2001/02.106  The authorities indicate that, as at 30 June 2006, 
Telstra accounted for 71% of the PSTN (public sw itched telephone network) market, 43% of the 
mobile phone market by subscribers, and 44% of the broadband market by subscribers.  Since 1989, 
                                                      
100 APEC (2004), p. 100.  While the application re quirements are relatively liberal, the Minister for 
Communications, Information Technology and the Arts can impose further licence conditions.  The charge for applying for a carrier licence was reduced from $A 10,000 to $A 2,200, and the fixed component of annual 
carrier licence charges reduced from $A 10,000 to $A 1,000, by the ACMA. 
101 ACMA (2006), p. 10.  
102 Carriers are companies that own telecommunica tions network units (basically transmission 
infrastructure).  Among service providers, carriage service providers supply services using network units 
provided by carriers, and provide, fo r example, phone or internet access se rvices.  Content service providers 
provide, for example, pay TV services. 
103 Telstra is required by the USO to provide standard telephone services, public payphones and 
prescribed carriage services to all residents of Australia on  an equitable basis, wherever they reside or carry on 
business.  The DDSO requires Telstra to provide "reasonable and equitable"  access to a digital data service with 
a data speed broadly equivalent to 64 kbps upon request.   The ACMA approves and regulates how Telstra fulfils its USO and DSSO obligations, and decides wh ether Telstra provides "reasonable and equitable" access 
to other service providers.   
104 Productivity Commission (2006a).  In 2004/05, USO costs were set at $A 211 million, although 
Telstra considered this to be less than its actual costs. 
105 The Government held shares will be transferred to the Future Fund, an investment fund set up to 
strengthen the Commonwealth's long-term finance.   
106 ACCC (2006b), p. 6. WT/TPR/S/178/Rev.1 Trade Policy Review 
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Telstra has been subject to price control arrangeme nts aimed at stimulating competitive outcomes, by 
a requirement to pass on productivity gains to cons umers through lower prices for services such as 
line rentals, local, long-distance, international, and fixed to mobile call services.  In April 2004, the 
Minister for Communications, Information Technology  and the Arts designated the ACCC to review 
the operation of Telstra's retail price controls, l eading to new price control arrangements on Telstra 
commencing on 1 January 2006, and remaining in e ffect until 30 June 2009.  In 2004/05, the overall 
price paid by consumers for telecommunications  services fell by 6.6% from the previous year.107 
97. Competition in the telecommunications market  has been supported by the national access 
regime (Chapter III(4)(iii)(a)), contained in the Tr ade Practices Act 1974.  The telecommunications 
competition framework was refined by the Teleco mmunications Competition Act passed in 2002, 
with a view to, inter alia :  speeding up access to core telecommunication services;  facilitating 
investment in new infrastructure;  and building up a more transparent market.  In September 2005, the 
Parliament passed another package of further regu latory adjustments to the telecommunications 
regime, leading up to the divestiture of the Govern ment's remaining stake in Telstra (paragraph 95).  
The package included the operational separation of Telstra's retail and wholesale and network 
business areas, with full effect  from 1 December 2006;  operational separation involves measures 
dealing with both price and non-price conduct, with a view to ensuring that Telstra does not use its 
dominant wholesale/network position to give advantage to its own retail business in an anti-
competitive manner.    
(b) Media 
98. On 18 October 2006, the Australian Parliament  passed the media reform package, under 
which the current media-specific and newspaper-spec ific foreign ownership restrictions would be 
removed from 2007.  The media will remain a "sen sitive sector":  all direct (i.e. non-portfolio) 
proposals by foreign interests to invest in the medi a sector, irrespective of size, are subject to prior 
approval under the Government's foreign investme nt policy.  Proposals involving portfolio share 
holdings of 5% or more must also be submitted for examination.108  
(vi) Transport 
99. Transport accounted for a significant share of Au stralia's economy (4.9% of GDP in 2005/06), 
and the demand for transport is expected to almost double over the next 20 years.109  However, the 
recent global boom in mining commodities and the sub sequent increase in export demand have been 
obstructed by lack of transport facilities in some parts of Australia, particularly in coal ports. 
(a) Maritime services 
100. The Australian merchant trading fleet has decr eased in size;  the number of ships fell from 
82 in 1996 to 74 in 2003, the deadweight tonnage  fell from 3.3 million tonnes to 2.1 million tonnes, 
and the gross tonnage fell from 2.3 million tonn es to 1.6 million tonnes over the same period.110  
According to the authorities, this reflects greater reliance on foreign-flagged vessels. 
101. Australian shipping legislation generally requires both Australian and foreign-flagged vessels 
to comply with internationally agreed safet y and operational standards established under the 
                                                      
