Australia | Jun 03 2010
By Greg Peel
The last time Australia's trade balance (exports minus imports by dollar value) was in surplus was in March 2009. That was the month the stock market troughed post-GFC with a little help from massive Chinese commodity buying.
Despite fully appreciating just what sort of substantial contract price increases Australia's producers or iron ore and coal had received prior, economists still forecast a consensus $800m deficit to the trade balance in April. So when the figure came in at a small surplus of $134m there was much surprise, and few quiet nods to China once more.
Total exports rose 11% in April, driven by an 18% increase in non-rural goods. And those non-rural goods were all resources, given exports of manufactured goods and transport equipment both fell, for example, ANZ notes.
April was also a month which saw consumer appetite waning as the last echoes of government hand-outs faded into the distance. So despite the strong Aussie at the time, imports were flat for the month.
While iron ore and coal contracts previously traded on annual contracts they now trade on quarterly contracts. While the ABS noted some exporters were yet to actually sell at new contract prices in April, Westpac suggests these will likely be backdated into revisions. In the meantime there'll be no more big price jumps until the June numbers so it will all come down to volumes.
ANZ has nevertheless acknowledged the 12.5% jump in coking coal prices already achieved for Q3 contracts and consensus expectations for further double-digit iron ore price rises ahead, albeit not quite as steep as analysts had expected before the European crisis escalated. These prices should ensure the terms of trade keep rising into the second half of 2010, ANZ suggests.
Note that a trade surplus has absolutely nothing to do with the government's fiscal budget. It forms part of the current account, which in Australia's case remains in substantial deficit. A monthly trade surplus simply means that for one month, we sold more offshore than we bought.
