Australia's economy: a quarry for export and a service economy at home

What Australia sells to the world

Australia's export list is short at the top. The Department of Foreign Affairs and Trade's tables for the 2025 calendar year, built from Australian Bureau of Statistics data, put total exports of goods and services at A$665.2 billion, and the first five items account for more than half of it:

The fifth line is the one that does not come out of the ground. Education-related travel counts what international students pay in Australia, their fees to Australian universities among it, as an export; at A$55.0 billion in 2025 it was worth close to the whole of the natural gas trade. Spending by foreign tourists is a separate line, and the two together are a large part of the services Australia sells abroad.

The Reserve Bank's snapshot of August 2026 sorts exports by type: resources 57.8%, services 21.5%, rural goods 11.6% and manufactures 7.7%. On the import side, the largest item in 2025 was personal travel by Australians abroad, A$68.5 billion, followed by refined petroleum, passenger cars and business services.

Where the exports go

The buyers moved from Europe to East Asia over the twentieth century. By 1967 Japan had become Australia's leading export partner, and Britain joined the European Common Market in 1973. The Parliamentary Library records exports to China rising from under A$7 billion in 2000 to more than A$169 billion in 2020, when China took 36.7% of the total.

In 2025 China's share was 29.4%, or A$195.6 billion, followed by Japan at 9.8%, the United States at 9.0%, the Republic of Korea at 6.7% and India at 4.8%. China was also the largest source of imports, at 19.8%, ahead of the United States at 15.0%. The largest changes in 2025 came in the smaller markets: exports to the United Kingdom rose 76.5% and to the United States 46.1%, while those to Japan fell 13.9%. Two blocs sell Australia more than they buy from it. The European Union took 3.9% of Australia's exports in 2025 and supplied 12.9% of its imports, while the members of ASEAN took 11.9% and supplied 17.9%. The concentration has a cost that the Parliamentary Library documented when China placed trade restrictions on Australian coal, barley, beef, wine, cotton and lobsters from 2020: iron ore kept total exports to China rising, since at the peak in mid-2021 it supplied more than 75% of the value of goods sent there, while the sanctioned products were sold elsewhere.

How the mining boom rose and fell

The Reserve Bank dates the modern boom to 2005 to 2011. Urbanisation and industrialisation in China and other emerging economies raised demand for the steel and energy commodities that Australia holds in quantity, and prices rose faster than supply could follow. By 2011 the terms of trade, the ratio of export prices to import prices, were about 75% above the average of the preceding century.

Investment followed prices. Mining investment had averaged just over 1.5% of GDP for the fifty years before the boom; it rose from about A$20 billion in 2004 to A$130 billion in 2012 and peaked at 9% of GDP. Almost all iron ore mining takes place in Western Australia, mostly in the Pilbara, and two-thirds of coal mining is in Queensland, so the boom was felt first in those two states. Wikipedia's economy article describes the years between 2010 and 2013 as a two-speed economy, in which mining regions grew while states such as Victoria went through recessions of their own.

The Australian dollar did much of the adjusting. Floated in 1983, it reached about US$1.10 at its peak in mid-2011 and by 2017 had fallen by about 30% against the US dollar. When commodity prices fell and the new mines added supply, the Reserve Bank cut its cash rate between 2011 and 2016 and activity shifted back towards the rest of the economy. The bank's own assessment is that the 2005 to 2011 cycle was far less disruptive than the terms of trade surges of the 1950s and 1970s, which brought high inflation on the way up and recessions on the way down.

What most Australians do for a living

Mining's weight in exports is not matched at home. In the Reserve Bank's August 2026 snapshot, health and education produced 13.9% of output, mining 9.9%, finance 7.7%, construction 7.6% and manufacturing 5.7%. Wikipedia's economy article, citing figures for 2017, puts the service sector at 62.7% of GDP and 78.8% of the workforce. Output by state follows population rather than ore: New South Wales produced 30.8%, Victoria 22.9%, Queensland 19.1% and Western Australia 16.5%.

Manufacturing is what shrank. It fell from 30% of GDP in the 1960s to 12% in 2007, after tariffs that once protected around 60% of manufacturing in the 1960s were cut from the 1980s onwards. Car assembly is the plainest case. The first Holden left the Fisherman's Bend factory in November 1948, and by the early 1960s four other makers had set up factories employing between 80,000 and 100,000 workers. Mitsubishi stopped production in March 2008, Ford in 2016, and Holden and Toyota in 2017. Most textile manufacturing had moved to Asia by 2010.

