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Friday, 6 May 2016

WA net exports to boost growth in Q1

Trade deficit improves

Net exports could add as much as 0.8ppts to economic growth in the first quarter, suggesting that solid GDP growth could continue into 2016.

The International Trade figures for March showed a vastly improved picture, although this was the 24th consecutive trade deficit at a seasonally adjusted $2,136 million.

The cumulative deficit for the first quarter was $8,477 million, but this was some 21.4 per cent better than the epic revised blowout of $10,789 million in the December quarter, so at least things are moving in the right direction.


There were strong rebounds in export FOB values for all of the major commodities in March,  particularly for gold which accounted for well over half of the total gains for the month, while services exports have really surged to be up by 16.3 per cent from one year ago.


Despite a strong improvement in merchandise export values in March to $20,699 million from $18,595 million in February, in rolling annual terms the impact of the iron ore and coal price crashes are clearly visible.


Where and to whom?

There was a rebound in the value of exports to China in March, with the monthly result of $6.62 billion a strong increase from the $5.7 billion seen in February and representing 31 per cent of merchandise export values for the month.

Nevertheless in rolling annual terms the value of exports to China has been hit thunderously hard by the iron ore price correction to be more than 20 per cent lower than at the peak.

While exports to the US are shaping up, exports to Japan and South Korea have faded.


At the state level Western Australia has worn the brunt of the downturn, but has now pieced together two back-to-back gains on the back of an iron ore price rebound, which is a heartening sign for the state. In rolling annual terms commodity exports from WA are down by 17 per cent from one year ago.


The improvement in the outlook for WA is reflected in the monthly trade balance below, while Queensland has also now recorded 18 consecutive monthly trade surpluses. The two most populous states continue to spend up big.


The wrap

Overall this was a much improved result all round, and one which will result in a strong contribution to economic growth in the first quarter, perhaps as much as 0.8 percentage points, which is indeed welcome.

It will be tough gig for the economy is to match the surprisingly strong 3 per cent growth seen in 2015, but this will help towards notching a pretty solid start.

That said, the commodity price rebound seems to be on rather shaky ground, so this dynamic could reverse as we move towards the latter half of the year.