Trade Overview of Australia in 2023
The Australian government has consistently championed foreign trade and the dismantling of trade barriers, especially those that affect agricultural products. It recognizes that the Australian economy heavily leans on mineral resources and hence promotes international trade for economic stability and growth. The government has placed a significant emphasis on education, transforming it into the country’s most prominent service-sector export. Tourism trails closely behind education in this respect, contributing significantly to the nation’s service sector.
Australia’s merchandise exports, soared to US$412.2 billion in 2022, reflecting a significant increase from US$250.8 billion in 2020. Conversely, merchandise imports totaled US$309.2 billion in 2022, generating a trade surplus of US$103 billion. This figure is up from a trade surplus of US$39 billion in 2020 when imports were valued at US$211.8 billion. The services sector, however, didn’t perform as well. It ended up with a deficit of US$15.2 billion, a significant decline from a surplus of US$5.1 billion in 2021 and US$10.2 billion in 2020.
Department of Foreign Affairs and Trade data for 2020 reveals China as Australia’s primary export destination, absorbing 36.7% of all goods and services. Japan closely follows as the second largest consumer of Australian exports. Interestingly, China also topped the list of import sources, accounting for 23.8% of total imports, with the US trailing behind. The ten-member Association of South-East Asian Nations (ASEAN) absorbed 11.1% of Australia’s exports and supplied 14.4% of its imports in 2020. The European Union (excluding the UK) represented 3.9% of exports and 15.7% of imports.
Australia’s trade policies are shaped by its affiliations with global economic and trade organizations. As a member of the World Trade Organization, the OECD, the 21-member Asian-Pacific Economic Co-operation forum, and the Asian Development Bank, Australia enjoys the benefits of international collaboration and knowledge sharing. In 2017, it signed an economic cooperation agreement (PACER-Plus) with New Zealand and several Pacific-island countries. This agreement came into effect in 2020. Australia has also established free-trade agreements (FTAs) with various partners, including Chile, China, Japan, Malaysia, New Zealand, Singapore, South Korea, Thailand, and the US, as well as with ASEAN.
Further solidifying its trade ties, Australia enacted new bilateral FTAs with Hong Kong and Peru in 2020. The same year, an economic partnership agreement with Indonesia was enforced. Talks for a bilateral FTA with the EU are currently in progress. In a separate development, the Australian government signed an FTA with the UK in December 2021, following the latter’s departure from the EU bloc. This FTA is set to come into effect by the end of 2022.
Australia is actively involved in the development of significant regional trade agreements. As a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, it collaborates with ten other countries to promote liberalized global trade. Additionally, it’s part of the Regional Comprehensive Economic Partnership between ASEAN and the bloc’s existing FTA partners (India excluded). This agreement was enforced in January 2022.
Commodity prices significantly influence Australia’s trade balance. Iron ore, coal, and liquefied natural gas account for over half of the country’s total exports. The outbreak of the COVID-19 pandemic in early 2020 resulted in softened prices and dwindling demand due to lockdown measures and economic restrictions worldwide. However, prices of these commodities rebounded in 2021 and are projected to rise further in 2022. This price surge can be attributed, in part, to the imposition of US/EU sanctions on Russian fossil fuels following the Ukraine invasion in February 2022. These factors will lead to increased export values and a sharp rise in the import bill due to the spike in oil prices.
Australia’s relations with China, a significant trade partner, have been strained due to the pandemic. This strain was primarily caused by Australia’s demand for an independent investigation into the virus’s origins, which was first reported in China. The Australian government has also openly criticized China on several fronts, prompting the latter to impose trade restrictions and tariffs on Australian imports. Notably, China imposed tariffs of 116–218% on Australian wine for five years until March 2026, and temporary tariffs of 107–212% were applied in the same year. In retaliation, Australia has blocked large-dollar Chinese acquisitions within the country. Despite these tensions, Australia’s trade surplus with China remains significant due to high exports of iron ore.
Political changes in Australia following the May 2022 general elections, which saw the victory of the centre-left Labor Party, are expected to curtail further deterioration in relations with China. Despite this, Australia continues to work on reducing its dependence on China by diversifying its export markets and securing FTAs with other nations, particularly the EU and India. This strategy represents a long-term project. The presence of rare-earth minerals in Australia provides a unique opportunity to expand exports due to their critical role in global supply chains.
Tariffs and import taxes
As one of the founding members of the World Trade Organization (WTO), Australia adopts a tariff-classification system that aligns with the WTO’s Harmonized Tariff. While most Australian tariffs are set as ad valorem rates, meaning they are based on the value of the goods, certain products, such as alcoholic beverages and specific tobacco items, attract a combination of ad valorem rates and a fixed dollar amount per liter or kilogram. Tariffs on particular petroleum products reflect a specific value amount per quantity. The methodology for calculating import-tariff liability follows the WTO Valuation Agreement guidelines, with the primary method used being the transaction value, based on the price paid or payable for the goods. This customs value is determined at the place of export or at the free-on-board level.
Australia maintains a liberal trade policy, imposing no import quotas and setting a general tariff protection rate of 5%, which is even lower for imports from developing countries. Prior to 2015, certain imports like clothing and some finished textiles were subject to higher tariffs of 10%. However, this policy has been revised, and now all textiles also benefit from the preferential rate of 5%. Australia also offers tariff concessions to reduce costs on goods meant for re-export or used as inputs for businesses targeting exports.
