The trade figures for June were a bit grim, but the performance on the trade account over the year to June 30 showed a continuation of the improvement we have seen for the past four years or so.
Thanks to the rising value of the Australian dollar there was a 1.0% seasonally-adjusted rise in imports in June, which helped push the monthly trade deficit out to a larger than forecast $1.75 billion from the revised $970 million in May.
But the main factor was the wild and stormy weather around Newcastle and in the Hunter Valley from the June long weekend. That helped cut exports by 3.0%, as the flow of coal exports slowed sharply, and in some cases, didn't happen for up to a month.
The market forecast was for a trade deficit of $1.2 billion but the impact of the higher dollar on imports and the extent of the slowdown in coal sales and production, was clearly underestimated.
Companies and analysts are looking for a rebound in July and August from the coal industry. (It will be slow in coming. The major shipper, Coal and Allied only ended its force majeure declaration last Friday for its Hunter Valley mines and exports. It expects to lift production and exports during this month to pre-storm levels.)
It's the second time in six months that our trade performance has been impacted by bad weather.
Cyclones and heavy rain and flooding in February and March flooded mines in the Northern Territory, Western Australia and parts of Queensland. Shipments of iron ore, coal, uranium, copper, and other commodities were delayed or stopped, and that undermined the trade figures as well.
The Australian Bureau of Statistics reported yesterday that for 2006-07 as a whole, the balance on goods and services was a deficit of $12.0 billion.
This is $2.5 billion better thanthe deficit for 2005-06, resulting from a $19.6 billion or 10% increase in exports offset by a $17.1 billion or 8% increase in imports of goods and services.
We exported $215.85 billion worth of goods in 2007 as compared to $196.27 billion in 2005. Imports were $227.88 billion, compared to $210.79 billion.
Exports of non-rural and other goods were up $15.4 billion, or 12%, while exports of rural goods fell $200 million, or 1%, because of the drought, compared to 2005-06.
In terms of exports, the combined total value of exports to China ($22.84 billion) and India ($10.1 billion) now account for more than Australia's exports to Japan ($32.62 billion). Exports to India and China are growing much faster as well. South Korea ($13.07 billion), the US ($9.82 billion) and New Zealand ($9.45 billion) are our other major export destinations.
HSBC chief economist for Australia and New Zealand, John Edwards, said total seasonally adjusted goods exports in June were 7% lower than a year ago, despite the commodity boom.
"These numbers will reassure the Reserve Bank that household spending can sustain the pressure of another 25 basis point tightening next week, but the central bank's attention right now will almost certainly be on the evolution of the liquidity issues in credit markets rather than the demand data," Dr Edwards said.
