Lexi Webster
Australia has a strong global economy, with trade contributing to 45% of its GDP and supporting one in ten jobs in the country. The country has trade agreements with several nations and economic regions, including Hong Kong, Peru, Indonesia, and the Association of Southeast Asian Nations (ASEAN). In 2024, Australia's top five partner countries for merchandise trade and services imports were led by Thailand, while India was among the top five countries for exports. Australia's economic prosperity is closely linked to Asia, with the majority of its principal export partners located in Northeast and Southeast Asia.
| Characteristics | Values |
|---|---|
| Trade as a percentage of GDP | 45% |
| Jobs directly dependent on trade | 1 in 5 Australian jobs |
| Jobs dependent on foreign investment | 1 in 10 Australian jobs |
| Foreign investment in Australia | A$4.7 trillion |
| Foreign investment growth (2022) | 9% |
| Foreign investment growth (average per year since 2003) | 7.1% |
| Number of free trade agreements | 18 |
| Top 5 merchandise trade and services export partners include | India |
| Top 5 merchandise trade and services import partners include | Thailand |
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What You'll Learn
Australia's top trade partners
Australia has a strong global trade presence, with businesses relying on international trade and foreign investment for their success. In 2024, Australia's top five partner countries for merchandise trade and services imports were:
Thailand
Thailand is one of Australia's top trade partners, with trade between the two countries totalling $24.1 billion in 2024, a rise of $1.2 billion (5.4%) on the previous year.
China
China is another significant trade partner for Australia, with Australian exports to China totalling $145 billion in 2022, making it Australia's largest export market that year.
Japan
Japan is also a key trade partner, with Australian exports to Japan totalling $59 billion in 2022, making it the second-largest export market for Australia that year.
United States
The United States is a prominent trade partner of Australia, with Australian exports to the US totalling $49 billion in 2022, making it the third-largest export market that year.
Indonesia
Australia and Indonesia have a strong trade relationship, with the Indonesia-Australia Comprehensive Economic Partnership aiming to boost export opportunities for Australian businesses in Indonesia, one of the world's fastest-growing regions.
Australia's trade relationships are vital to its economy, contributing to 45% of its GDP and supporting one in ten jobs in the country. The Australian government actively pursues an open trade agenda to strengthen these economic ties and promote future success.
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Trade agreements with Hong Kong and Peru
Australia has proven itself to be a key player in the global economy, with trade contributing to 45% of the country's GDP and providing one in ten jobs. In 2020, Australia secured new trade agreements with Hong Kong and Peru, marking a significant milestone in strengthening economic relations with these countries.
Australia-Hong Kong Trade Agreement
The Australia-Hong Kong Free Trade Agreement (A-HKFTA) and the associated Investment Agreement (IA) came into force on 17 January 2020. These agreements solidified Australia's relationship with one of its most significant trade and investment partners. The A-HKFTA and IA provide increased certainty for Australian businesses, service providers, and investors operating in Hong Kong. Furthermore, these agreements ensure continued access to the Hong Kong market for Australian exporters of education, financial, and professional services. A key advantage is the guarantee that Hong Kong will not impose tariffs on Australian goods in the future.
Peru-Australia Free Trade Agreement (PAFTA)
The Peru-Australia Free Trade Agreement, or PAFTA, entered into force on 11 February 2020. PAFTA represents a pivotal moment in the economic relations between Australia and Peru, providing Australian businesses with a gateway to Latin America. By removing barriers to trade and investment, PAFTA facilitates stronger value chains between the Americas and Asia. Under PAFTA, Australian exporters to Peru gain substantial new opportunities, particularly in the agricultural sector, with historic access granted to Peruvian markets for Australian beef, sugar, and dairy farmers. PAFTA also enhances bilateral services trade and provides a more transparent and predictable environment for Australian service providers operating in Peru.
These trade agreements with Hong Kong and Peru exemplify Australia's commitment to fostering stronger economic ties and promoting open trade and investment, ultimately contributing to the country's long-term economic success and the prosperity of its citizens.
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The Indonesia-Australia Comprehensive Economic Partnership
Australia has a strong global trade and investment relationship with many countries. In 2020, new trade agreements with Hong Kong and Peru were implemented. Australia also has trade agreements with 14 other economies, including Indonesia, its 14th largest trading partner.
