Aussie trade surplus hits record $5.7bn

Australia's trade balance increased in May to a surplus of $5.75 billion. (AAP)

Australia's trade balance increased by $925 million in May to hit a record $5.75 billion, driven entirely by surging iron ore exports to China.

Australia's trade surplus hit a record $5.7 billion in May after a $925 million monthly rise largely on the back of iron ore exports to China.

The $5.75 billion surplus was up 19 per cent in seasonally adjusted terms, the Australian Bureau of Statistics said on Wednesday, and it handily beat expectations of a $5.25 billion surplus.

The surprisingly strong rise could put a federal budget surplus within reach a year early.

Overall seasonally adjusted exports were up four per cent for the month, to $41.6 billion, while imports increased one per cent to $35.8 billion.

The major reason for the $925 million increase was iron ore, with the value of metal ore and minerals exports jumping by $1.3 billion, or 13 per cent, to $11 billion.

Iron ore exports to mainland China rose by $1 billion, while iron ore exports to Japan were up by $222 million.

While iron ore prices have spiked this year, the data indicated that increased volume was far more of a factor in May than higher realised prices.

Lump iron ore exports were up by $455 million, with quantities up 19 per cent and unit values up two per cent.

Iron ore fines were up $822 million, with quantities up 11 per cent and unit values up four per cent.

Exports of hard coking coal - the kind used in steelmaking - were up $477 million, with quantities up 25 per cent and unit values down three per cent.

China accounted for $262 million of that rise, or 58 per cent, with exports to Belgium, India and the Netherlands also all up, by between $133 million and $117 million.

Exports of thermal coal - used to generate electricity - were down by $29 million, with increased exports to South Korea failing to outweigh a drop in exports to Japan.

J.P. Morgan analyst Tom Kennedy called the stronger iron ore export volume "an encouraging development for real GDP".

Westpac analyst Andrew Hanlan noted the increased exports would be boosting mining profits and in turn tax revenues, providing the federal government with fiscal flexibility.

"There is the possibility that the Federal underlying cash balance edged into surplus in the 2018/19 financial year - one year ahead of schedule and the first surplus since 2007/08, ahead of the impact of the GFC," Mr Hanlan wrote.

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