Australia’s trade deficit hit a record in February thanks to those floods in Queensland which swamped a number of big mines owned by BHP and Mitsubishi, Wesfarmers, Rio Tinto and other producers, and cut coal exports.
The Australian Bureau of Statistics said the deficit was sharply higher than all forecasts at $3.29 billion compared to the revised $2.54 billion gap in January.
The previous all time high was in October of last year when the deficit hit $2.82 billion.
Economists had forecast it would be around the $2.5 billion gap but the rise had no adverse impact on the Australian dollar which rose to 92.14 USc by the close in Australia, compared to 91.96c before the news was released and 91.88c afterwards.
Although the cause was well anticipated, the size of the impact seems to have taken the market by surprise.
For various reasons our ability to deliver on the resources boom continues to be constrained: the list of problems is long and growing in these past three years.
From flooding and cyclones in Queensland, the Northern Territory or Western Australia, or pollution problems or poor mining conditions at some base metal mines, infrastructure constraints in NSW and Queensland, or a shortage of railway stock
The trade figures will continue to feel the impact of this flooding for several more months, especially as the producer most seriously hurt is the biggest: the BMA alliance between BHP and Mitsubishi in the Bowen Basin in central Queensland. There are forecasts its exports could be constrained for another three months.
BHP said in late February the heavy rain in Queensland may cut its share of coal output from two ventures by as much as 15% compared to 2007’s total.
Exports fell 4% in March and that caused the damage as imports were unchanged in February from the previous month.
In the three months to the end of February, exports fell to $18.260 billion from $18.756 billion, seasonally adjusted in December. Imports rose $1 billion, from $US20.548 billion in December last year to $21.548 billion in both January and February.
As a result the trade deficit has soared: from $ 1.792 billion to the latest figure of $3.289 billion and an unwanted record.
Australia has been running a trade deficit since March 2002 and the sluggish economy in the wake of the recession in the US and the puncturing of the tech and net booms.
Adding to the pressure on the trade account was the drought of the past two years, but this year rural exports and production are forecast to bounce back by ABARE (the Australian Bureau of Agricultural and Resource Economics).
The high value of the Australian dollar is also knocking hundreds of millions of dollars off our export income, and adding hundreds of millions more to our services deficit as more Australians travel overseas to take advantage of the stronger currency, and growth in inbound tourism slows.
However ABARE said last month it expects exports of commodities, especially base metals, coal, iron ore, LNG, nickel and other non rural products, to surge 30% in 2008-09
Prices for Australia’s top five commodity exports — iron ore, coking coal, thermal coal, gold and crude oil — have risen to records this year; and the reserve Bank is forecasting a 10% to 15% improvement in our terms of trade in 2008, mainly due to the expected rises in export coal (steel making and thermal) and iron ore shipments.
The ABS said exports of good and services fell 4% and non rural goods dropped 7%, including a 16% slump in coal sales. Metal ores and minerals slipped 18%.
The lack of any growth in imports in February, compared to January could be a reflection that demand in the economy is slowing: as we have seen from the small fall in retail sales in the month and a slowing in building approvals and home sales.
