South Korea

Bilateral relations

South Korea is Australia’s fourth largest trading partner, after China, Japan and the US. Bilateral trade accounted for around $41.3 billion of Australia’s international trade in 2019 (4.5% of total).

Goods and services exports to South Korea totaled $28.2 billion in 2019, driven largely by shipments of coal, LNG, iron ore and beef. Australia is also among the world’s biggest suppliers of agricultural and food related products to South Korea. Australian imports have risen and fallen sharply in the past few years, reflecting the one-off purchase of Korean-made ships in 2017 (around $18 billion). The COVID-19 pandemic disrupted bilateral trade in 2020.

Beyond the pandemic, South Korea’s long-term focus on boosting “green” and “digital” investments is positive for Australian exporters, particularly of iron ore, copper, food and beverage. It also opens opportunities for aerospace, automotive, shipbuilding, electronics and machinery exporters to supply South Korea’s strong manufacturing base.

The KAFTA—Australia’s bilateral trade agreement with Korea—which came into force in December 2014, lowered tariffs between the two countries and has significantly strengthened trade relations. Emtivac Engineering, which supplies pumps and compression systems to Hyundai, is one Australian company that has benefitted from growing trade with Korea.

Services trade between the two countries ($3.1 billion in 2019) is smaller than goods trade. Services exports to South Korea amounted to $2.2 billion in 2019. The FTA raises opportunities for suppliers of legal, accounting and telecommunications services, and enhances market access for other services, including financial services and education.

South Korea is currently Australia’s tenth largest source of visitor arrivals and eighth largest source of international student enrolments. From 2016 to 2019, tourist arrivals averaged around 290,000 per year and Australia consistently received around 30,000 international student enrolments. The COVID-19 pandemic and associated international travel restrictions disproportionately hurt services trade in 2020. Ongoing international travel restrictions points to another challenging year for services exports in 2021. Longer term, rising incomes in South Korea will support demand for Australian education and tourism.

South Korean direct investment in Australia has grown sharply over the past 15 years, totalling $31.4 billion in 2019 (0.8% of total). Korean steel maker POSCO’s stake in the $6 billion iron ore mine at Roy Hill in Western Australia is currently South Korea’s largest overseas construction project. Trade and investment between Australia and South Korea has been gradually expanding beyond resources, into areas such as tourism, technology, engineering, real estate and infrastructure.

Australian investment in South Korea, at around $23 billion in 2019, is less than 1% of the country’s total foreign investment portfolio. A large proportion of this Australian investment has been made by financial and infrastructure firms.