Trade-weighted index in Australia - Data and Analysis (1971-2034)

IBISWorld forecasts the trade-weighted index to climb by 3.5% in 2026-27, to 65.4 index points. The strong rebound in the trade-weighted index has been driven by the appreciation of the Australian dollar against its major trading partners, particularly the US dollar and Japanese yen. Persistent inflation pressures, fuelled by steady wage growth and low unemployment, have encouraged the RBA to maintain a strict monetary policy, keeping rates high relative to other central banks, like the US Federal Reserve, which has left its target range unchanged at 3.50% to 3.75% since December 2025. While US interest rates have held steady through 2026, the Reserve Bank of Australia raised the cash rate in February, March and May 2026, to 4.35%. This divergence has boosted demand for the Australian dollar, pushing the exchange rate higher. Elevated energy prices have also supported Australia's export revenues and the Australian dollar throughout the year. Momentum has faded more recently, as the RBA left the cash rate unchanged in June and August 2026, dragging the index down between the May and August 2026 Statements on Monetary Policy. Iron ore prices slipped during 2026 as Chinese steel demand softened and new supply came online, which the RBA identified as one of the factors behind the currency's recent retreat in its August 2026 Statement on Monetary Policy.The trade-weighted index has exhibited volatility over the five years from 2021-22 to 2026-27, declining for most of the period before recovering sharply over the final two years. The slowdown of the Chinese economy has weighed on the Australian dollar over the past five years. Demand conditions for Australian exports have been volatile, as heightened trade tensions between the US and China, alongside property-sector challenges in China, have added to the uncertainty of the Chinese economy. As China significantly influences Australia's resource exports, economic downturns in China, particularly in its property sector, negatively impact demand for exports like iron ore and coal and investment in sectors like resources and tourism, contributing to declines in the trade-weighted index.Over the past five years, the Australian dollar has notably depreciated against the US dollar before rebounding across 2025-26 and 2026-27, limiting growth in the trade-weighted index. The US Federal Funds rate rose above the RBA cash rate after a rapid post-pandemic economic recovery led to persistently high inflation. This made the Australian dollar less appealing, causing it to depreciate, especially against the US dollar from June 2021 to June 2025. This trend has since reversed, with the Australian dollar forecast to rise relative to the US dollar during 2025-26 and 2026-27. Substantial increases in the Australian dollar against the Japanese yen, driven by yen weakness, have fuelled growth in the trade-weighted index over the period. Overall, IBISWorld forecasts the trade-weighted index to rise at a compound annual rate of 1.2% over the five years through 2026-27.