Australia has exhibited robust economic growth over the last decade, in spite of a strong Australian dollar that has depressed exports. However, in 2006, severe drought, increasing inflation, and high oil prices all contributed to a deceleration of economic growth. The country achieved a 2.5 percent increase in real gross domestic product (GDP) in 2006, down from a 2.7 percent GDP growth rate in 2005.

Australia is rich in natural resources with significant petroleum, natural gas and coal reserves. Australia’s energy consumption is dominated by coal, which fuels most of the country’s power generation. Petroleum accounts for a large share of energy consumption, but due to declining output, Australia is facing a growing dependence on petroleum imports. Over the past two decades, Australia has steadily consumed increasing amounts of natural gas, which is likely to continue over the medium term.

Australia is one of the few countries belonging to the Organization for Economic Cooperation and Development (OECD) that is a significant net energy exporter. Australia is the world’s largest coal exporter and is the fifth largest exporter of liquefied natural gas (LNG). Australia’s prospects for expanding energy exports in the future are promising as Asian demand for both coal and LNG rises. However, Australia can expect increasing export competition from China (coal) and Indonesia (coal and LNG).

In July 2005, the Australian government formed the Australian Energy Regulator (AER). The AER is responsible for economic regulation in Australian energy markets. In addition, the AER promotes investment in the energy sector to ensure supply security, while monitoring prices faced by end users. In 2006, Australia’s 13 government bodies transferred energy regulation responsibility to the AER. The AER is seeking $23 billion in infrastructure investments over the next 15 years.