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Issue #588

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2014 Media Kit
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Australian trade gap shrinks as exports recover

By: | at 08:00 PM | International Trade  

A solid rise in exports sharply narrowed Australia’s trade deficit at the start of this year, raising hopes that the economy will shift to a higher gear in 2007.

Exports rose two percent and imports fell one percent to shrink the January trade gap to A$876 million from a shortfall of A$1.379 billion in December, the Australian Bureau of Statistics said.

Exports have struggled in recent years amid shipping bottlenecks at key mining center ports, denying Australia greater gains from the China-led commodities boom.

While the January trade deficit was Australia’s 58th consecutive shortfall, it was below the A$1.1 billion market estimate and helped significantly by the first rise in exports since October.

“Despite the rise in exports values, overall export performance remains a major disappointment given the still buoyant global economic conditions,” said Stephen Koukoulas, global strategist at TD Securities. But exports and economic growth will eventually lift as port expansions come on stream and farm output rises, Koukoulas added.

A survey of 21 economists by Dow Jones Newswires shows the economy likely grew at a seasonally adjusted 0.6% in the fourth quarter and at an annual clip of 2.0%, up from the 2.2% on-year growth rate in the September quarter.

The ABS published its national accounts data showing higher interest rates, a severe drought and shipping bottlenecks putting the skids on growth in 2006.

The effect of three interest rate hikes in 2006 has been most evident on the housing sector with building approvals falling 0.9% in January from December, the ABS said.

It was the third monthly fall in approvals in the last four months, a clear indication that tighter monetary policy settings are having a wide impact, economists said.

“For the housing sector, the three rate hikes in 2006 are still having a notable damping impact on building approvals,” said Ange Montalti, senior economist at ANZ.

But housing should accelerate through 2007 as low supply and rising demand forces a reversal in activity, Montalti said.

Government spending also remains strong, gaining 9.4% in the fourth quarter, the ABS also reported. Economists said the government sector would cushion growth in the fourth quarter.

The government’s chief commodity forecaster published upbeat farm forecasts for the next year.

Production from the 2007-08 Australian wheat crop will rise to 25 million metric tons, rebounding from drought-affected output of 9.8 million tons in 2006-07, the Australian Bureau of Agricultural and Resource Economics said in a report.

The forecasts are premised on expectations that the drought will end in the not too distant future. (Dow Jones & Company, Inc.)