The Australian trade surplus has narrowed in the June quarter of 2026 as resources exports slow and imports rise, reflecting a domestic economy that is still growing despite higher interest rates.
Business & Markets Desk is a contributing writer covering business and public affairs for The Sydney Times.
The Australian trade surplus has narrowed in the June quarter of 2026 as resources exports slow and imports rise, reflecting a domestic economy that is still growing despite higher interest rates and a weaker currency. The Australian Bureau of Statistics reported that the trade surplus fell to $8.5 billion in the June quarter, down from $11.2 billion in the March quarter and $12.8 billion in the December quarter of 2025. The narrowing is driven by a combination of lower commodity prices, reduced export volumes, and increased import demand as households and businesses continue to spend despite the higher interest rate environment.
The trade surplus had been a bright spot for the Australian economy throughout 2025 and early 2026, as high commodity prices and strong demand from China and other Asian markets drove resources exports to record levels. The surplus helped to support the Australian dollar, to contribute to national income, and to offset the weakness in household consumption and business investment that resulted from the RBA's interest rate hikes. The narrowing of the surplus is a sign that the tailwind from high commodity prices is fading, and that the Australian economy is becoming more dependent on domestic demand to drive growth.
The resources export slowdown is driven by lower commodity prices rather than lower production volumes. Iron ore, which is Australia's largest export commodity, averaged $110 per tonne in the June quarter of 2026, down from $130 per tonne in the same quarter of 2025, reflecting a slowdown in Chinese steel production and increased supply from Brazil and Africa. The lower price reduced the value of iron ore exports by roughly 15 percent year-on-year, even as export volumes remained relatively stable. BHP and Rio Tinto, which together account for roughly 60 percent of Australian iron ore exports, reported lower revenues in their June quarter results, reflecting the price decline.
Coal exports also fell in the June quarter, as the closure of the Liddell Power Station reduced demand for thermal coal from the NSW electricity market and as global coal prices remained under pressure from the transition to renewable energy. Metallurgical coal, which is used in steelmaking, averaged $250 per tonne in the June quarter, down from $280 per tonne in the same quarter of 2025, reflecting weak steel demand in China and increased supply from Indonesia and Mongolia. The lower coal prices reduced the value of coal exports by roughly 10 percent year-on-year, adding to the pressure on the trade surplus.
Liquefied natural gas exports remained strong in the June quarter, as the Ichthys and Prelude floating liquefied natural gas facilities in Western Australia continued to operate at high capacity. LNG exports averaged $12 billion per month in the June quarter, roughly flat compared with the same quarter of 2025, as high global gas prices offset the impact of the stronger Australian dollar. The LNG sector is now Australia's second-largest export sector after iron ore, and it is a significant contributor to the trade surplus and to national income. The sector's performance is underpinned by long-term contracts with buyers in Japan, China, and South Korea, which provide a stable revenue stream regardless of short-term price movements.
Import demand has remained resilient despite higher interest rates and a weaker currency, reflecting a domestic economy that is still growing and households that are continuing to spend. The ABS reported that imports of goods and services rose by 3.2 percent in the June quarter, driven by increased imports of consumer goods including clothing, footwear, and household appliances, and by increased imports of capital equipment including machinery and vehicles. The resilience of import demand is a sign that Australian households are still feeling confident enough to spend, despite the higher cost of living and the higher cost of imported goods resulting from the weaker Australian dollar.
The weaker Australian dollar is making imports more expensive, which is contributing to the trade deficit in goods and services. The ABS reported that the value of imports of goods rose by 4.5 percent in the June quarter, while the value of exports of goods rose by only 1.2 percent, reflecting the combined effect of lower commodity prices and a weaker currency. The trade deficit in goods and services is a concern for the RBA, because higher import prices feed through to consumer prices and make it harder to bring inflation back to target. The bank is aware of the dynamic, but it has made it clear that it will not hesitate to keep interest rates high for as long as necessary to achieve its inflation objective.
The services trade balance has improved in the June quarter, as the recovery in international tourism and education continues to boost exports of services. The ABS reported that exports of services rose by 5.8 percent in the June quarter, driven by increased spending by international visitors and international students. The tourism sector has been recovering strongly from the COVID-19 pandemic, with international visitor arrivals reaching record levels in the first half of 2026, and the education sector has also seen strong growth as international student enrolments have increased. The improvement in services exports is helping to offset the weakness in goods exports, and it is contributing to a more balanced trade position.
The services trade balance is also benefiting from the weaker Australian dollar, which makes Australia a cheaper destination for international visitors and international students. The tourism sector is particularly sensitive to currency movements, because a lower AUD reduces the cost of accommodation, food, and transport for foreign visitors, making Australia a more attractive destination relative to other countries. The education sector is similarly benefiting, because a lower AUD reduces the cost of tuition and living expenses for international students, making Australian universities more competitive in the global education market. The benefit is partially offset by the higher cost of imported goods and services for the tourism and education sectors, including accommodation, food, and transport.
The trade surplus is expected to narrow further in the second half of 2026, as commodity prices remain under pressure and import demand remains resilient. The RBA's August 2026 Statement on Monetary Policy noted that the trade surplus is likely to remain a drag on GDP growth in the near term, as the contribution from net exports turns negative. The bank's forecast is for the trade surplus to average $7 billion per quarter in the second half of 2026, down from $10 billion per quarter in the first half, as the resources export slowdown continues and import demand remains firm.
The narrowing of the trade surplus is a sign that the Australian economy is becoming more dependent on domestic demand to drive growth, and that the tailwind from high commodity prices is fading. The shift is not necessarily negative, because a more balanced economy is less vulnerable to commodity price shocks and currency fluctuations, but it does mean that the RBA's task of bringing inflation back to target will be more challenging as import prices remain elevated. The bank's dilemma is that it needs to keep interest rates high enough to contain inflation, but high rates also support household consumption and import demand, which is working against the trade surplus. The tension is unavoidable, but it is creating anxiety for businesses and households that are facing higher costs and higher interest rates simultaneously. Read more economic analysis at the Business & Markets hub
ABS trade data is available at the Australian Bureau of Statistics. RBA economic forecasts are published at the Reserve Bank of Australia.
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