Pete Wargent blogspot

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

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Thursday, 3 November 2016

Timely boost coming Queensland's way

Deficit narrowing

Despite softer export volumes the trade deficit narrowed very nicely by 35 per cent in September, down to $1.2 billion.

That's the best result since late 2014. 

After some horrible deficits in recent times, is there now even a cheeky trade surplus hoving into view? Maybe!

The main driver of the improvement in September was an estimated $368 million increase in coal FOB values, as rocketing coal prices finally began to benefit Australian exports. There should be more to come here too.

Services exports are also improving, if steadily.

The trade services balance has been clawing its way back for several years now as the lower dollar gradually helps the economy to rebalance.

In fact, the trade services deficit was at its most agreeable level since November 2010, helped along by strong inbound tourism.

The services PMI gauge also returned to expansion in October, up by +1.6 points to a reading of 50.5, supporting the improved result. 

Asian exports weak for now

Commodity exports to Asian countries have been very weak, particularly to Japan and Korea, although this trend should hopefully reverse as coal export prices rise.

Indeed, a combination of rocketing coal prices and record gas (LNG) volumes is set to send a welcome boost in Queensland's direction.

After treading water for years, export values from the Sunshine State are now on the up again. 

The trade surplus in Queensland improved to $1.3 billion, the best result 16 months, with more good news for the state in the post. 

The wrap

Overall the preliminary estimates showed a significant improvement in the trade deficit, helped by rising commodity prices, if not volumes. 

The figures still suggest that a trade surplus might even be feasible before too long.

After a very difficult transition, Queensland finally looks set to see some upside as gas exports from Gladstone are ramped up, as coal begins to deliver royalties again, and as tourism thrives in the lead-up to the Commonwealth Games.