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

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Tuesday, 6 October 2015

Trade deficit persists at $3bn

Trade deficit #17...

Expectations were pretty much on the money for August's International Trade in Goods & Services figures.

An increase in iron ore and coal export values was offset by an unwinding of the preceding month's spike in gold exports, while imports also increased to be a surprising +8.3 per cent higher over the year.

Imports of consumer goods have been particularly strong given the weakening dollar, which may be a signal that domestic consumer activity is rising.

The seasonally adjusted deficit for the month of $3,095 million August was the 17th consecutive deficit and the fourth time this year that the deficit has exceeded $3 billion.

The July trade deficit was also revised out to $2.8 billion, although the 3mMA result is at least improving somewhat after April's blowout.

While this was a weak headline result it is expected that LNG exports from Gladstone - which are due to begin to ramp up from this month - should begin to pare back the deficit over the year ahead.

The lower dollar may also eventually have an impact on imports and overseas departures. 

Merchandise exports

As mused here earlier this week, August 2015 was the first time in 16 months that the value of monthly merchandise exports in original terms were higher than in the prior year corresponding period, albeit only marginally so.

Services of exports were relatively flat in the month at $5.3 billion.

Of the merchandise exports the lower dollar has helped to drive up export values of certain line iterms such as meat, fruit & nuts (not the chocolate bar), alcoholic beverages, and various other export types.

For the big ticket export commodities the August result essentially tracked expectations with estimated iron ore, LNG and coal export FOB values all ticking higher in the month, but gold exports inevitably reversing some of the massive +60 per cent spike of the preceding month. 

China dependency

Despite a notable decline in export values to a rolling annual total of $81.1 billion to China, the largest trading partner continued to account for some 32 per cent of total exports, which is quite some dependency.

The was a sizeable +44 per cent jump in exports to India in the month to $1.2 billion. This took annual exports to India up to $10.3 billion which is the highest rolling annual total in the 23 months since September 2013.

At the state level there were year-on-year increases in estimated export FOB values from Queensland (+16 per cent), New South Wales (+15 per cent) and Victoria (+14 per cent), but these were offset by the decline in Western Australia (-10 per cent) which has followed on from the iron ore price correction.

Queensland's monthly trade balance is now improving steadily as export volumes ramp up.

Tourism & services

Finally the tourism economy continues to improve significantly thanks to the lower dollar, which has helped to drive a partial rebound in the services trade balance.

Tourism from China in particular has exploded, with one economist estimating that this sector has accounted for some 7 per cent of GDP growth.

Overall, though, a pretty weak set of numbers, all things considered.