107 ACCC (2006a). 
108 DCITA media release.  Viewed at:  http://w ww.minister.dcita.gov.au/media/media_releases/ 
new_media_framework_for_australia [15 September 2006]. 
109 COAG (2006). 
110 ABS (2006), p. 553. Australia WT/TPR/S/178/Rev.1 
 Page 97 
 
 
International Maritime Organization (IMO) treaties.  For a ship to be registered in Australia, it must 
be majority Australian owned, unless it is designa ted as chartered by an Australian operator.   
102. Cabotage by foreign-flagged vessels is permitted.   Both domestic and foreign-flagged vessels 
are required to obtain a licence or a permit to operate  in Australia's coastal shipping.  To obtain a 
licence, operators are required to pay their crew Aust ralian rates of pay while the vessel is engaged in 
coastal shipping in Australia, and must not be receiving subsidies from foreign governments.  If the 
Minister for Transport is satisfied that there is no suitable licensed ship ava ilable for a shipping task, 
or the services provided by a licensed ship are cons idered inadequate, and an unlicensed ship meets 
the "public interest" requirement, a single voyage  or continuing permit may be granted to the 
unlicensed ship.  The "public inter est" is assessed on a case-by-case basis.111  Nonetheless, permits are 
almost always related to foreign-flagged vessels.112  Following a review of the permit/licence system, 
the Government has decided not to make any changes to the current policy.   
103. In 2003, 47% of Australia's exports and 80% of imports carried by sea were shipped under 
liner carriage.113  International liner shipping is exempted  from Australia's competition legislation:  
Part X of the Trade Practices Act 1974 (TPA) allows international liner shipping to form agreements 
for the joint supply and pricing of such shipping ser vices.  In addition, the TPA requires international 
liner cargo shipping operators to and from Australi a to be represented by an Australian resident.  
Australia's regulatory framework for liner shipping  was reviewed by the Productivity Commission in 
2004/05.114  The PC recommended that introducing co mpetition into liner shipping arrangements 
would promote efficiency and improve public inte rest.  Australia maintains no restrictions on 
international bulk shipping, except for requiring a ll ships to meet international safety, marine 
environment protection, and security standards.  
104. Port development and management is carried out  mostly by state or territory governments, 
either through port authorities or by government departments.115  There are some privately operated 
ports.  Auxiliary port services are subject to both Co mmonwealth and state legislation.  Towage and 
cargo handling, are usually provided by the privat e sector, and there is no restriction for foreign 
suppliers to provide stevedoring services.  Licence s for the provision of towage, pilotage and other 
auxiliary services through private business are genera lly issued through pub lic tender.  Foreign 
vessels are able to access Australian sea ports a nd use port and harbour facilities under the same 
conditions as domestic vessels.  The use of terminals is not mandatory.   
105. Recently, increased attention has been drawn to competition and access issues in several ports 
around the country.116  For example, the Export and Infrastructure Taskforce found capacity 
constraints at most of Australia's bulk ports for th e export of coal and iron ore.  Accordingly, the 
COAG agreed, as part of its new National Reform Ag enda that all state and territory governments 
should review the regulation of ports and port au thorities, as well as handling and storage facility 
                                                      
