Lyla Lindsey
Australia's top export destinations are parties to trade agreements, with most countries signing a direct bilateral free trade agreement. China has long been Australia's top export destination due to its demand for energy and iron ore. In the 12 months to May 2024, iron ore accounted for 60% of Australian goods exported to China. Bilateral trade in goods and services with the US has doubled since the Australia-USA Free Trade Agreement in 2005, making the US Australia's second-largest two-way trading partner. However, Australia's most valuable exports are not sold in the US, but in China, Japan, and South Korea.
| Characteristics | Values |
|---|---|
| Top export destinations | China, US, India, Vietnam, Philippines |
| Top exports | Iron ore, coal, gas, energy, mining, beef, IP charges, franchising and licensing fees, royalties and other charges for the use of intellectual property |
| Impact of exports | Increase in global demand for Australia's exports will result in an increase in the price of those exports |
| Impact of imports | Cheaper imports have made Australians richer |
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What You'll Learn
China: Australia's top export destination
Australia has a relatively open, trade-exposed economy, meaning that changes in other countries' demand for its goods and services can significantly impact its economy. The country has plentiful natural resources, including the second-largest accessible reserves of iron ore, the fifth-largest reserves of coal, and significant gas reserves. As a result, commodities have long made up a sizeable share of its exports.
China has been Australia's top export destination for a long time, driven by its demand for energy and iron ore due to decades of industrialisation. In the 12 months to May 2024, iron ore accounted for 60% of Australian goods exported to China. Australia's exports to China are not limited to iron ore, however. The country also exports other commodities, such as coal and natural gas, which are primarily mined and produced in Western Australia and Queensland.
The increase in mining revenues and investment has had spillover effects on other sectors of the Australian economy. For instance, it has led to higher demand for workers in the mining sector and related industries, resulting in increased employment and wages, which have supported household incomes and consumption. This has resulted in more money being spent on goods and services in the country.
While China is Australia's top export destination, the United States is also a significant trading partner. Bilateral trade in goods and services with the US has doubled since the Australia-USA Free Trade Agreement (AUSFTA) came into effect in 2005. Australia's most valuable exports to the US are services, followed by intellectual property charges, which include franchising and licensing fees, royalties, and other IP-related fees.
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Iron ore: 60% of exports to China
Australia has the second-largest accessible reserves of iron ore in the world. Almost all of the country's iron ore mining occurs in Western Australia, mostly in the Pilbara region in the northwest of the state.
China is the world's largest importer of seaborne iron ore and has long been the primary market for Australia's iron ore exports. In 2018, China accounted for 67% of Australia's iron ore exports. By 2021, this number had risen to nearly 80% of total exports. Iron ore is a key raw material in steel production, and China is the world's largest producer of steel.
In recent years, diplomatic tensions between the two countries have threatened the trade relationship. China has sought to reduce its reliance on Australian iron ore, slashing steel exports to Australia by 50% in an attempt to "wean itself off" Australia's iron ore industry. Despite this, Australia's iron ore exports to China have remained strong, breaking records for both export volumes and prices. The Australian Government’s Department of Industry, Science, Energy and Resources expects iron ore exports to reach a value of $83 billion by 2025.
The trade is mutually beneficial, with Australia's iron ore industry expected to generate $150 billion in revenue by 2020, and China relying on Australia for 60% of its iron ore imports. Experts believe that China will be unable to significantly reduce its dependence on Australian iron ore by 2030.
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Mining and energy: key exports
Mining and energy are key exports for Australia. The country has a rich history of mining, dating back to the gold rushes of the 1850s, which encouraged population growth and immigration. Today, mining remains a cornerstone of the Australian economy, contributing around 13.6% of total GDP in 2023.
Australia is a top producer of many valuable minerals and energy sources, including iron ore, coal, lithium, uranium, gold, nickel, bauxite, and natural gas. Iron ore is one of Australia's most valuable exports, with Japan, Taiwan, and South Korea being key importers. In the 12 months to May 2024, iron ore accounted for 60% of Australian goods exported to China.