Indonesia is a significant market for Australian goods and services exporters. In 2021-22, two-way trade in goods and services with Indonesia was valued at A$18.35 billion. Indonesia is one of Australia's largest markets for coal, crude petroleum, wheat, and live animals. It is also one of the fastest-growing economies in the Indo-Pacific region. By 2030, it is estimated to be the world's fifth-largest economy.
The IA-CEPA ensures that Australian businesses can take advantage of Indonesia's growth. Under the agreement, 99% of Australian goods by value will enter Indonesia duty-free or under preferential arrangements. This is a significant improvement compared to the previous agreement, the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), where only 85% of goods were allowed duty-free. The IA-CEPA also provides a boost to several service sectors, including education, tourism, finance, mining, and energy.
The agreement also includes a Skills Development Exchange Pilot, which allows businesses from both countries to send employees to undertake workplace placements for up to twelve months in the other country. This pilot aims to strengthen cooperation and understanding between the two nations while providing an opportunity for participants to develop their workplace skills.
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Foreign investment in Australia
Foreign investment has been a longstanding part of Australia's economic development. It has helped build the country's economy and will continue to enhance the well-being of Australians by supporting economic growth and innovation. Foreign investment supplements domestic savings, and without it, production, employment, and income would all be lower.
There are two main ways in which foreign residents or companies can invest funds in the Australian economy: portfolio investment and foreign direct investment (FDI). Portfolio investment refers to the purchase of securities (such as stocks or bonds) or equity and debt transactions that do not offer the investor any control over the operation of the enterprise. Common examples include the purchase of property, shares in Australian companies, or government bonds by foreign superannuation or pension funds. FDI, on the other hand, occurs when a foreign individual or entity establishes a new business in Australia or acquires 10% or more of an Australian enterprise, thus gaining some control over its operations. Examples of FDI include the establishment of Australian branches of multinational companies or joint ventures between Australian and foreign companies.
The Australian government encourages and promotes foreign investment, recognising its many benefits. The government reviews foreign investment proposals on a case-by-case basis through the Treasury to ensure they are consistent with the country's national interest. Australia offers several advantages compared to other countries seeking foreign investment. For instance, businesses with foreign investment generate around 40% of Australian exports, and foreign investment supports one in ten jobs in the country.
According to statistics, foreign economies had a total of almost $5 trillion invested in Australia at the end of 2024. The United States and the United Kingdom are the biggest investors in Australia, followed by Belgium, Japan, and Hong Kong. China is the thirteenth largest foreign investor, with 1.5% of the total investment. Australia attracts the 15th-highest amount of direct foreign inward investment globally.
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Australia's trade with Asia
Australia's economy is complementary to the growing economies of Asia. In recent years, Australia has secured preferential access to Asian markets, particularly in Northeast and Southeast Asia, through a network of free trade agreements. This has provided Australian companies with access to fast-growing markets, such as the anticipated 3 billion Asian middle-class consumers by 2030.
The Regional Comprehensive Economic Partnership, agreed to in 2019 and including 15 economies, is expected to boost export opportunities for Australian businesses in Asia. Australia's membership in the Asia-Pacific Economic Cooperation (APEC) forum also promotes regional trade and investment interests.
Asia literacy is becoming increasingly important for young Australians as the country seeks to strengthen its ties with the region. The Australian curriculum emphasizes the need for students to develop knowledge and understanding of Asian societies, cultures, and environments, fostering social inclusion and cohesion and contributing to the region's wellbeing.
Overall, Australia's trade with Asia is vital to its economy, and the country continues to pursue opportunities to strengthen these trade relationships.
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Frequently asked questions
Australia has trade agreements with numerous countries. In 2020, Australia secured trade agreements with Hong Kong and Peru, and was set to enter into the Indonesia-Australia Comprehensive Economic Partnership. Australia's top 5 partner countries for merchandise trade and services exports in 2024 included India.
Trade is equivalent to 45% of Australian GDP and is responsible for one in five Australian jobs. Foreign investment supports one in ten jobs in Australia.
Australia's top trading partners are located in Northeast and Southeast Asia. The top 5 partner countries for merchandise trade and services imports in 2024 included Thailand.
Australia has a network of 18 free trade agreements, giving Australian companies preferential access to fast-growing markets in Asia. This has resulted in duty-free or preferential access to an extra 1.7 billion consumers in other economies.
