Australia posts another monster trade surplus, thanks to gold

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  • Australia recorded its second-largest trade surplus on record in January.
  • Exports surged to a record-high, helped largely to a surge in the value of gold exports.
  • Imports also rebounded, led by gains across most categories.
  • While parts of the domestic economy are struggling, the trade-exposed sectors are doing considerably better.

Australia’s trade surplus surged to the second-highest level on record in January, driven by a surge in the value of exports.

According to the Australian Bureau of Statistics (ABS), the trade surplus swelled to $4.549 billion after seasonal adjustments, breezing past expectations for a decline to $3 billion during the month.

December’s trade surplus, originally reported at $3.681 billion, was also revised up to $3.769 billion.

“The trade surplus has been on an improving trend over the past year,” said Kristina Clifton, Senior Economist at the Commonwealth Bank.

“This trend is helping to lift company profits and government revenues.”

During the month, the value of exports surged by 5% to a record-high of $39.937 billion in seasonally adjusted terms.

However, the massive headline increase was driven by just one category: non-monetary gold, a notoriously volatile component in the monthly trade report.

From December, the value of non-monetary gold exports surged by $1.373 billion, significantly larger than the $396 million, $97 million and $46 million lift respectively in the value of non-rural, rural and services exports during the month.

For non-rural goods — the largest category by dollar value — exports of metal ores and minerals (iron ore), coal and LNG all rose during the month, increasing by $279 million, $351 million and $51 million respectively.

Those gains were partially offset by a larger $325 million decline in the value of exports of transport equipment.

This table from the ABS shows the breakdown of the January trade report by category.


On the other side of the trade ledger, imports also rebounded by 3.3% to $35.388 billion, reversing most of the fall seen a month earlier.

The value of imports increased across all goods categories except for non-monetary gold with consumption, capital and intermediate and other merchandise goods all increasing by $483 million, $737 million and $157 million respectively.

For capital goods imports, the increase was driven by increases in machinery and industrial equipment. For consumption goods, all categories bar one increased, led by auto imports.

Non-monetary gold imports, along with services imports, dipped by $65 million and $191 million from a month earlier.

According to Andrew Hanlan, Senior Economist at Westpac, the January report suggests Australia’s trade surplus could grow even further in the March quarter, driven by firmer export prices and volumes.

“The trade surplus widened in 2018 and into 2019 on higher export earnings, boosted by rising commodity prices,” he said.

“Notably, key commodity prices – iron ore and coal — have surprised to the high side of late, in part due to supply disruptions having an amplified impact in markets where supply and demand are in relatively tight balance.

“The surplus for Q1 as a whole is expected to be a material improvement on that in Q4, with export volumes forecast to rise, following a disappointing second half of 2018, and on a further increase in the terms of trade.”

While parts of the domestic economy are struggling right now, the external sector, for the moment, is looking pretty good.

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