Australia, with a population of 16 million in 1986, is an advanced capitalist society with a federal system of government. More than 85 percent of Australia's population lives in urbanized areas, particularly in the east, southeast, and southwest of the continent. Sydney with 3.4 million residents and Melbourne with 2.9 are the country's two largest cities. Australia's population density of 2.1 persons per square kilometre is lower than that of any other country having a population of more than 5 million. The domestic economy is dominated by the finance, service, and manufacturing industries; yet in terms of external trade Australia has an export dependence on agricultural and mineral commodities, making the economy sensitive to world trading conditions. Like many other similar societies, Australia has experienced some economic contraction since the mid-1970s, a contraction exacerbated by the small indigenous market and commodity-based export dependence.