Trade Surplus

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<p><span>EXPERT OBSERVER</span></p>
<p><span>Australia's trade balance is now falling away.</span><br><br><span>In fact, it was already tailing away by the end of February.</span></p>
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<p><span style="font-size: 12.16px;">Coal exports were dropping away in the early months of 2020.</span></p>
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<p><span>And commodity export values had rolled over.</span><br><a href="https://1.bp.blogspot.com/-XinURAg-fLg/XoxjhIC658I/AAAAAAAA1JA/7IOfS1zHzgcbMnLHiaYwpBlodZB4CfuOwCNcBGAsYHQ/s1600/IT3.jpg" style="font-size: 12.16px;"></a></p>
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<p><span>Worryingly, even in February services credits were hammered, as tourism began to dry up.</span></p>
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<div class="separator"><span style="font-size: 12.16px;">The Reserve Bank didn't sugar-coat anything in its Minutes today, predicting a sharp contraction in growth and a substantial rise in unemployment.</span></div>
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<div>The RBA noted that financial markets have been operating somewhat more effectively, partly thanks to central bank measures around the world, with a starburst of co-ordinated fiscal and monetary stimulus coming down the pipe. </div>
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<div>Borrowing costs for some new borrowers are declining, but note that these trends impact borrowers on a case by case basis, and in some respects lending standards and assessments have been tightening and becoming more conservative.</div>
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<strong>PETE WARGENT</strong><em> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em>
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pwargent-M4siyDbqQY

Australia's trade balance is falling away: Pete Wargent

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<p><span>In the month of March, the import bill declined by $0.5bn, down by 1.5%, to $34.4bn. Weakness in the month was driven by volatility in transport equipment (both capital and consumer) - stripping this out, imports rose by 0.7% in March.</span></p>
<p><span>The export detail remains volatile, with temporary supply disruptions a factor. In the month of March, metal ores slumped by $1.2bn, largely as anticipated, as iron ore shipments were delayed by Cyclone Veronica. Coal exports rose by $0.8bn, on a rebound in volumes, while gold fell back by $0.6bn, off a high base.</span></p>
<p><span>For the March quarter, the ABS advise that the trade surplus widened to $14.2bn from $8.6bn in Q4, an improvement of $5.6bn.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/5/7/trade%201.jpg" target="_blank">Click here</a> to enlarge: </p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/7/trade%201.jpg" alt=""></span></p>
<p><span>Key to this development was higher commodity prices, which boosted export earnings. The terms of trade increased in the order of 3% in the quarter, we estimate.</span></p>
<p><span>Export earnings in Q1 rose by a little over 3.5%, while the import bill actually shrank, down by 1.4%.</span></p>
<p><span>Our preliminary calculations suggest that: export volumes expanded modestly in the quarter, up by almost 0.5%, with<br>a sharp rebound in gold off a low base a key positive; and imports were soft in the quarter, contracting by almost 1.5%, against the backdrop of patchy domestic demand across the private sector.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/5/7/trade%202.jpg" target="_blank">Click here </a>to enlarge: </p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/7/trade%202.jpg" alt=""></span></p>
<p><span>On these preliminary calculations, real net exports likely added to activity in Q1, potentially in the order of 0.3ppts to 0.4ppts. This is an upside surprise to our forecast of +0.1ppt – albeit largely driven by falling imports (a sign of domestic weakness) rather than by strength in exports.</span></p>
<p><span>Such an outcome represents a turnaround from the December quarter 2018, when net exports subtracted 0.2ppts from activity as export volumes declined by 0.7%, dented by the impact of the drought and temporary disruptions in the resources sector.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/5/7/trade%203.jpg" target="_blank">Click here</a> to enlarge:</p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/7/trade%203.jpg" alt=""></span></p>
<p><strong>Key points:</strong></p>
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<p><span>•</span><span>In March, the trade surplus remained elevated at $4.9bn, only down a little from a record high of $5.1bn for February (revised up from $4.9bn).</span></p>
<p><span>•</span><span>The March outcome exceeded expectations (market median $4.5bn and Westpac $4.2bn).</span></p>
<p><span>•</span><span>Imports were the main surprise, falling by a further 1.5%, rather than rebounding by 1.0% as we anticipated.</span></p>
<p><span>•</span><span>Exports fell but by somewhat more than anticipated, down by 1.8% v's a forecast -0.6%</span></p>
<p><span>•</span><span>For the March quarter, the ABS advise that the trade surplus widened to $14.2bn from $8.6bn in Q4, an improvement of $5.6bn.</span></p>
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<p><span>Andrew Hanlan is senior economist for Westpac and can be contacted </span><a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/andrew-hanlan/3/222/430" target="_blank">here</a><span>. </span></p>
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j.ballantyne1990-6AQqhLzZaK

