Do market economists really understand what is going on in the Australian economy? After all they are paid to do just that and yet time after time we see them focusing on the narrow picture rather than standing back to assess the wider story.
Take the trade figures, the latest of which – for February – were issued this week by the Australian Bureau of Statistics. They showed a surprisingly large jump to $3.5 billion (the second highest record) in the size of the surplus from market estimates of $1.7 billion.
That’s quite a big miss by any standards and was accounted for by a slide in imports – especially consumption goods which fell 10%, or $859 million, or around half the $1.659 billion fall in our import bill in the month. Exports rose 1%, or $469 billion.
But then in January the trade surplus came in around $1.5 billion, one-third market forecasts. So the market soothsayers can’t take a trick.
The most succinct comment though came from TD Securities Annette Beacher who dismissed them saying “This report will soon be forgotten as markets trade sideways ahead of the RBA Board meeting later today.”
She was right to dismiss this one month report. This report doesn’t indicate a trend except that the trade surplus was the 4th in a row and is by far the bigger story, along with the rapid growth in the value of exports in the past year. That’s what economist should have focused – the sharp rise in export income in the year to February, and the way the cost of imports has barely budged in the past year.
Imports seasonally adjusted totalled $28.832 billion in February, up $157 million on the $28.675 billion of February, 2016. Our import bill was down on January, but is still around the level from June through August of last year, so the fall hasn’t been as dramatic as some of the commentary might suggest.
Analysis of the ABS data shows that on a trend basis, the value of our exports has jumped by 31% in the past year to $32.405 billion. That is $7.1 billion higher in February 2017 than in the same month of 2016. February’s seasonally adjusted figure of $32.405 billion was also the second highest monthly total on record after December’s $33.061 billion.
December’s upwardly revised trade surplus of $3.7 billion (from $3.33 billion in the January figures) was the highest on record.
In fact since the trade account returned to surplus in November of last year, it has been in the green for a four month total of $11.06 billion. There was a four month period of surpluses from December 213 to March 2014 totalling $3.452 billion.
In fact at the moment the surpluses of the past four months outweigh the deficits from July to October. In fact the country is now running a net surplus for the eight months to February of just on $6.7 billion. If the surplus is maintained until June it will be the first full year surplus since the late 1970’s.
The most recent run of surpluses was from March 2011 to December the same year in the wake of the floods and cyclones which hit iron ore and coal rices and sent global prices for both commodities soaring to record levels.
Surpluses for those eight months totalled $11.651 billion. That’s the largest cumulative trade surplus on record. A surplus of around $700 million for March will break that record and if the situation continues to June then an annual trade surplus will be in sight.
And even if the trade figures are it by the impact of the flooding from Debbie, it will only be temporary and could easily be offset by the temporary price surge for coal exports that are made in the next few weeks from NSW especially and some Queensland ports.
