Pete Wargent blogspot

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

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Friday, 8 January 2016

Trade balance improves a bit (Go Maroons!)

Imports slow

In theory the lower Aussie dollar should help the International Trade balance by slowing imports and eventually increasing the total value of goods and services exports. 

Businesses and consumers may take time to change behaviours, however - and some may be contractually obliged to continue with certain commitments - but perhaps at last imports are beginning to slow, having risen inexorably until the last month.

Imports of goods declined by 1 per cent from $29.9 billion to $29.7 billion, while there was also a 1 per cent increase in exports.

This led to an 11 per cent or $341 million improvement in the twentieth consecutive trade deficit, which pulled back to $2.9 billion...following several startling blowouts over the past year! 

It probably says something that a trade deficit of $2.9 billion is seen as a half decent result, though, while slowing iron ore export volumes from Port Hedland suggest that the economy will see less of a boost from net exports in the fouth quarter. 

Commodities and services exports

Lower iron ore prices have clearly taken their toll, with monthly export FOB values of $3.7 billion in November miles below the December 2013 peak of $7.2 billion.

Despite this, a second "good news" story was that the value of services exports continued to improve by 8 per cent year-on-year to hit a new trend high of $5.7 billion, now accounting for more than 19 per cent of total exports.

The uplift in services exports is all the more important given the uninspiring lack of growth in merchandise exports which have remained broadly flat over the past year. 

Consumers are certainly planning to enjoy the decade low in oil prices which should result in low inflation (and thus probably interest rates), and expected cheap fuel at the bowser. 

The flip side to this is that Australia's export values have been clonked accordingly, while iron ore, coal, LNG, gold, copper and a host of other less vital commodities have all seen prices hit hard in recent times.

Legumes boom?!

Elsewhere there was an enormous increase in the export of vegetables to $487 million (!) which helped to pump up rural exports.

Another of the big growth industries over the last year has been that of meat and animal exports, catering for a growing Asian market. 

Athough Indonesia has reportedly considered sourcing more of its meat locally, it is expected that Australia will export up to 600,000 head of cattle to Indonesia in 2016, with permits to be issued to the Australian Live Exports Council on a trimester basis (great for net exports, but not so much for the 600,000 head of cattle).

Monthly merchandise exports to China came in at a shade under $7 billion or 34 per cent of the total, but on a rolling annual basis have slumped from more than $100 billion to $82 billion.

Queensland looking up

Although Western Australia continues to account for 40 per cent of merchandise exports, monthly FOB values are way down from a peak of $12 billion to $8 billion.

On the other hand monthly FOB export values from Queensland are shaping up again nicely to hit $4.5 billion in November as LNG projects steadily come online.

Some analysts believe that the contribution to GDP growth from LNG could increase from nil today to 0.5ppts by 2017/18.

As a result Queensland's monthly trade balance has improved to $1.2 billion having been in deficit as recently as September 2014.

A final piece of good news was the steady improvement in the trade services balance has shifted to a considerably healthier -$491 billion, from a somewhat ugly -$822 billion back in June. 

The monthly tourism services balance of $520 billion looks in particularly good nick - despite Aussies continuing to travel overseas more than might be expected given the weakening of the currency - tourism credits have soared by 29 per cent over the past two years to $3.65 billion in November.

That's another win for the Sunshine State.


No little relief today as China's stock market didn't crash! Aussie stocks looking set to finish the week in the red once again, though, the ASX 200 (XJO) sliding by another 29 points to just 4,981 at the time of writing.