Ever wondered why the Australian dollar (AUD) sometimes feels like it’s riding a roller coaster compared to other major currencies? The answer is less about complex financial formulas, and more about what’s actually driving the country’s economy at its core. This article explores how specific Australian industries—especially those with major export footprints—directly shape the AUD’s strength, using real-life market data, regulatory references, and a few lessons from my own hands-on experience trading the currency.
Let’s start with the basics: a currency’s value, especially for a country like Australia, is heavily influenced by what the country sells to the world. In simple terms, the more global demand there is for Australian goods, the more international buyers need to buy AUD to pay for them. This demand for the currency can push its value up.
But not all industries are created equal. Australia’s export profile is famously narrow, and I learned this the hard way as a rookie trader in Sydney, watching the AUD spike whenever iron ore prices jumped. I remember missing an important move on a Friday morning, only to realize later that a supply disruption in Brazil (Australia’s main iron ore competitor) had sent Chinese importers scrambling for Aussie contracts. That’s how tightly the AUD is tied to certain sectors.
Australia is the world’s largest exporter of iron ore, with China as its biggest customer. According to Austrade’s export statistics for 2023, iron ore alone accounts for roughly 20% of total Australian exports. The Reserve Bank of Australia (RBA) also repeatedly references iron ore’s impact in its Bulletin, noting that swings in commodity prices often lead to immediate adjustments in the AUD/USD rate.
Here’s a quick story: In May 2021, when iron ore prices hit an all-time high, I watched the AUD surge to near 0.78 against the USD. The move was so sharp that even market veterans on the ForexFactory AUD/USD forum commented, “Iron ore is driving this train.” But when Beijing hinted at steel production curbs, iron ore prices slumped—and the AUD followed suit.
After mining, energy exports—especially coal and liquefied natural gas (LNG)—have a huge effect. Australia is a top-three global exporter for both. The Australian Government’s Resources and Energy Quarterly reported that in 2023, coal and LNG together made up more than 15% of total export value.
Whenever there’s a disruption in global energy supply (say, Russia-Ukraine tensions), buyers in Japan and Korea move quickly to secure Australian contracts, which again puts upward pressure on the AUD. For example, in early 2022, I was watching the AUD/USD chart when news broke about new Japanese LNG deals with Australia. The currency immediately popped higher, despite soft domestic economic data.
While not as flashy as mining, Australia’s agricultural exports—especially beef, wheat, and wool—have a consistent influence on the AUD. The Australian Bureau of Statistics puts agricultural exports at around 10% of the country’s export value.
I remember a time in 2019 when a severe drought led to poor wheat harvests. The subsequent drop in export revenue coincided with a weakening AUD, as confirmed in the Rural Bank Grains Report. Agricultural shocks may not cause wild currency swings, but over time, they contribute to the broader trend.
Now, here’s a twist most people overlook: Australia’s services sector, especially international education and tourism, is a major source of foreign income. Pre-pandemic, these two combined were worth over AUD 60 billion annually, according to Department of Education data.
During COVID-19, when borders closed, the AUD tanked—not just because of commodity prices, but because students and tourists weren’t coming (and weren’t buying AUD). Now that borders have reopened, there’s been a partial recovery, though Chinese student enrollments remain a big “watch this space” risk.
Let’s simulate a scenario: In 2021, a cyclone disrupts Western Australia’s iron ore exports. Global iron ore futures spike. Overnight, international buyers rush to lock in contracts, buying up AUD. The next day, I noticed the AUD/USD pair jumped 1.2% in pre-market trading—despite no change in interest rates or other macro factors. This kind of move is common, and every trader in my Slack group was talking about it.
On the flip side, when China imposed informal bans on Australian coal in late 2020 (see ABC News coverage), the AUD took a hit, even though other commodities were stable. It showed how dependent the currency is on a handful of key sectors.
I once interviewed a senior analyst at the Commonwealth Bank, who put it bluntly: “If you want to predict the AUD, watch iron ore, LNG, and the flow of international students. Everything else is secondary.” That’s echoed in countless RBA papers and IMF country reviews (IMF Australia 2022 Article IV).
Forum regulars on Whirlpool also joke that “AUD is just a proxy for China’s steel mills”—a bit of an exaggeration, but not far off.
A lot of confusion comes from the fact that what counts as “verified trade” (i.e., officially recognized exports/imports for currency settlement or statistical purposes) varies between countries. This can impact how quickly and accurately industry data reflects in the AUD.
| Country/Region | Verification Standard | Legal Basis | Executing Body |
|---|---|---|---|
| Australia | Customs Export Declarations, Export Permits | Customs Act 1901 | Australian Border Force, ABS |
| China | CIQ Certificates, Export Licenses | Foreign Trade Law of PRC | General Administration of Customs |
| EU | Single Administrative Document (SAD) | EU Customs Code | National Customs Authorities |
| USA | Automated Export System (AES), EEI Filing | Export Administration Regulations | US Census Bureau, CBP |
Source: WCO Revised Kyoto Convention
Let’s take a real example: In 2020, Australia claimed record beef exports to China, but Chinese authorities rejected some shipments over labeling issues (see USTR’s NTE Report). The result? The AUD barely moved at first, because the official Australian statistics still counted the goods as exported. But when it became clear that Chinese customs wouldn’t clear the cargo, the revenue didn’t materialize—eventually pushing the AUD lower as traders priced in lost sales.
This mismatch in trade verification standards is why seasoned forex traders are so obsessed with “realized” versus “reported” export numbers, and why I now always double-check both ABS and counterpart country data before making a big trade.
In sum, if you want to understand (or trade) the Australian dollar, pay close attention to the performance—and international treatment—of the mining, energy, agriculture, and services sectors. Market shocks in these areas ripple quickly into the AUD, but the actual impact can be distorted by how trade is officially verified across borders.
My advice? Don’t just watch the headlines—dig into the actual export numbers, cross-reference with overseas customs data, and keep an eye on “verified” versus “reported” trade. It’s not glamorous, but it’s how I’ve avoided more than a few nasty surprises.
For further reading, I recommend reviewing the RBA’s analysis on commodity prices and the AUD, and the Australian Government’s latest trade statistics. The more granular your data, the better your read on the AUD.