Finance grew with compulsory saving. The superannuation guarantee introduced by the Keating government in the 1990s requires employers to pay a share of wages into retirement funds, and the IMF's 2026 mission describes those funds as a source of stability, with limited borrowing, steady inflows and large holdings of foreign assets.

How farming holds on in a dry country

Agriculture was between a sixth and a fifth of GDP in the early 1950s and, by Britannica's account, less than 5% by the start of this century; Wikipedia's figure for agriculture, fishing and forestry together is about 2.1% in 2019. It remains an export trade. Britannica records that up to four-fifths of the wheat crop is exported, chiefly to East Asia, the Middle East and the Pacific, and that the grain is all white-grained, sown in May, June and July and harvested from September in Queensland to January in the south. Beef and wheat were the two farm products among the top eleven exports of 2025.

Farms are large and few. Less than a tenth of the country is used for intensive production and three-fifths for sparse grazing on natural pasture, and Britannica reports that about a tenth of farm businesses account for roughly half of output. The sheep flock peaked in 1970 and the cattle herd in the mid-1970s, and both have shrunk since. Water limits all of it. Only a minute fraction of the land is irrigated, by Britannica's account, and in the irrigation districts overwatering and poor drainage have brought soil salinity.

How governments tax and spend

The Commonwealth raises most of the money and the states spend much of it. Wikipedia's economy article puts the states' and territories' share at about 18% of government revenue against responsibility for almost half of spending, a gap it describes as a pronounced vertical fiscal imbalance. The Commonwealth taxes personal and business income, levies excise and customs duties and collects the goods and services tax. The states rely on payroll tax, land tax and, above all, stamp duty on property sales, and local councils levy rates.

The imbalance was made by war and by the courts. In 1942 the Commonwealth enacted a uniform income tax and offered the states grants in place of their own; the High Court upheld the scheme in the First Uniform Tax Case that year and again in 1957. In 1997 it struck down state licence fees on tobacco as customs duties that only the Commonwealth may levy, and the GST of 2000 moved another tax base to Canberra.

The IMF's 2026 mission found the combined deficit of the Commonwealth and the states had widened over the two previous fiscal years, with large state infrastructure programmes, health spending and the National Disability Insurance Scheme among the causes, and debt rising fastest in some states. It judged public debt still low beside that of many advanced economies and recommended replacing stamp duties with recurrent property taxes and relying less on income tax.

What the economy runs on

Coal generated 46% of Australia's electricity in 2023 and renewable sources 35%, of which solar supplied 16%, wind 12% and hydro 6%, by the figures in Wikipedia's geography article. Coal and natural gas together also earned A$123.9 billion in exports in 2025. The IMF's 2026 mission traced much of the renewed inflation to an energy-price shock. It also warned that the growth of data centres could push up energy costs if renewable capacity lagged behind.

The labour market was tight in 2026. The Australian Bureau of Statistics estimated unemployment at 4.6% in August 2026, as cited in Wikipedia's economy article, with participation at 67.1%, and the IMF described employment gains as strong through the start of the year.

Why growth ran for almost thirty years

Wikipedia's economy article records no recession between 1991 and 2020. The early 1990s recession cut GDP by 1.7% and employment by 3.4% and pushed unemployment to 10.8%; the next came in 2020, when pandemic lockdowns cut GDP by 7% in the June quarter. In between, the economy grew through the global financial crisis of 2008 to 2009, which the government met with stimulus spending and the Reserve Bank with interest rate cuts, while demand from China kept mining going.

The foundations were laid in the 1980s. The Hawke government floated the dollar in 1983, deregulated finance and admitted foreign banks, cut tariffs and quotas and sold government enterprises. A goods and services tax took effect in July 2000, and the Reserve Bank now aims to hold inflation between 2 and 3%.

What prices and housing did after the pandemic

Inflation returned after the pandemic. The two Wikipedia articles used here disagree on the peak: the history of Australia gives 7.8% in late 2022, and the economy article 6.1% in May 2022, falling to 2.4% by December 2024. The IMF's mission in September 2026 found that inflation had risen above the Reserve Bank's 2 to 3% target again since the second half of 2025, driven by strong domestic demand and higher oil prices. The bank lowered its cash rate in 2025 and reversed course in 2026. The IMF projected growth of 1.9% for 2026 and 1.6% for 2027.

Housing is the largest household exposure. The Reserve Bank's August 2026 snapshot gives an average residential dwelling price of A$1,111,100, household debt of 178% of income and household wealth of 933% of income. The IMF described a correction in the housing market following a period of strong price rises, and named weak productivity growth, slowing for decades and especially since the pandemic, as the economy's main structural problem. It also recorded that a boom in data centre construction was adding to private investment and to the pressure on the construction industry.