Australia's trade account, surplus elevated at a near record high: Andrew Hanlan

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<p>In February, the trade surplus climbed to a record high of $4.8bn, up from $4.35bn in January, eclipsing the previous record of $4.6bn in December 2016.<br>The February result exceeded expectations (market median $3.7bn and Westpac $3.8bn).</p>
<p>Imports surprised to the low side, declining by 1.1%, whereas we anticipate a rise of 1.1%. A drop in fuels was the source of weakness.</p>
<p>Exports provided an upside surprise, increasing by 0.2% vs a forecast decline of 0.9%. Notably, the expected pull-back in gold failed to materialise.</p>
<p>More fundamentally, a key dynamic driving a widening of the trade surplus is the boost to export earnings from higher commodity prices, notably for iron ore and coal. <br>Total exports in February are 13.2% above the level of a year ago, outstripping a 4.4% rise in imports.</p>
<p><a href="https://www.propertyobserver.com.au/images/2019/4/3/TRADE%201.jpg" target="_blank">Click here </a>to enlarge: </p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/3/TRADE%201.jpg" alt=""></p>
<p>Metal ore exports (including iron ore) jumped in February, as anticipated, up by $1.0bn to $9.6bn - which is also a record high. Recall, the iron ore price leapt to US$85/t in the month as global supply was dented by the tailings dam disaster in Brazil. Iron ore is now trading close to US$90/t.</p>
<p>The trade surplus in the March quarter to date is running at $4.6bn a month, well up from $2.9bn per month in the December quarter. The bulk of this improvement likely reflects higher commodity prices.</p>
<p>The lift in commodity prices is boosting Australia's national income, which is flowing through to higher tax revenues - providing governments with additional fiscal flexibility, as evident in recent budget updates. However, despite this, wages growth remains sluggish.</p>
<p><a href="https://www.propertyobserver.com.au/images/2019/4/3/TRADE%202.jpg" target="_blank">Click here</a> to enlarge: </p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/3/TRADE%202.jpg" alt=""></p>
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<p><span>In February, the import bill declined by 1.1% to $35.0bn. Key to the fall was a drop in fuels, down $344mn. Imports ex fuel were broadly flat in the month, inching 0.1% lower. Similarly, for the March quarter to date relative to the December quarter, fuels are tracking sharply lower - likely a mix of lower prices and lower volumes.</span></p>
<p><a href="https://www.propertyobserver.com.au/images/2019/4/3/TRADE%203.jpg" target="_blank">Click here</a> to enlarge: </p>
<p><span><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/4/3/TRADE%203.jpg" alt=""></span></p>
<p><span>Export earnings inched 0.2% higher in the month of February. As noted above, metal ores (including iron ore) jumped by $1.0bn to $9.6bn, a record high - driven by rising prices. Coal fell by $0.8bn on lower volumes. For the quarter to date, export earnings are up by around 4% on the December quarter - led higher by metal ores and gold, as well as rural goods, more than offsetting a softening for coal.</span></p>
<p><em><strong>ANDREW HANLAN </strong>is a senior economist for Westpac</em></p>
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