DELOITTE: Australia's trade deficit is shrinking to its smallest smallest since the 1970s

Imported ironin Nantong, China. Feature China / Barcroft Images / Barcroft Media via Getty Images

Surging prices for commodities are about to shrink Australia’s trade deficit to its smallest since the 1970s, according to the latest quarterly business outlook from Deloitte Access Economics.

“Australia’s current account deficit is about to be smaller than at any time since Gough Whitlam was PM (1972-75),” says Deloitte.

Commodity prices, pumped by demand from China, and a bumper wheat crop are pushing export earnings higher at the same time as the construction phase of the mining boom means more ore volumes from the nation’s mines.

The latest official numbers show the value of exports jumped by 8% to $30.083 billion in November while import values were flat, coming in at $28.84 billion.

The first trade surplus since March 2014 was underpinned by a strong rise in the value of mineral exports. Iron ore is currently trading at near a multi year peak price of $US83.65 a tonne.

Coal, coke and briquettes exports jumped by $923 million, 26% rise on previous month. Metal ores and minerals — mainly iron ore — also bounced, rising by $687 million or 11%, from October.

“This good news on trade won’t last forever, but it looks to be great news in the offing on the balance of payments for both this financial year and next,” Deloitte says.

While national income may be rebounding, tax collection is still a problem for the government.

“Despite a leap in commodity prices, Treasury continues to write down expected collections of company taxes, while weak wage growth is having its wicked way with taxes from wages and salaries – where Treasury’s latest writedowns have been even larger,” says Deloitte.

“And although some states are riding high on stamp duties thanks to a housing price boom, that extra revenue looks unlikely to last too long.”

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