Iron ore exports were the key driver of Australia's strong trade surplus in September

Getty/Sean Gallup

Australia recorded a $1.745 billion trade surplus in seasonally adjusted terms in September, easily beating market expectations of $1.2 billion.

According to the Australian Bureau of Statistics (ABS), the previous month’s surplus was revised down to $873 million from $989 million.

The Australian dollar initially rose to US77 cents following the data release, also supported by a sharp rise in new building approvals. A short time ago, the AUD had climbed to 0.7719 US cents.

In seasonally adjusted terms, total goods & services exports for the month were $32.961 billion, while total imports were $31.216 million. Total exports rose by 2.9% in September, while imports rose by just 0.2%.

September’s surplus was largely the result of an increase in goods exports, with the value of non-rural goods exports climbing by almost $600 million in September in seasonally adjusted terms, a rise of 3%.

The gain in non-rural goods exports was comprised mostly of iron ore and other minerals, which climbed by 8% to a seasonally-adjusted total of $584 million on higher volumes, offsetting a fall in iron ore prices in September.

Non-monetary gold exports rose by 17% in the month, representing an increase of $217 million in seasonally adjusted terms. Combined with a $65 million fall in non-monetary imports, that line item accounted for around half of the headline beat.

This table from the ABS summarises the September trade report in seasonally adjusted terms:

Capital Economics Chief Economist Paul Dales said that while the result was encouraging, it was unlikely to prevent GDP growth from slowing in the third quarter.

“In volume terms, exports may have risen by around 4% for the quarter and imports may have been up by around 3%. That suggests net exports in the third quarter broadly matched the 0.3% contribution to real GDP growth in the second quarter,” Dales said.

Westpac analysts said Australia’s trade surplus increased by $345 million across the September quarter, to $3.5 million from $3.1 million.

That coincided with a slight fall in Australia’s terms of trades, due to lower commodity prices. However, Westpac said overall volumes for both exports and imports had picked up.

“Notably, export volumes recovered further after the weather disrupted decline in Q1, up around 3% in Q3 we estimate. At the same time, import volumes are expanding to meet rising domestic demand, including an increase in business investment,” Westpac said.

The bank drew the same conclusion as Capital Economics in its GDP forecast, predicting that net exports are likely to contribute around 0.3% towards Q3 GDP.

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