Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 4 August 2015


Record quarterly trade deficit

In the event market consensus was very close to the money today.

Retail figures were very good, hitting expectations to record turnover growth of 0.7 per cent - with retail turnover in volume terms up by a very respectable 0.8 per cent for the quarter. 

That's good stuff.

Unfortunately expectations of another pretty rubbish trade deficit of around $3 billion also proved to be very close to the mark!

The ABS released its International Trade in Goods and Services data for June 2015, which revealed a 15th consecutive trade deficit, coming at a seasonally adjusted $2,933 million.

It was a slightly better month for exports, but imports were up too, and the total deficit for the second quarter came in at a record $9,766 million.

Exports lift slightly

There was some moderately uplifting news on commodity exports with a number of the main commodities going against the grain to record a rebound in FOB values from preceding months.

In particular iron ore export FOB values of $4.5 billion in June were a significant improvement on the very weak April result of just $3.5 billion.

Total merchandise exports to China rebounded strongly to sit back above $7.5 billion in June, thereby allowing China to account for more than 31 per cent of the monthly total.

Japan and Korea remain in distant second and third places with 13 per cent and 7 per cent shares of merchandise exports by destination respectively.

State versus state

The rebound in commodity exports in June was of benefit to Western Australia and Queensland in particular.

Western Australia (35 per cent), Queensland (21 per cent) and New South Wales (15 per cent) continue to account for the greatest share of monthly exports.

After a couple of stinking months, Western Australia also saw something of a rebound in its monthly trade balance in June. 

Queensland's trade balance is also tracking noticeably better in 2015 than was the case the preceding calendar year as export volumes have ramped up.

Tourism rebound

The monthly trade services balance continues to bumble along unconvincingly, but it is evident that tourism services have benefited from the material decline in the Aussie dollar.

The trend in overseas arrivals and departures figures suggest that the tourism sector will continue to thrive as fewer Aussies elect to travel overseas - many instead choosing to holiday at home - and record numbers of short term arrivals visit these shores.

The wrap

Overall there is some evidence here that the lower dollar has helped the economy a little, with export values recording a slight rebound.

But given the parlous state of several sectors of the economy - not to mention a record trade deficit for the June quarter blowing out to nearly $9.8 billion - it seems likely that the lower dollar could still do with being plenty lower again.

All of which made the updated wording of today's Monetary Policy Decision a little mystifying.

The Reserve Bank left the cash rate on hold at 2 per cent as expected, but the wording on the currency shifted to note that "the Australian dollar is adjusting"...whereupon naturally it bolted all the way back up to 74 US cents.

Who'd be a central bank Governor?