Australia's economy — what the country actually earns from

Services account for roughly 80 per cent of employment and a similar share of gross value added. The single largest employing industry is health care and social assistance, which has grown steadily for two decades and accelerated with the National Disability Insurance Scheme and an ageing population. Retail trade, construction, professional and technical services, and education and training follow.

Mining, despite its outsized role in exports and in the national conversation, employs only around two per cent of the workforce. It is extraordinarily capital-intensive: a single iron ore operation can move tens of millions of tonnes a year with a few thousand staff, many on fly-in, fly-out rosters.

Manufacturing has shrunk substantially since the 1980s and lost its most visible sector when the last domestic car plant closed in 2017. What remains is concentrated in food processing, metals, machinery and specialised equipment rather than mass consumer goods.

Export earnings tell a completely different story from employment. Iron ore is consistently the largest single export, followed by coal — both metallurgical coal for steelmaking and thermal coal for power — liquefied natural gas, and gold. Together these resource exports typically make up more than half of goods and services export income.

The largest services exports are education — international students paying fees and living costs in Australia — and tourism. Both were devastated by the 2020–2022 border closures and have since recovered, with international education returning to being one of the country's largest export earners.

Agriculture, though culturally central and politically powerful, is a smaller share than most Australians assume: beef, wheat, wool, wine, barley and dairy matter, but the sector is roughly comparable in export value to education rather than to iron ore.

China has been Australia's largest trading partner since 2009 and buys around a third of Australian goods exports, overwhelmingly iron ore. Japan, South Korea, India and the United States follow, with the United States being the largest source of foreign investment rather than the largest goods customer.

Between 2020 and 2023 China imposed trade restrictions on a range of Australian goods including barley, wine, beef, coal, timber and lobster, in a period of sharp diplomatic tension. Most of those measures have since been removed. Notably, iron ore was never restricted, because China had no alternative supplier at the required scale.

That episode is the clearest available illustration of both the vulnerability and the leverage in the relationship: exporters of substitutable goods were badly hurt, while the single largest export was untouched.

The Commonwealth collects the great majority of tax revenue: personal income tax is by far the largest single source, followed by company tax and the goods and services tax. The GST, at 10 per cent, has not changed since it was introduced in 2000, and all its revenue is distributed to the states.

Personal income tax is progressive, with a tax-free threshold of $18,200 and marginal rates rising in steps to 45 per cent, plus a 2 per cent Medicare levy. From 1 July 2026 the rate applying to the first taxable bracket above the tax-free threshold was legislated to fall, with a further reduction scheduled for 1 July 2027.

States raise their own revenue mainly through payroll tax, stamp duty on property transfers, land tax and gambling taxes — a narrow and volatile base, which is why property market downturns hit state budgets hard.

Superannuation sits alongside the tax system as a compulsory second pillar: employers must pay a percentage of ordinary time earnings into a fund, set at 12 per cent from 1 July 2025. The accumulated pool is among the largest pension asset bases in the world relative to population.

Housing affordability is the dominant domestic economic issue. Australian house prices relative to income are among the highest in the developed world, driven by a combination of restricted land supply near jobs, tax settings that favour investment property, sustained population growth and long periods of low interest rates. No level of government controls all of those levers, which is part of why the problem persists.

Productivity growth has been weak for over a decade, and this is now the standard explanation for stagnant real wages. The Productivity Commission's work attributes it to a mix of slowing business investment, a shift towards sectors where measured productivity grows slowly, and reduced dynamism in the business population.

Concentration is a quieter but persistent issue: Australia's small domestic market has produced unusually concentrated banking, supermarket, insurance, airline and telecommunications sectors, with two or three players in each.

Finally there is the transition question — a large share of export income comes from fossil fuels at a time when the country has legislated emissions targets and its customers are decarbonising.