Strong exports deliver 'healthy' trade surplus

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Strong exports deliver 'healthy' trade surplus

Strong coal and iron ore exports contributed to a ‘‘healthy’’ $2.3 billion trade surplus in August despite falls in overall exports and imports, economists say.

They believe the export outlook remains strong even though commodity prices are beginning to plateau.

International trade data released today shows exports were down 2.0 per cent in August in adjusted terms, compared with the previous month, while imports fell 5.0 per cent.

Australia had a $2.3 billion trade surplus in the month, matching economists’ expectations, the data released by the Australian Bureau of Statistics showed.

AMP Capital Investors chief economist Shane Oliver said the data was a ‘‘bit on the soft side’’, but there was nothing particularly concerning.

‘‘I think it’s still consistent with reasonable strength in the economy,’’ Dr Oliver said.

While coal and iron ore exports were still quite strong, they had probably already peaked as prices came off since the June quarter.

Dr Oliver said strong export earnings, thanks to coal and iron ore exports, would flow through to higher national income and higher dividend payments, increased investment by mining companies, increased employment by mining companies and increased federal tax revenue.

‘‘All of this has a stimulatory effect on the economy,’’ he said.

However, CommSec economist Craig James said there was nothing in the trade data to make the Reserve Bank of Australia more concerned about the inflation outlook and outlook for the economy.

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He said a drop in gold exports had led to some volatility in trade figures, but overall the nation still had ‘‘a healthy trade surplus’’ thanks to coal and iron ore exports.

‘‘Previously it was the case that we rode on the sheep’s back and now clearly it’s the case that we’re riding on the miner’s back,’’ he said.

The ABS said the $2.346 billion August surplus came as it downwardly revised a surplus of $1.743 billion in July.

JPMorgan economist Helen Kevans said the improvement in the trade surplus was ‘‘less compelling’’ than expected.

‘‘The disappointment was on the export side of the ledger, which failed to recover from the previous month’s deterioration, falling a further 2 per cent, month on month,’’ Ms Kevans said. ‘‘In absolute terms, the balance of payments continues to benefit from higher commodity prices, which has led to a step-shift higher in export revenues and the trade balance relative to recent history.’’

She said while the trade balance may struggle to hit the June highs as commodity prices plateau in the near term, the risks around the export outlook that accumulated in the third quarter seemed to be ‘‘fading from view’’.

She expects the export outlook to remain ‘‘bullish’’, with robust commodities demand keeping the trade balance positive.

The economists said the trade data was unlikely to have swayed the RBA’s decision to leave the cash rate unchanged at its October board meeting today.

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The majority of economists and analysts had expected the central bank to lift the cash rate to 4.75 per cent from its current 4.5 per cent.

AAP

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