A variety of legislations has been established to implement non-tariff restrictions on imports in Australia. These regulations are primarily designed to protect health, morals, and security, as well as to uphold quality standards. They also enforce international commitments and agreements such as bans on trading endangered species or cultural property. These controls may be imposed for various reasons, but all aim to protect domestic and international interests.
The Customs (Prohibited Imports) Regulations 1956, for example, impose import restrictions and prohibitions on specific goods like firearms. This legislation can also apply to goods imported from certain countries, such as the prohibition of uncertified rough diamonds. A comprehensive list of restricted and prohibited imports can be found on the Australian Border Force website.
Numerous other pieces of legislation regulate imports in Australia. These include the Copyright Act 1968, Wildlife Protection (Regulation of Exports and Imports) Act 1982, Movable Cultural Heritage Act 1986, Ozone Protection Act 1989, and Trade Marks Act 1995. The Commerce (Trade Descriptions) Act 1905, the Commerce (Import) Regulations Act 1940, and the Trade Marks Act 1995 exert strict controls on accurate labelling of imported goods, further demonstrating Australia’s commitment to upholding quality standards.
In terms of biosecurity, the Biosecurity Services Group was established under the Department of Agriculture, Fisheries and Forestry in 2009. Before this, various agencies, including the Australian Quarantine and Inspection Service and Biosecurity Australia, set import regulations. The Biosecurity Services Group now provides policy advice, assesses quarantines, and reviews potential risks associated with lifting existing bans on imports of animal and plant products.
Finally, customs clearance is obligatory for all goods entering Australia, with most commercial cargo importers employing the services of a licensed customs broker to fulfill the clearance requirements. The importer or broker uses the import invoice, bill of lading or arrival bill, and other related commercial documents to prepare a customs import entry. This information is then electronically filed with customs for assessment and clearance. Customs brokers are authorized to advise importers of specific regulations and controls applying to imports and assist in meeting legal requirements. Furthermore, countervailing duties can be imposed where evidence suggests that dumped or subsidized goods are significantly harming the Australian industry. These processes are all consistent with World Trade Organization requirements.
The Australian Customs Service oversees the export of goods from the country and assists in the compilation of trade statistics. While the majority of goods can be exported without restrictions, certain limitations do apply. For instance, specific goods, including suicidal devices, are strictly prohibited from being exported. A permit system also regulates the export of certain other items. These permits are often necessary for goods governed by international agreements, such as diamond exports, which are limited to countries partaking in the Kimberley Process Certification Scheme of 2003, or for goods posing potential health hazards like blood and tissue products. This permit system is designed to protect native flora and fauna.
Various legislations impose restrictions on other goods meant for export. This includes the Australian Wine and Brandy Corporation Act 1980, Wildlife Protection (Regulations of Exports and Imports) Act 1982, Australian Horticultural Corporation Act 1987, Hazardous Waste Act 1989, Therapeutic Goods Act 1989, Grain Marketing Act 2002, and Customs (Prohibited Exports) Regulations 2004. In response to the COVID-19 pandemic in early 2020, the federal government adjusted customs regulations to impose a fine of up to A$210,000 on individuals illicitly exporting hand sanitiser and personal protective equipment, such as medical face masks.
In addition to the permit requirements for exports, a formal entry of all goods meant for export must be filed with Customs if the value of the goods surpasses A$2,000 per consignment. However, certain exemptions to this entry requirement exist, such as for personal and household items.
Export insurance and credit
The export process in Australia requires that an export entry, or export declaration, be filed with Customs either electronically or by submitting a form at a Customs office. This must be done before goods can be loaded onto a ship or aircraft for export. Customs then provides an export clearance number indicating approval for their export. Ships and aircraft cannot leave Australia unless they have received a certificate of clearance from Customs. This certificate is only issued once all legal and administrative requirements for the vessel and its cargo have been met.
In terms of financing, most Australian exports are sold on short-term credit and financed by commercial banks at currency-specific rates. A fixed rate is usually applied for the term involved. Commercial banks prioritize the needs of exporters, and they handle exports under “documentary credits” (payment guarantees) or other terms. In cases where no documentary credit is available, banks may require exporters to purchase credit insurance for each shipment.
The Export Finance and Insurance Corporation (EFIC), an independent, government-owned entity, provides medium to long-term finance facilities to buyers of Australian exports or their financiers, aiding export purchases. Exports financed through the EFIC typically involve capital goods and/or services rather than consumables or commodities. The EFIC’s financing mechanisms include direct loans, project finance, export finance guarantees, documentary credits, bonds, medium-term payments insurance, and political-risk insurance. EFIC targets areas where private-sector capacity is insufficient or unavailable and, as of October 2021, it can also make equity investments and offer guarantees for overseas infrastructure transactions.
The EFIC can finance up to 85% of a contract value (or up to 80% for ships), with loan terms extending to 18 years. To be eligible for EFIC financing, which is available in any major trading currency, export contracts must involve capital goods largely produced in Australia or related services primarily provided from Australia. Foreign-owned companies established in Australia can utilize all EFIC facilities for goods and services that have at least partial Australian origin.
The EFIC also offers insurance coverage. It covers up to 100% against nonpayment due to defined political risks, such as exchange-transfer blockage, cancellation of import licenses, new import restrictions, war, revolution, or civil disturbance, and up to 90% of loss on commercial risks like insolvency or protracted default by the buyer. All risks are considered political when the buyer is a foreign government or is backed by a government guarantee. Stand-alone political-risk coverage against confiscation, war damages, and forced abandonment is also available for plant and equipment used in overseas projects by companies operating in Australia.