111 Satisfactory inspection reports are required for tankers and dry bulk vessels.  Viewed at:  
http://www.dotars.gov.au/maritime/freigh t/licences/index.aspx [11 August 2006]. 
112 Vessels with permits carried 24% of coastal to nnage in 2003/04, and performed 32% of coastal 
tonne-kilometres. 
113 Productivity Commission (2005d). 
114 Productivity Commission (2005d). 
115 Maritime safety for commercial shipping is the responsibility of the Australian Maritime Safety 
Authority, an agency of the Australian Government. 
116 The authorities state that competition between ports is more limited in Australia than in many other 
countries, due to the generally large distance between ports, and the specialization of ports in exporting particular resource commodities. WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 98 
 
 
operations at significant ports within their jurisdicti on, so as to promote competition and a consistent 
national approach.117   
106. Several pieces of legislation ha ve been revised during the period under review;  in particular, 
the Maritime Legislation Amendment Act 2006 incl udes amendments to the Lighthouse Act 1911, the 
Navigation Act 1912, the Protection of the Sea (Preve ntion of Pollution from Ships) Act 1983, and the 
Shipping Registration Act 1981.  Amendments related mainly to regulations on pilotage, prevention 
of pollution, and increased penalties for infringement.  The authorities state that penalties were increased both in terms of fines and period of impr isonment, as the previous penalty level had not 
been high enough to deter infringement.  In addition,  Australian chemical tankers are now required to 
prepare and carry a Marine Pollution Emer gency Plan for Noxious Liquid Substances.
118   
(b) Aviation services 
107. Australia's international civil aviation grew by 3. 9% in 2005/06 in terms of passengers carried 
to and from Australia, and by 3.3% in terms of freight traffic.  A total of 52 airlines operated 
international passenger flights in June 2006, while the top three, Qantas, Singapore Airlines, and Air 
New Zealand, accounted for 48.1% of total passenge rs to and from Australia.  Passenger numbers 
carried by domestic airlines reached 40.7 million in 2005, an increase of 7.6% over 2004.  Currently, 
major domestic airlines include Qantas, Virgin  Blue, and Jetstar, a subsidiary of Qantas.119   
108. The aviation industry is regulated mainly by the Department of Transport and Regional 
Services (DOTARS), together with the Civil Aviati on Safety Authority (CASA)  and the International 
Air Services Commission (IASC).  The IASC, esta blished under the International Air Services 
Commission Act 1992, allocates the available capac ity on international routes under bilateral air 
services arrangements to one or more carriers, base d on its assessment of the applicant's ability to 
undertake scheduled services, and sets conditions  where these are considered appropriate.120   
109. The Government, through DOTARS, is res ponsible for administering and negotiating 
Australia's air services arrangements.  DOTARS main tains a "register of available capacity", which 
contains details of the capacity available under each air services arrangement.  For a carrier to operate 
scheduled international air services, a licence must be obtained from DOTARS.121  Other aviation-
related functions of DOTARS include approving air port development programmes, as well as airline 
and airports security programmes. 
110. Australia permits the establishment of domestic ai rlines (other than Qantas) with up to 100% 
foreign ownership.  An air services agreement with New Zealand, which entered into effect on 
25 August 2003, allows consecutive cabotage (i.e. ca botage following an international journey) for 
                                                      
117 COAG (2006). 
118 Maritime Legislation Amendment Act 2006 .  Viewed at:  http://www.comlaw.gov.au/ComLaw/ 
Legislation/Act1.nsf/0/30E1F5593CCDD6E6CA25714C008128FE/$file/024-2006.pdf  [11 August 2006]. 
119 DOTARS (2006). 
120 Capacity and route rights available to Australia n and foreign international airlines servicing 
Australia are agreed bilaterally.  The IASC may review an allocation at any time, either at th e request of the 
carrier concerned, or if it believes it to be necessary.  Th e IASC is also responsible for reviewing the allocations 
after a specified period, and providing advice to the Minister for Transport about any issue related to 
international air operations (IASC online information.  Viewed at:  http://www.iasc.gov.au/iascrole.aspx#Role 
[30 September 2006]). 
121 Both scheduled and non-scheduled international air services need to meet the relevant requirements 
of the Air Navigation Act 1920, the Civil Aviation Act 1988 and related regulations.  Market entry for non-
scheduled services is determined in compliance with  domestic legislation and regulatory requirements 
(APEC, 2004). Australia WT/TPR/S/178/Rev.1 
 Page 99 
 