Australia is the world's largest producer of lithium, with the Greenbushes mine in Western Australia accounting for over 20% of global production in 2021. The country also has the world's largest uranium reserves, with significant deposits found in Queensland, the Northern Territory, Western Australia, and South Australia.
Coal is another key export, with Australia ranking as the second-largest coal exporter globally in 2018. While coal is exported, it is also used to generate a significant portion of Australia's primary energy supply.
In addition to its mineral exports, Australia has abundant reserves of industrial minerals such as clays, mica, salt, and building materials. The country also has significant natural gas and oil reserves, with Western Australia, Queensland, New South Wales, and Victoria being key production regions.
The United States is also a significant trading partner for Australia, with bilateral trade agreements in place. The two countries have strengthened their cooperation in the mining sector, particularly regarding critical minerals such as antimony, manganese, and rare earths.
Australia's exports of raw materials have contributed to its transformation into an exporting powerhouse, with a strong focus on export-oriented industries. The country's vast natural resources and strong demand from countries like China, Japan, and South Korea have positioned Australia as a key supplier of energy and minerals on the global stage.
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$15.85 $59.95
Bilateral trade agreements
Australia has a relatively open, trade-exposed economy, with plentiful supplies of natural resources. Commodities such as iron ore, coal, and natural gas make up a sizeable share of its exports. Australia's free trade agreements (FTAs) aim to benefit Australian exporters, importers, producers, and investors by reducing or eliminating barriers to international trade and investment.
Australia currently has 18 FTAs in force, including bilateral agreements with:
- Chile
- China
- Hong Kong
- India
- Indonesia
- Japan
- South Korea
- Malaysia
- New Zealand
- Peru
- Singapore
- Thailand
- The United Kingdom
- The United States
Australia also has four plurilateral agreements:
- The ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)
- The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- The Pacific Agreement on Closer Economic Relations (PACER) Plus
- The Regional Comprehensive Economic Partnership (RCEP)
The Department of Foreign Affairs and Trade (DFAT) leads and coordinates FTA negotiations on behalf of the Australian government, ensuring the interests of agriculture industries are strongly represented. FTAs provide a competitive edge for Australian businesses by opening up opportunities in key markets and facilitating access to highly protected markets or enabling entry into new or expanding markets.
One example of a bilateral FTA is the Australia-United Kingdom FTA, which entered into force on May 31, 2023. This agreement followed the UK's formal request to accede to the CPTPP in February 2021 and the subsequent signing of the UK's Accession Protocol in July 2023.
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US: second-largest two-way trading partner
Australia has plentiful natural resources, including the world's second-largest accessible reserves of iron ore, the fifth-largest reserves of coal, and significant gas reserves. Commodities such as iron ore, coal, and natural gas are mined and produced primarily in Western Australia and Queensland. Australia's economy is relatively open and trade-exposed, meaning that changes in other countries' demand for its goods and services can significantly impact its economy.
China has long been Australia's top export destination due to its demand for energy and iron ore. However, the United States is Australia's second-largest two-way trading partner. Bilateral trade in goods and services with the US has doubled since the Australia-USA Free Trade Agreement (AUSFTA) came into effect in 2005. While Australia typically maintains a trade deficit with the US, importing more than it exports, the US is still a significant market for Australian goods and services.
Australia's most valuable exports to the US are services, which include tourism, education, and business services. Intellectual property charges, such as franchising and licensing fees, are the second-largest Australian export to the US. Additionally, Australian beef exports to the US have seen strong growth, fuelled by favourable market access under the US-Australia Free Trade Agreement and a weaker Australian dollar.
The US-Australia trade relationship is not without its challenges. Some US politicians have argued that Australia's strict biosecurity controls, such as the ban on fresh beef due to bovine spongiform encephalopathy (BSE), represent a barrier to trade. However, despite these differences, the US remains a crucial trading partner for Australia, contributing to the growth and diversification of its economy.
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Frequently asked questions
China has long been Australia's top export destination, due to its demand for energy and iron ore.
The US is Australia's second-largest two-way trading partner.
Australia's most valuable exports to the US are services, IP charges, and travel services.
Mining and energy account for the majority of the value of Australian exports, with agricultural products making up the rest.
India, Japan, and South Korea are also among Australia's top export destinations.
