International Trade (Unit 3 Topic 1)  

Australia's Balance of Trade

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The balance of trade on goods and services — often shortened to BOGS — is the value of what Australia sells to the rest of the world minus the value of what it buys. A surplus means exports exceed imports. A deficit means the reverse. It is the largest component of the current account and the only part that flows directly into GDP as net exports.

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For more than four decades Australia ran deficits. From the mid-1970s to 2017, a small open economy dependent on imported capital equipment, technology and manufactured consumer goods bought more than it sold in almost every year. Commodity export prices were relatively weak, and strong domestic growth pulled imports in faster than exports grew.

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That pattern broke twice, and both times prices did the work. In 2015 the balance hit a record deficit of $38.8 billion when iron ore and coal prices collapsed — new mine supply arrived just as China's construction slowed, dragging iron ore from around US$180 a tonne to under US$40. Export volumes kept growing; it was values that fell. Then from 2017 the LNG projects built during the mining investment boom reached full production, and commodity prices recovered. The balance moved into sustained surplus, and in mid-2019 the current account followed for the first time since 1975.

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Russia's invasion of Ukraine in 2022 pushed the surplus to a record $123.5 billion as Europe scrambled for alternative energy. It has been unwinding ever since — $88.6 billion in 2023, $29.2 billion in 2024, $6.9 billion in 2025 — as energy prices normalised and China's property downturn softened iron ore.

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The lesson is that Australia's trade position is a price story more than a volume story. The same commodities keep leaving; what changes is what the world will pay for them.