Every month, the Bureau of Statistics reports whether Australia sold more to the world than it bought. Here’s what the trade balance and current account measure, and why the numbers have changed so much.
The trade balance measures the difference between what a country sells to the rest of the world, its exports, and what it buys, its imports.
When exports are worth more than imports, the country has a trade surplus. When imports are worth more, it has a trade deficit.
The Australian Bureau of Statistics publishes trade figures every month.
What Australia trades
Australia’s biggest exports are resources and energy, especially iron ore, coal, natural gas and gold. Agriculture, such as beef, wheat and wool, is also important. Education, through international students, and tourism are major services exports.
Its biggest imports include cars, fuel, machinery, electronics, medicines and overseas travel by Australians.
China is by far Australia’s largest trading partner, followed by Japan, the U.S., South Korea and India.
From deficits to surpluses
For most of its modern history, Australia ran trade deficits. It imported more than it exported, and borrowed from overseas to fund investment.
That changed around 2018. Strong demand from China for iron ore, and higher energy prices, pushed exports up sharply. Australia has run trade surpluses ever since, reaching record levels when commodity prices spiked in 2022.
The size of the surplus goes up and down mainly with commodity prices, which Australia doesn’t control.
The current account
The current account is a broader measure. As well as trade, it includes income flows between Australia and the rest of the world, such as interest paid on foreign debt and dividends paid to overseas owners of Australian companies.
Because so many Australian companies and mines are partly owned by foreign investors, Australia pays out more of this income than it receives. For decades, that meant Australia had a current account deficit.
In 2019, Australia recorded its first current account surplus in more than 40 years, thanks to its booming exports. Since then, the current account has moved between surpluses and deficits.
Is a surplus good?
A trade surplus is often presented as good news, and strong export earnings do boost national income and tax revenue.
But a deficit isn’t necessarily bad. Countries that import a lot of capital equipment, or attract a lot of foreign investment, often run deficits while their economies grow. The U.S. has run large trade deficits for decades.
For Australia, the bigger risk is its reliance on a handful of commodities and on China. A sharp fall in iron ore prices or Chinese demand would quickly shrink its surplus.
