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

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

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.

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.

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.

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

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.

Export earnings in Q1 rose by a little over 3.5%, while the import bill actually shrank, down by 1.4%.

Our preliminary calculations suggest that: export volumes expanded modestly in the quarter, up by almost 0.5%, with
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.

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

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.

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.

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

Key points:

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).

The March outcome exceeded expectations (market median $4.5bn and Westpac $4.2bn).

Imports were the main surprise, falling by a further 1.5%, rather than rebounding by 1.0% as we anticipated.

Exports fell but by somewhat more than anticipated, down by 1.8% v's a forecast -0.6%

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.

Andrew Hanlan is senior economist for Westpac and can be contacted here

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Andrew Hanlan Trade Surplus

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