Australia | Nov 05 2009
By Chris Shaw
Against market expectations of around $2.2 billion, Australia’s trade deficit for September came in better than expected at $1.8 billion, with a strong performance on the export side offsetting a large gain in imports in the month.
Exports in total rose 4.6%, with non-monetary gold up 64%, non-rural goods up 2% thanks to stronger coal volumes and services credits increasing by 3%, while rural goods exports fell by 3%. On the import side gains were seen across the board, the measure rising by 5.2% in total.
Leading into the result Westpac senior economist Anthony Thompson had expected export volumes to grow by 1.5% against a 5.0% increase in import volumes, outcomes that would have meant a weakening of the net exports GDP contribution for the quarter. The actual numbers were stronger on both sides, as for the quarter export volumes gained 4.3% and imports 5.7%, Thompson estimating this equates to a net exports GDP contribution of minus 0.3% against the minus 0.2% recorded in the June quarter.
According to Commonwealth Bank senior economist John Peters, the net exports GDP contribution is more likely to be around minus 0.8% for the quarter, based on his estimate of the September quarter current account deficit of $16.7 billion, which equates to 5.6% of GDP.
In terms of general expectations in the months ahead, Peters sees an acceleration in global economic growth as evidenced by stronger indicators such as performance of manufacturing numbers, a trend ANZ Banking Group economist Dr Alex Joiner suggests is needed for Australian exports to grow on a more sustained basis.
The trade deficit numbers mean on a seasonally adjusted balance of payments basis the deficit in the September quarter was $5.4 billion, up from a revised $1.2 billion in the June quarter. According to Joiner the stronger dollar and the solid performance of the Australian economy in recent months means the trade deficit is likely to become entrenched over the next year as improved purchasing power supports stronger imports.
CBA’s Peters suggests this is especially the case for capital goods imports, as business investment is likely to hold up at historically high levels while state and federal spending on infrastructure should also remain elevated. As well, he notes the stronger economy should improve consumer confidence with respect to job prospects, which is likely to see imports remain high given the cheaper prices implied by the stronger Aussie dollar.
The market took the data fairly well, Thompson noting the Australian dollar rose above US91c after trading slightly below that level prior to its release. He sees resistance at around US91.50/80c but suggests continuing to buy dips in the dollar back to the US90.50c level.