Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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"I've been investing for over 40 years & read nearly every investment book ever written, yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

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"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Thursday, 4 February 2016

QLD merchandise trade balance on the up

Deficit widens

Markets don't tend to get all that excited by International Trade figures there days, but that doesn't mean that they are unimportant, and it won't stop us having a look through some key numbers and trends.  

The December result was the 21st consecutive trade deficit, and this one was a biggie at a seasonally adjusted $3.5 billion, taking the deficit for the fourth quarter out to $9.5 billion, representing quite some blowout from ~$7.5 billion recorded for the third quarter. 

Through calendar year 2015 the cumulative trade deficit racked up was $33 billion.


There has been a bit of resurgence in a number of commodity prices lately, which may help to pull the deficit back a little in 2016.

For example, the oil price jumped by 8 per cent overnight, while iron ore has rebounded by 16.5 per cent from its 2015 low, with Dalian iron ore futures trading close to "limit up" thi afternoon, pointing to further gains (refer to detailed commentary from Scutt at Business Insider here).

Meanwhile the gold price now looks to be in a much healthier position at above US$1,140/oz. 

Merchandise exports

In original terms total merchandise exports increased a little from $20.2 billion to $21 billion in December, but remained well below the peak of December 2013. 

Moderate increases in estimated FOB values for natural gas (LNG) and gold were offset by another decline in the monthly value of iron ore exports (which, as you can see in the chart below, at $3.3 billion in December recorded their worst result since March 2010).

On the plus side services exports continue to push to new highs, having increased by 8.7 per cent in trend terms in 2015.


While there was an increase in the value of meat and live exports in 2015, and gold exports showed a solid recovery, the big picture is that it was always going to be one heck of a challenge to offset the huge fall in iron ore export values.

The value of coal exports was essentially flat in the calendar year, but iron ore export FOB values declined by a thumping 26 per cent from $66 billion to $49 billion. 


State versus state

The iron ore price malaise has of course been felt most keenly in Western Australia, where total merchandise export values declined by 17 per cent in 2015.

In contrast merchandise export values increased steadily last year in Queensland, with LNG projects set to add further to export volumes and values through 2016 and beyond.


With LNG exports beginning to ramp up, we might expect to see Queensland's merchandise trade balance improving, and indeed the $1.5 billion surplus in December represented a fresh 49 month high. 


Queensland's merchandise trade surplus of $13 billion for 2015 was triple the level of that recorded for 2014.

Tourism & education booming

Two sectors of the Australian economy are really hitting their straps at the moment, both of which are enjoying the lower dollar: tourism and education.

The International Trade figures showed that the monthly tourism services trade balance has soared to well over +$700 million - a superb result - while the monthly trade services balance has also improved very substantially since an absolute stinker of a nadir of -$1.3 billion in August 2013. 


The wrap

This was a weak result, driven predominantly by lower commodity prices, rather than lower export volumes. 

Thus net exports will in all likelihood contribute to GDP growth in the fourth quarter, in turn helping GDP to hold up reasonably well, but the indirect impacts of weak commodity export values on income and investment will bite in time.

Policy makers will certainly be hoping that the recently experienced rebound in iron ore, oil, gold and copper prices continues for a while yet.