Australia commenced a basic reorientation of its economy in the 1980s and has transformed itself from an inward looking, import-substitution country to an internationally competitive, export-oriented one. Key reforms included unilaterally reducing high tariffs and other protective barriers; floating the Australian dollar exchange rate; deregulating the financial services sector, including liberalizing access for foreign bank branches; making efforts to restructure the highly centralized system of industrial relations and labor bargaining; better integrating the state economies into a national federal system; improving and standardizing the national infrastructure; privatizing many government-owned services and public utilities; and fundamentally reforming the taxation system, including introducing a broad-based Goods and Services Tax (GST).

The ultimate goal is for Australia to become a competitive producer and exporter, not just of traditional farm and mineral commodities, but also of a diversified mix of high value-added manufactured products, services, and technologies. Australia was one of the OECD's fastest-growing economies throughout the 1990s, a performance that owed much to the economic reform program. Despite a transient slowdown in late 2000, it has been 14 years since Australia experienced a recession and economic growth remains robust. Economic growth should be just under 3% in 2005, although the persistent strength of the Australian dollar and infrastructure bottlenecks could constrain export growth.

The Australia ñ U.S. Free Trade Agreement (AUSFTA) entered into force on January 1, 2005. The AUSFTA marks the first FTA the U.S. has concluded with a developed economy since the U.S.-Canada FTA in 1988. Australia has also completed FTAs with Singapore and Thailand and is pursuing similar Agreements in the region. A burgeoning trade relationship marked by ongoing, multi-billion dollar resource export contracts has driven FTA negotiations with China. Parallel efforts are underway with Malaysia and ASEAN.