 
airlines designated as single aviation market (SAM) carriers (for New Zealand airlines only).122  
Opening cabotage service to foreign airlines may re duce the risk of tacit collusion in Australia's 
duopolistic market.123   
111. Foreign investment in an Australian internationa l carrier is permitted up to 49% (other than 
Qantas).  For Qantas, up to 35% aggregate foreign ownership, and 25% indi vidual foreign ownership 
is allowed.  Other restrictions are:  the word "Q antas" may not be removed from the company's name;  
the head office and principal operation centre must be  based in Australia;  two thirds of the board 
members, and the chair of the board, must be Australian citizens;  and Qantas must not be incorporated outside Australia.   
112. The Civil Aviation Safety Authority (CASA), an independent statutory authority, is 
responsible for aviation safety regulation under the Civil Aviation Act 1988 and relevant regulations.  
Airservices Australia, also a statutory authorit y, manages Australian administered airspace and 
provides services including air traffic control.  Aust ralia has been pursuing bilateral aviation safety 
agreements (BASAs) with key aviati on partners.  BASAs are believed by the authorities to be able to 
streamline the certification processes for mutual accep tance of aviation safety standards in a number 
of areas, including aircraft certification, ma intenance, flight operation, and environmental 
certification.  A BASA has been concluded with the United States. 
113. The Government commenced the privatization of airports in 1997, and Sydney Airport was 
privatized in June 2002.
124  As some major airports had significant market power, which could be 
used to set prices much higher than those in a mo re contestable market, the Government introduced 
price regulation together with the privatization process at major airports.125  Initially, prices had been 
regulated in various forms, including price notifica tion, price monitoring, and price cap arrangements.  
However, in October 2001, with some  airports facing financial pressur es in the light of reduced global 
demand for aviation services following the 11 September attacks, and the collapse of Ansett, a major 
domestic carrier, the Government eased the regulator y arrangements.  In May 2002, the Government 
announced a further easing of price regulation arra ngements in line with recommendations made by 
Productivity Commission.  Price notification and price cap arrangements for all airports (except 
regional airlines using Sydney Airport (see below) ) were discontinued, and price monitoring for 
seven airports (Adelaide, Brisbane, Canberra, Darw in, Melbourne, Perth, and Sydney airports) was 
introduced on 1 July 2002 for five years.   
114. The ACCC is in charge of monitoring the prices, costs, and profits regarding aeronautical and 
related services at these seven airports.126  When monitoring, the ACCC does not attempt to decide 
whether profits obtained by airports are eviden ce of "taking advantage of monopoly power";  
however, its reports help the Government to evalua te and prevent any misuse of market power, as the 
Government reserves the right to return to stronger price controls if required.  In addition, Sydney 
Airport must notify the ACCC if it intends to incr ease prices of aeronautical services to regional 
airlines.  Non-compliance with ACCC decisions could trigger a public inquiry and the freezing of 
price changes.  Currently, the Productivity Commi ssion is conducting an inquiry to assess the price 
monitoring regime;  the final report is expected to  be submitted to the Gove rnment in January 2007. 
                                                      
122 Further, the recent passing of the Civil Aviati on Legislation Amendment (Mutual Recognition with 
New Zealand) Bill 2005 enables mutual recognition of Air Operator's Certificates (AOCs), which will remove 
the necessity for SAM carriers to hold dual certifi cates for operations in Australia and New Zealand. 
123 OECD (2005b). 
124 By September 2001, all Commonwealth owned airports, apart from Sydney Airport, had been leased 
to commercially operated private sector companies (WTO, 2003). 
125 Productivity Commission (2006b).  
126 APEC (2004). WT/TPR/S/178/Rev.1 Trade Policy Review 
Page 100 
 
 
115. In addition, the national access regime provides for third-party access to services at Australian 
airports.  Established in 1995 a nd operating through Part IIIA of the Trade Practices Act (TPA) 1974, 
the regime promotes commercial negotiation between access seekers and infrastructure owners;  if an agreement cannot be reached via commercial negotia tions, compulsory arbitration is provided by the 
ACCC. 
116. Currently, major shareholders of the seven ai rports are investment and fund management 
companies.  Ownership arrangements for the seven price-monitored airports are contained in the 
Airports Act 1996:  up to 49% fore ign ownership is permitted, with a 5% limit on foreign airlines and 
cross-ownership limits between Sydney Airpor t (together with Sydney West) and Melbourne, 
Brisbane, and Perth airports (Table II.2). 
 Australia WT/TPR/S/178/Rev.1 
 Page 101 
 
 
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