As per the recent data released by the Australian Bureau of Statistics on trade deficit, the following aspects have come under spotlight:
Largest trade deficit witnessed with missing the market estimates: In May 2016, Australia reported for a trade widening of AUD2.22 billion reflecting an increase of 24% from an upwardly revised AUD1.79 billion deficit in April 2016. Primarily, the decline of $433 million over the revised April total was driven by an increase in imports of goods and services.
Steady levels in exports while non-mining service sector continues on recovery mode: The trade deficit in May has been the largest deficit since February given that exports jumped about 0.7% to AUD26.17 billion. The marginal rise was driven by increase in commodity exports. Total exports in May were of the order of AUD 26,170 million. However, there was a 2.3% rise in resource exports on a month-on-month basis post the decline in April. Metal ores and minerals’ exports surged 3.6% with metals exports, excluding non-monetary gold, growing 6.1%. There was a 2.2% fall in rural goods’ exports post the 4.1% rise in April. On the other hand, export of services witnessed growth of 0.5%, up for the fourth straight month, in a way depicting a stable rise in service exports with an indication that sectors other than mining continuing to recover.
Balance on Goods and Services (Source: Australian Bureau of Statistics)
Rise in Imports: Imports rose 2.2% to AUD28.39 billion in May. Primarily, imports of capital and intermediate goods surged 3.8% and 4.6%, respectively on sequential basis. Imports of intermediate and other merchandise goods rose AUD 385 million and capital goods rose AUD 182 million. Imports of non-monetary gold increased AUD 124 million against consumption goods that fell AUD 81 million. This implicitly reflects rise in domestic demand. However, it is too early to predict the course of recovery. There are also opinions that growth in export may outweigh growth in imports in the near term.
Export and Import Trend (Source: Australian Government, Department of Foreign Affairs and Trade)
Commodity prices: In the month of May, the commodity prices did suffer a slight blow while weak local currency drove export volumes for the resource-dependent economy. Rising export volumes and prices for iron ore and coal majorly drove the increase in export income. The rise in iron ore prices coupled with Chinese demand led to a recovery in goods export values post the near five-and-a-half-year low in December last year for the exports income.
Rise in foreign debt and effect from Australian dollar: As seen in the earlier months of the year, foreign debt kept growing above $1 trillion. The lower AUD supported non-mining and resources exports. However, the weak currency led to a competitive advantage that was offset by uneven international markets.
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